Global markets fall, US markets recover, leaving investors jittery

Global markets fell for the eighth day on Friday, while the US markets recovered from Thursday's plummet. As global markets drop, fear grows that the global economy could slip into another recession.

By Edward Krudy, Reuters / August 5, 2011

An employee of the Greek Stock Exchange passes in front of chart with the stock prices in Athens, Friday, Aug. 5, 2011. The eurozone's debt crisis battered global markets once again Friday, challenging vacationing European leaders to find a way to keep the turmoil from pushing Spain and Italy to a financial collapse that would hit an already-waning global recovery.

Thanassis Stavrakis / AP

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NEW YORK

World stocks fell for an eighth day but U.S. stocks gained ground Friday after a dizzying descent that wiped $2.5 trillion off the value of global equities this week and brought back memories of the 2008 financial crisis.

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Wall Street stocks recovered from losses of more than 2 percent to trade mostly higher in the afternoon, a day after indexes posted their worst losses in two years. The MSCI's All-Country World Index pared its losses, but was still down 1 percent on the day.

``What you had was a crisis-of-confidence move down, unjustified by the fundamentals,'' said Jeffrey Saut, chief investment strategist of Raymond James Financial, in St. Petersburg, Florida. ``It's like pushing down on a spring. You can only press down so far.''

World leaders moved to address the turmoil, which has been driven by fears the global economy is slipping back into recession and by the inability of policymakers in Europe to extinguish the debt crisis engulfing the region.

As frustration grows at what investors see as the European Central Bank's ineffectual response to the crisis, sources said the bank is demanding that Italy commit to fast-track specific welfare reforms and a constitutional amendment enshrining a fiscal rule before it will buy Italian bonds.

Jittery markets took the comments as a sign a move may be near. The euro jumped to a session high against the dollar and helped reverse the greenback's slump against the Swiss franc after it hit a record low on safe-haven buying.

The euro was at session highs at $1.4293, up 1.3 percent.

China and Japan called for global cooperation. French President Nicolas Sarkozy was due to discuss the financial markets with German Chancellor Angela Merkel and Spanish Prime Minister Jose Luis Rodriguez Zapatero.

Brazilian Finance Minister Guido Mantega said the world economy ``is in a situation of stress'' and South American nations must work together to create mechanisms to protect their economies from turmoil.

Rumors circulated that ratings agency Standard & Poor's would downgrade the U.S. debt rating after the close, but S&P said it would not comment on them. News of stronger-than-expected U.S. jobs growth in July relieved some of the financial markets' worst fears, but that was not enough to spur sustained buying after an early bounce.