U.S. markets down as crisis in Europe deepens

DUBLIN — Italian unions geared for a strike against planned budget cuts Tuesday, and a core group of European finance ministers were expected to confer in Berlin, as officials struggled to halt a slow-motion crisis that is slamming world stock markets.

U.S. markets opened sharply down on Tuesday, with energy, tech and financials leading the sell-off. The Dow Jones Industrial Average fell 2.37 percent, the S&P 2.53 percent and Nasdaq 2.17 percent.

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 After the worst sell-off since the financial crisis, traders and passersby react to grim news about the stock markets and the global economy.

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The economic crisis triggered a strike of Italy's largest union in protest of an austerity plan being debated by the government. (Sept. 6)

Klein: The economic crisis has become a political crisis

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In Europe, exchanges were mixed, following a dramatic sell-off on Monday that pushed major indexes down more than 5 percent.

Asian exchanges fell Tuesday, some by more than 2 percent. Japan’s Nikkei closed at its lowest point since April 2009 — falling 2.2 percent, to a level unseen since the previous global economic downturn. Other major Asian markets also sustained losses, with South Korea’s KOSPI dropping 1.1 percent and Australia’s S&P/ASX 200 down 1.5 percent.

U.S. markets tumbled Friday, but were closed Monday for Labor Day.

In Switzerland, the National Bank surprised markets by slapping a new fixed minimum exchange rate of 1.20 francs to the euro. The Swiss have been struggling to curb their soaring currency, which has become a haven amid jitters over the euro. As a result, the nation’s exports are becoming increasingly expensive, threatening the Swiss economy.

Some analysts feared a disruption in currency markets if other nations that have also seen their currencies rise markedly as both the euro and the dollar have slumped consider similar measures.

The Swiss central bank warned it was prepared to buy massive amounts of foreign currency to support the new minimum exchange rate. The franc tumbled 9 percent against the euro and nearly 8 percent against the dollar in early trading.

Japan’s yen held steady against the dollar Tuesday, but it strengthened against the euro, hitting a six-month high of 108. Japan’s appreciating currency, particularly against the dollar, has hounded major exporters whose products become more expensive when the yen soars.

Tokyo last month attempted to intervene in its currency, but the impact was short-lived, and some financial analysts predict that the yen will rise to 73 or 72 against the dollar within several months.

With signs of an economic slowdown in the developed world, an increasing number of officials and analysts warn that Europe’s struggle over public debt and a weakened banking system could cause even broader problems.

Attention Tuesday was focused on Rome and Berlin. The Italian parliament was expected to begin debating a new austerity program of tax increases and budget cuts, and unions planned to strike in opposition.

In Berlin, the German, Finnish and Dutch finance ministers were slated to meet in an effort to resolve a disagreement that threatens to undermine an expanded bail-out for Greece. Finland wants collateral for its portion of any new emergency loan to Greece. Now other countries are calling for similar treatment. Germany opposes the idea and is trying to broker an alternative.