Wall Street experiences heavy trading session

Dow Jones: 11,444.61 (+60.93) Nasdaq: 2,532.41 (-23.98) SP 500: 1,199.38 (-0.69):WORLD STOCKS fell for an eighth day yesterday in a dizzying descent that has wiped about $2.5 trillion off the value of global equities this week, but hopes the European Central Bank will buy bonds of crisis-hit Italy helped lift markets off the lows of the day.

Wall Street stocks swung violently between gains and losses in a heavily traded session a day after indexes posted their worst losses in two years. The MSCIs All-Country World Index fell 1.3 percent on the day.

The Dow Jones industrial average eked out a small gain, rising 0.5 per cent. Composite trading volume was the highest since the day after the US “flash crash” in May 2010, when US equity markets plummeted 9 percent in a single day.

Bank of America dropped 7.5 per cent, while Citigroup fell 3.9 per cent as Europe’s debt crisis and losses linked to souring home loans threaten to undermine industry earnings.

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.

Italy, under pressure to help halt the market rout that is endangering the global economy, pledged to speed up austerity measures and social reforms in return for ECB help with funding.

“That was the real thing that got us started (off the lows),” said Rick Klingman, managing director of Treasury trading at BNP Paribas in New York. That “may clear the way for the ECB to start buying some Italian bonds”.

The ECB’s reluctance to buy Italian bonds and ease pressure on markets has frustrated investors. Sources with knowledge of the matter said earlier yesterday that the bank is willing to take that step only if the country carries out reforms.

The euro last traded up 1.3 per cent at $1.4278 on trading platform EBS. The US dollar fell broadly, reversing some of the prior day’s sharp gains, as traders feared a downgrade to the United States’ credit rating was imminent.

Rumours circulated in jittery markets that a downgrade from ratings agency Standard Poor’s could come as early as last night.

The agency declined to comment on the rumour. – (Reuters)