Stock markets fall amid trouble at bank in Portugal

  • Article by: GERRY MULLANY and CHAD BRAY , New York Times
  • Updated: July 10, 2014 - 9:24 PM

Losses in U.S. stocks were not as severe as those in overseas markets.

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A Wall Street sign near the flag-draped facade of the New York Stock Exchange. U.S. stocks dropped Thursday amid financial jitters in Europe and disappointing retail earnings.

Photo: RICHARD DREW • Associated Press,

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Stock markets in Europe and the United States dropped on Thursday, set off by concerns about the soundness of Portugal’s largest publicly traded bank and data suggesting continued weakness in other European economies.

Most European markets fell by more than 1 percent, with Portugal’s main stock index plunging 4.2 percent.

In the U.S., the stock market dropped sharply at the opening of trading, but it later recovered some of its losses. The Dow Jones industrial average closed down 70.54 points, or 0.4 percent, to 16,915.07, according to preliminary figures, after falling as much as 180 points in early trading.

The Standard & Poor’s 500 stock index dropped 8.15 points, or 0.4 percent, to 1,964.68. And the Nasdaq composite index lost 22.83 points, or 0.5 percent, to 4,396.20.

The banking worries center on Espírito Santo International, which Tuesday said that it had missed payments on some of its debt; on Thursday, trading in its stock was suspended. The firm is the parent of the bank, Banco Espírito Santo, Portugal’s second-largest lender, which on midday Thursday also had its shares suspended. The market plummeted in Lisbon, with the PSI Index dropping almost 4 percent.

The tumult is a stark reminder that investors — despite recent optimism about Europe — are still worried about the overall health of the region’s financial system.

In recent months, investors have shown renewed interest in European stocks and debt. They have devoured the sovereign debt of troubled economies like Spain and Greece.

While Europe is on the mend, it is far from a full recovery. Ultralow inflation and weak growth continued to plague the economy. And the plight of a Portuguese lender only plays into the broader concerns that Europe’s financial system is still precarious.

Adding to the jitters in European markets was a fresh batch of disappointing economic data from Italy. Italian industrial output experienced its biggest drop since November 2012, which, along with concerns about its banking sector, caused the FTSE MIB index in Italy to drop nearly 2 percent.

Amid the adverse market conditions, Greece said Thursday that it raised 1.5 billion euros (about $2 billion) in a sale of three-year bonds. It was Greece’s second debt issue in three months after a four-year exile for the debt-racked country, which was frozen out of bond markets in 2010 after being rescued from bankruptcy.

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