The storm clouds hanging over the global economy darkened last night as the
chaos in the eurozone took its toll on the rest of the world.
Shares in New York plummeted and oil tumbled to an 18-month low after a
raft of bleak figures showed weakness in the U.S. and China -- the world's two
biggest economies -- as well as in Europe.
Signs of life in the ailing British economy provided a rare bright spot,
with factory orders and retail sales on the rise.
But warning that "rough waters may lie ahead" for the UK, Bank of England
official Martin Weale said: "Far from improving, immediate prospects for the
economy have worsened."
The Dow Jones was down around 250 points on the second worst day of the
year for Wall Street. The price of crude oil fell more than 2pc to $90.30 in
London -- the lowest level since December 2010 and nearly 30pc below the $128
a barrel reached in early March.
It came as the eurozone economy took another dramatic turn for the worse
and Spain lurched closer to needing a full-blown bailout.
Research group Markit said the single currency bloc's beleaguered private
sector suffered a bruising decline this month, with German firms now also
feeling the pain.
The purchasing managers' index, where anything below 50 represents
contraction, hit 46 in June -- the lowest level since June 2009 when Europe
was deep in recession.
Markit said the figures suggested that the eurozone economy, which was
saved from recession in the first quarter of the year by solid growth in
Germany, was set for a 0.6 percent decline in the second quarter.
"It is a worryingly steep downturn we are seeing and it is spreading from
the periphery through to Germany," said Chris Williamson, chief economist at
Markit.
Borrowing costs in Spain reached a new high as investors fretted about
the state of the basket case banking system and the government's creaking
finances.
Madrid sold pounds sterling 1.8 billion of five-year debt but was forced to pay
an interest rate of 6.07 percent -- a 16-year high and widely seen as unsustainable.
Fears that the euro crisis is infecting the global economy intensified as
US manufacturers suffered their worst month since July last year and output
from Chinese factories declined.
There was better news in Britain, where dwindling hopes of recovery were
boosted by an unexpected improvement in orders and confidence in the
manufacturing sector and a rise in High Street sales.
