World markets in major sell-off

September 22, 2011: 2:01 PM ET
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NEW YORK (CNNMoney) -- The world's financial markets took a beating Thursday as investors saw signs of economic weakness around the globe.

Contributing to the losses were the Federal Reserve's statement on Wednesday warning of a "significant" downside risk to the U.S. economy, as well as reports from global bank HSBC showing contraction in the Chinese and eurozone manufacturing sectors.

In Asia, the major indexes all finished more than 2% lower. Tokyo's Nikkei (N225) index dropped 2.1%. Shanghai's SE Composite Index (SHCOMP) lost 2.8%. And Hong Kong's Hang Seng (HSI) index suffered a 4.9% drubbing.

"We are seeing more weakness in the Asian session overnight," said Deutsche Bank analyst Colin Tan in a research note. "Further indication of contraction in China's manufacturing sector is clearly not helping."

European markets got hammered even worse. Britain's FTSE 100 (UKX) fell 4.7% at the close, while Germany's DAX (DAX) dropped 5% and France's CAC 40 (CAC40) plunged 5.3%. Financial stocks were among the hardest hit, with shares of Societe Generale and Credit Agricole falling nearly 10%, while BNP Paribas shed 5.7%.

The selling spilled over to currencies, with the euro sliding more than 1% against the U.S. dollar to $1.34.

U.S. markets, which were hard-hit Wednesday after the Fed statement, dropped more at Thursday's open. S&P (SPX), Nasdaq-100 (COMP) and Dow Jones (INDU) stocks were all down more than 3%.

Shares of U.S. bank stocks were taking a beating, with JPMorgan Chase (JPM, Fortune 500) down 4% and Goldman Sachs (GS, Fortune 500) falling nearly 6%. Wells Fargo (WFC, Fortune 500) slumped 3%, while Bank of America (BAC, Fortune 500) tumbled 5% and shares of Citigroup (C, Fortune 500) plunged nearly 7%.

The Federal Reserve's latest assessment of the economy spooked U.S. investors. Though the central bank has been warning of slower growth for months, its signal of "significant downside risks to the economic outlook, including strains in global financial markets" added to the pessimistic forecast.

The outlook came as the Fed announced an effort to boost the economy by shifting $400 billion in its portfolio to long-term Treasuries from short-term Treasuries.

Back in Europe, the Eurozone PMI's Composite Output Index slipped below the benchmark of 50 that signals contraction for the first time since July 2009, the HSBC reported. "Output growth slowed to near-stagnation in both Germany and France, showing the weakest rates of expansion since their recoveries began over two years ago," said the report.

HSBC also reported that China's Purchasing Managers' Index continued to stagger along below the 50 benchmark for the third straight month. To top of page

Index Last Change % Change
Dow 16,805.41 127.51 0.76%
Nasdaq 4,483.72 30.92 0.69%
S&P 500 1,964.58 13.76 0.71%
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Yahoo! Inc 43.50 0.90 2.11%
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