LIVEBLOG: Global markets in turmoil

Investment Week and our sister title Investment Europe provide ongoing updates on the turmoil in global markets as investors fret over the US and European debt crises.

15.45 Rumour has it that ratings agency S&P will downgrade the US after markets shut this evening. According to the Financial Times, Barclays said: "To be honest it would not come as a complete surprise as S&P always said that chance of a cut is 50:50. They also said they wanted the US government to cut expenditures by at least 4 trn; they have now cut it just shy of more than 2trn. "So to be consistent and not loose their credibility S&P actually needs to cut the ratings". Separately and unsurprisingly, Bloomberg reports Merkel and Sarkozy's planned phone call will also take place following market closures this evening.

15.19 US equities have given up their early gains of today, as fears over a second recession overcame optimism about job figures released before the opening bell. The Dow Jones Industrial Average dropped 0.32%, the S&P 500 was down 0.65% and the Nasdaq Composite fell 1.44%. The turnaround in US equities as the morning progresses may be leading Europe's exchanges lower again. The Dax is 2.3% down, the Cac 40 dropped 0.66% and the FTSE 100 is now 2.35% below their respective closing point last night.

15.03 All the plans Switzerland's National Bank enacted and announced on Wednesday to weaken its franc - from the 0.5% rate cut to increasing the physical stock of notes - may be undone by the turmoil, as the currency could strengthen to parity with the euro, said Deutsche Bank. Alan Ruskin, global head of G10 currency strategy, said the safe haven franc could "carry on to parity if European authorities cannot stabilize the Italian bond market soon".

15.00 UBI Banca's chief executive Victor Massiah referred there are no liquidity problems for Italian banks, and the interbank market is absolutely open, according to pseudonym trader "Tyler Durden".

14.45 Anthony Bolton, manager of Fidelity's China Special Situations investment trust, said: "Extreme equity market volatility as we are now experiencing should be seen as a time of opportunity rather than a time to become more defensive.

"At times of sharp volatility, all markets tend to be affected equally. Asian and emerging markets currently look oversold versus developed markets due to their much stronger economies and lower debt levels. This provides opportunities for investors with a greater risk appetite."

Fidelity added markets have shown recently "US and Europe political leadership has been... woefully lacking, and we have seen two failed attempts so far to address the debt problems within the eurozone.

"These failed due to a lack of firm European political leadership, ensuring that each outcome is a flawed compromise based on the lowest common denominator of country self-interest."

For Dominic Rossi, Fidelity's global CIO for equities, savers needing income should look at equities: "For the last 20 years, investors have bought equity markets for capital growth, now is the time to buy equities for income."

Andrew Wells Fidelity's global CIO for fixed income, warned many corporates are now rated lower risk than governments. "In recent years, companies have been taking the steps that governments should have been taking and paying off their debt. We now have a good range of companies who can service their debts and with interest rates likely to stay lower for longer, this will be positive for total returns from corporate bonds."

14.44 European central banks are buying up peripheral bonds, reports London & Capital Asset Management's head of dealing Steve Collins.

14.41 As the crisis took a short breather while US markets opened, asset managers started looking beyond Bloomberg screens to taking advantage of turmoil.

JP Morgan Asset Management said do not flee to popular safe havens of Swiss franc or yen - they are both overbought and vulnerable to central bank intervention. "Rather, look to the areas we know offer long-term opportunities - emerging market debt and equities - and for income, high-yielding blue chips in developed markets look more attractive than government bonds, or cash." But drip money in over 12 months, "as timing an exact entry point is almost impossible in such volatile conditions".

14.32 US markets have opened strongly, on the back of better than expected jobless statistics for the economy. Dow Jones is up 150 points, the S&P has risen 13 points, or 1%, and the Nasdaq by 28 points, also equivalent to a 1% increase.

But details of the statistics are pouring out, with commentators saying the size of the labour market has shrunk, hence the drop in unemployment, rather than new jobs being created.

14.22 To put this latest iteration of the eurozone's credit crisis in more perspective, the amount of value vaporized from global shares this week - over $2.5trn - is almost as great as the size of France's entire economy. The MSCI All-Country World index has fallen 8.6% this week - well on the way, says Reuters, to its largest weekly drop since the height of the last financial crisis, in November 2008.

14.15 Market falls have caused UK pension deficits to increase by £10bn yesterday alone, wiping out "potentially any" gains for final salary schemes at FTSE 350 companies since October 2010, Aon Hewitt says in a note.

13.48 Cameron has spoken with Governor of the Bank of England, Sir Mervyn King, BBC reports. UK Foreign Secretary William Hague said: "The government is fully functioning in response to this crisis and anything else that's happening in the world. The crucial thing now is for eurozone governments to deliver on what they promised a few weeks ago. The Spanish and Italian governments must show they have credible plans to deal with their debts and to make their economies competitive."

The UK already took a hit from the eurozone crisis early this morning when Royal Bank of Scotland, 84% publicly owned, reported a £733m provision for its exposure to Greek government bonds, as part of its £1.4bn post-tax loss for the first half of 2011.

13.43 Paris stocks have also jumped on the back of better than expected US unemployment data, rising by 2%, Sky News reports.

Meanwhile, US stock futures rallied by 1.4%, the BBC reports.

13.35 US jobless statistics are in and better than expected, causing the FTSE 100 to soar by a staggering 100 points immediately after the news. The US rate of unemployment dropped to 9.1% in July, with 117,000 jobs added to the economy.

Earlier, Bloomberg reported American employers "probably failed to create enough jobs in July to reduce the jobless rate". Expected outcomes from a poll it conducted before the data was released ranged from ‘no change' to an increase of 150,000.

13.25 Germany's Economy Ministry reported a decrease in German industrial production in June on falling construction and investment goods output. It was a 1.1% decline from May, worse than the 0.1% gain 26 market participants told Bloomberg they expected. In addition German business confidence fell further than expected in July, and investor confidence hit its lowest point since the credit crunch as the next crisis unfolds. Nevertheless, the Bundesbank expects Germany's economy overall to expand by 3.1% this year and 1.8% in 2012.

13.05 Olli Rehn, European Commissioner for Economic and Monetary Affairs, said: "The market unrest witnessed in the last few days is simply not justified on the grounds of economic fundamentals. It is not justified for Italy. It is not justified for Spain. Such dramatic changes in the markets are incomprehensible. It is not as if the fundamentals of the Italian or Spanish economies have changed overnight!" He said both countries have "committed themselves to ambitious measures to reach fiscal consolidation and to put their economies back on track. And both countries are implementing those measures."

12.50 Barclays Wealth confirms it will hold a confidence call with its clients this afternoon at 2.15pm GMT with an update on its current views given market developments during the past few days. It will issue a note to the press later in the day.

12.25 UK foreign secretary William Hague is monitoring developments in financial markets "extremely closely", the BBC reports.

12.19 Olli Rehn, European Commissioner for Economic and Monetary Affairs, said to journalists in Brussels neither Spain nor Italy will need an emergency loan program.

12.18 Italy's former prime minister Romano Prodi told BBC Radio 4 it would be wrong to change Italy's government now "during the storm", despite his successor Silvio Berlusconi seeming unable to convince markets of his country's strength as a borrower.

"You cannot change the government during the storm if you have no clear alternative." Prodi also blames part of the current crisis on a lack of clarity about who is actually in charge in Brussels. "We arrived at this point because it is unclear the hierarchy of power in Europe. This is the fact."

11.40 Mark Burgess, chief investment officer at Threadneedle, said the firm is buying UK equities today, as they yield 1% more than 10-year gilts, "a valuation anomaly I have never seen before".

It could all hardly come at a worse time: "Middle of the holiday season when markets are thin and many policy makers and market participants are away". Burgess says current turmoil on Europe's bond markets "is increasingly likely to precipitate recession". He predicts "a globally co-ordinated bout of quantitative easing" to allow policy makers to get a jump on fast-moving markets.

"Getting to this decision, however, is going to be complicated and we may well need a catalyst in the form of a significant market crisis to make this happen." The ‘good news': "We may be seeing the beginnings of this crisis now."

11.39 Reacting to the day's events, UK Chancellor George Osborne will speak to Bank of England governor Mervyn King by the end of the day, the BBC reports.

11.30 Cyprus' finance minister said his country does not require a bailout and urges other economies to avoid it, according to Reuters.

11.20 The German bund is making new day lows, said Steve Collins at London & Capital Asset Management.

11.00 ING Investment Management is the latest group to call for enlarging the European Financial Stability Facility, following comments to BBC Radio 4 this morning by European Union Economic and Monetary Commissioner Olli Rehn that, "to be effective, the European Financial Stability Facility needs to be credible and respected by the markets."

Valentijn van Nieuwenhuijzen, head of ING's strategy, tactical asset allocation group, said: "If things really become bad and countries like Italy and Spain as well as their banking systems come under attack there will simply be not enough funds in the kitty.

"It would have been much more preferable to give the EFSF so much fire power that it would convince markets that the EMU could withstand any speculative attack. If this had been done, it would have greatly reduced the chances of such an attack being launched in the first place. Markets are likely to test policymakers resolve again at some point and this may be sooner than some pundits might think."

10.25 Beleaguered Italy's growth forecast for this year is in, with 0.7% growth expected.

Its Q2 GDP figure is 0.3%, as expected. Ireland meanwhile has its BBB+ credit rating affirmed by S&P, reports the UK's Channel 4 Economics Editor Faisal Islam.

10.00 Skandia Investment Group portfolio manager John Ventre thinks despite investors' fears, now is the time to invest in European equities.

"There's an old market adage that goes something like this: "if you catch a falling knife you end up in a bloody mess".

"But when equity markets are as cheap as they are today, then investors have a margin of safety that's a bit like wearing a sturdy pair of gloves. European equities are trading at 8x forward earnings and 4x forward cash-flow. Cheap by any measure, but bargain basement next to 10 year German bunds at 2.4%."

The fund manager added: "it's time for me to put my money at work".

09.50 In an effort to calm market fears, partner Cheviot Asset Management David Miller says: "This is no re-run of 2008". Events yesterday and today are not a repeat of the 2008 crisis, but the next stage of resolution of the same credit bubble, he said.

"While the headline market numbers are alarming, we should all take a deep breath and remember that the fundamentals are much better than 2008; banks are stronger, companies are generally in good shape, and traders are less heavily leveraged."

"This is the time for cool heads," he urged.

09.40 Guy de Blonay, manager of Jupiter's Financial Opportunities fund calls for a four- or fivefold increase to the European Financial Stability Facility to reassure markets.

9.30 (GMT) Markets across Europe opened down this morning following global panic sparked yesterday afternoon by the ECB's refusal to clarify whether it will purchase Italian and Spanish bonds, prompting fears over both economies' solvency.

By 10.30 CET the Dax was off 2.5%, the Cac 40 down 1.1% and Britain's FTSE 100 was 2.4% lower. Follow our regular updates of the day's events, with an emergency call between France's President Nicholas Sarkozy, Germany's Chancellor Angela Merkel and Spanish prime minister José Luis Rodríguez Zapatero scheduled, and all eyes set to turn to the performance of US stocks once that market opens.