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Last Updated: Wednesday, 17 May 2006, 22:05 GMT 23:05 UK
Shares slump across Europe and US
Traders watching price movements
Investors are feeling shaky as inflation fears hit the US
US and European shares have fallen sharply as fears of higher interest rates continued to beset investors.

The FTSE 100 lost 170 points - the biggest one-day fall since October 2002 - and 123bn was wiped off the value of Europe's top 300 firms on Wednesday.

The catalysts were new figures on US and eurozone consumer prices, which rose faster than expected in April.

They raised fears that interest rates would have to continue rising if the two regions were to contain inflation.

Investors cautious

The latest figures for inflation in the eurozone showed that it had risen faster than expected to 2.4% in April, making the European Central Bank more likely to raise eurozone interest rates from their current level of 2.5% next month.

High interest rates raise corporate borrowing costs and can hurt company profits.

Wednesday's sell-off saw the main benchmark share indexes in the UK, France and Germany all close with losses of more than 2.5%.

By the close, New York's Dow Jones Industrial Average index was 1.9%, or 214 points lower at 11,206.

Despite the big falls, there was still an air of realism among investors.

"There is certainly a lot of caution and bearishness around," said Colin McLean of SVM Asset Management.

"And while there may be losses to come in the next few sessions, the scale and pace of the moves in the last week are no different to other setbacks we have seen in the past year or so."


FTSE 100
23.70 0.44%
19.54 0.34%
Cac 40
14.48 0.38%
Dow Jones
78.53 0.76%
35.31 1.58%
S&P 500
11.22 1.02%
BBC Global 30
20.65 0.36%
Data delayed by at least 15 minutes

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12 May 06 |  Business
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12 May 06 |  Business
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10 May 06 |  Business
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11 May 06 |  Business


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