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World Markets Sink As G20 Fails To Ease Tensions

A man watches through a window as display boards at the Australian Stock Exchange flash news of a falling market in Sydney on Friday (AP)
A man watches through a window as display boards at the Australian Stock Exchange flash news of a falling market in Sydney on Friday (AP)

Investors shrugged off a pledge to stabilize markets from the world's leading economies, and stocks remained under pressure Friday, a day after fears over the global economy had sent them plunging.

Finance ministers from the G20 countries meeting in the U.S. capital pledged Thursday to "take all necessary actions to preserve the stability of the banking systems and financial markets" and to make sure banks have the cash they need to pay their day-to-day expenses.

The G20 statement wasn't much - it mostly reiterated pledges made earlier - but the show of solidarity was enough to initially stem the previous day's losses in Europe. Asian shares, however, continued to fall sharply, with South Korea's Kospi index posting a whopping 5.7 percent decline.

The bounce was short-lived, however.

"I think many in the markets are no longer reassured by platitudes, we want to see action and not just words - more walking the walk and less talking the talk," said Louise Cooper, an analyst with BGC Partners. "The G20 communique was more eloquent on the problems facing the world than the solutions to be found."

In Europe, France's CAC-40 was down 0.8 percent at 2,760 while the DAX in Germany was 1.3 percent lower at 5,099. The FTSE index of leading British shares fell 0.6 percent to 5,012.

Wall Street pushed lower after a brief rally at the open - the Dow Jones industrial average was down 0.5 percent at 10,679 while the broader Standard & Poor's 500 index fell 0.1 percent to 1,128.

The worries are piling up for investors: a U.S. Federal Reserve warning earlier this week that the American economy is in significant difficulty, a raft of downbeat European and Asian economic indicators, and the continued concern over Greece's debt.

"The markets are eagerly awaiting a resolution or at the minimum, a more rigid strategy to reduce Greeces debt liabilities," said Giles Watts, head of equities at City Index.

Bank stocks have led the way down in recent days as investors fret over their potential exposure to the debts of Greece. Those fears have become more acute as the markets increasingly price in the likelihood of a Greek default.

Athens has had a series of meetings with its creditors this week to try to avoid that, but it's unclear whether it will be able to dig itself out of its debt hole, even with the help of billions from the European Union and the International Monetary Fund.

Even the normally tightlipped head of the French market authority, AMF, told France Inter radio Friday that "the situation is very, very worrying. We are in a worldwide situation of crisis," pointing to debt in Japan, "imbalances" in the United States, and Europe's sovereign debt troubles.

"We must take urgent measures on the international level," said Jean-Pierre Jouyet.

Those concerns have knocked confidence in the euro over the past week or two. After Thursday's plunge it was trading a little bit steadier, up 0.2 percent at $1.3510.

Joaquin Almunia, who runs the department in the EU's executive Commission that has to clear bank bailouts, suggested earlier this week that one solution might be to extend crisis rules that make it easier for governments to rescue failing lenders. He also said that even banks that passed stress tests this summer may need to raise more money.

Earlier in Asia, Hong Kong's Hang Seng fell 1.4 percent to 17,668.83 after losing nearly 5 percent the day before. Australia's S&P/ASX 200 index fell 1.6 percent to 3,903.20.

South Korean shares took a large hit, with the Kospi tumbling 5.7 percent to 1,697.44. Mainland China's Shanghai Composite Index lost 0.4 percent to 2,433.16. Japan's market was closed for a holiday.

Oil prices were down again alongside equities - benchmark crude fell $1.43 to $79.08.

This program aired on September 23, 2011. The audio for this program is not available.

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