Panic gripped investors in the world’s stock markets yesterday as bank shares were hit hard.
Share prices on the London stock market slumped by a further 2.5 per cent, wiping another £50bn off shares.
The 83 per cent state-owned Royal Bank of Scotland Group announced it is cutting 2,000 jobs after writedowns on Greek debt, and costs for compensating insurance clients left it with a first-half loss of £1.4 billion.
The RBS share price fell by 12 per cent or 3.76p to 26.52p as it became the third UK bank to announce job losses this week.
It will axe posts in its securities unit over the next 12-18 months as it completes its integration of ABN Amro Holding NV, Chief Executive Officer Stephen Hester said in a conference call yesterday.
RBS has cut 27,500 jobs since Hester took over from Fred Goodwin in 2008.
HSBC pledged earlier this week to eliminate 30,000 jobs by 2013 and Barclays said it will cut about 3,000.
In all, European banks have slashed 230,000 jobs since the start of the financial crisis in 2007.
The FTSE 100 index fell a huge 190 points on opening yesterday, then recovered slightly to a 137 points fall to 5,246 points by midday.
In Paris, the CAC 40 fell by 1.3 per cent and Germany’s DAX was down 2.7 per cent.
Earlier, Asian markets had slumped with Japan’s main Nikkei index down 3.7 per cent and Hong Kong’s 4.6 per cent lower.
This followed Wall Street’s dramatic fall on Thursday evening, when the Dow Jones Industrial index had its worst day since December 2008, closing down 512.76 points, or 4.3 percent, at 11,383.68.
According to Cameron Peacock, market analyst at IG Markets, stock markets were ‘heading into the weekend break in a state of absolute panic’.
The latest meltdown was triggered by US economy fears and European Commission president Jose Manuel Barroso’s warning on Thursday that European leaders had failed to deal with the eurozone debt crisis.
Fears are mounting that Italy and Spain will not be able to repay their debts and may require bailouts of hundreds of billions of euros.
The European Central Bank was criticised for buying Portuguese and Irish government bonds yesterday instead of Greek and Italian bonds.
Italian 10-year yields overtook those of Spain for the first time since May 2010, reaching 6.14 per cent, while its Spanish equivalent traded 28 basis points lower on the day at 6.03 per cent.
Across the Atlantic, slightly improved unemployment figures failed to impress investors.
After a short opening rally, the Dow Jones index fell by 52.56 points to 11331.12 in the first two hours of trade, with the exchange expecting a ‘testing weekend’.
