February 5, 2010 –IR Summary/NYT - 

America’s recession that disturbed President Obama and the American citizens and they lost their sleep has also disturbed the European region. Though America has reversed its trend by gaining encouraging results all round, Europe too is interested to set right their economy which looks to be going somewhat downword.

A rout in stock markets that began in Europe spread to Wall Street on Thursday and around the globe to Asia on Friday, amid fears that Europe may be the world’s next financial flashpoint. Pressure has been mounting across the Atlantic as Greece, Portugal and a handful of struggling countries that use the euro scramble to pay off mountains of debt accumulated from years of profligate spending.

The Dow Jones industrial average slid 2.61 percent, or 268.37 points, to 10,002.18 Thursday, after briefly falling below 10,000 for the first time since November, as American investors grew more uncertain about Europe’s economy.

Stock markets across Europe slumped as much as 6 percent, and worries that the troubles might push even big European nations like Spain into a financial crisis drove the euro to $1.37, a seven-month low against the dollar.

Markets in Europe slipped further on Friday, after a sharp sell-off in Asia, amid continued worries about government debt in several European countries and about the state of the U.S. labor market.

“The question now is, how big is this fire going to be?” said Uri D. Landesman, head of global growth at ING. “What is panic, and what is legitimate? We don’t know at this point.”

Like the United States, Europe has been slow to exit recession. France and Germany — the biggest of the 16 countries that use the euro as their currency — have tried to put their financial houses back in order quickly. But countries on the fringe, including Greece, Portugal, Spain and Ireland, are having trouble paying for years of debt-driven expansion.

Now the bill is coming due. In the worst case, they could default on their debts, prolonging the economic downturn.

While the tension simmering in Europe has gone largely unnoticed by most Americans, the mounting pressure on these countries to discipline their finances has raised questions about whether the currency union that has peacefully bound Europe’s economies for more than a decade risks unwinding.

Adding to the anxiety among investors Thursday was a bleaker-than-expected report on the United States labor market. Investors are watching unemployment closely as they try to gauge the strength of the recovery and determine whether it will be severely constrained by tepid consumer spending.

On Thursday, the eve of the release of the Labor Department’s monthly employment snapshot, the government said the number of people filing first-time claims for unemployment increased to 480,000 last week, above Wall Street’s estimates of 455,000. Analysts expect Friday’s employment report to show that the jobless rate remained at 10 percent in January, and that 15,000 jobs were created.

The Standard & Poor’s 500-stock index plunged 34.17 points, or 3.11 percent on Thursday, to 1,063.11, and the Nasdaq composite index fell 65.48 points, or 2.99 percent, to 2,125.43.

How Europe decides to deal with its problems will shape its future political landscape — and the future of the euro itself.

Fearful investors have started asking whether France, Germany and other rich countries should be forced to bail out their poorer cousins, or simply allow them to default — an outcome that would have major repercussions for Europe and financial markets worldwide.More