US and Chinese stocks plunge

US stocks plunged on Thursday. Bloomberg reports:

U.S. stocks tumbled the most in a year on concern Europe’s debt crisis will halt the global recovery. The selloff briefly erased more than $1 trillion in market value as the Dow Jones Industrial Average fell almost 1,000 points, a 9.2 percent plunge that was its biggest intraday percentage loss since 1987, before paring the drop.

The Dow average ended down 347.8 points, or 3.2 percent, at 10,520.32. The Standard & Poor’s 500 Index fell as much as 8.6 percent, its biggest intraday plunge since December 2008, before closing down 3.2 percent at 1,128.15. It was the biggest percentage drop on a closing basis since April 20, 2009, for both measures. The Nasdaq OMX Group Inc. said it will cancel trades of stocks that moved more than 60 percent during the plunge. Futures on the Dow and S&P 500 expiring next month lost more than 0.5 percent at 6:52 p.m. in New York...

New York Stock Exchange spokesman Rich Adamonis said “there were a number of erroneous trades” during the tumble. The NYSE told CNBC that there were no system errors as speculation of bad trades swirled through the market.

Erroneous trades aside, the trigger was obviously the continuing European debt crisis.

The euro tumbled the most since the collapse of credit markets in 2008, dropping 1.5 percent to $1.2620 at 5:10 p.m. in New York and touching a 14-month low of $1.2529, even as Greece’s parliament approved austerity measures demanded by the European Union and International Monetary Fund as a condition of its 110 billion euro ($139 billion) bailout...

Bonds of debt-laden European nations tumbled. The yield on Spain’s 10-year note surged 24 basis points, or 0.24 percentage point, to 4.42 percent, the highest since June. Italy’s 10-year yield jumped 22 basis points to 4.27 percent.

The 10-year Greek bond yield surged 1.14 percentage points to 11.31 percent, the highest in Bloomberg data going back to 1998. The nation’s two-year debt surged 1.46 percentage points to 16.36 percent, also a record in Bloomberg data.

German bunds gained, sending the yield premium investors demand to own Greek and Spanish 10-year debt instead of Europe’s benchmark bond to records.

The ECB left interest rates unchanged on Thursday but investors were apparently looking for something more.

European Central Bank President Jean-Claude Trichet held interest rates at a record low of 1 percent today and said the bank didn’t discuss whether to purchase government bonds to stem the region’s debt crisis, defying market speculation that he would take such measures.

Almost forgotten amid the US stock market tumble was that the Chinese stock market saw an even bigger sustained drop earlier on Thursday. Again from Bloomberg:

China’s stocks plunged, driving the benchmark index to an eight-month low, on concern government measures to curb property speculation and cool inflation will hurt economic growth...

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slid 117.45, or 4.1 percent, to 2,739.70, its lowest close since Sept. 2. The CSI 300 Index retreated 4.6 percent to 2,896.86. Futures on the CSI 300 expiring on May 21, or the most active contract, lost 3.4 percent to 2,972.6.

The Shanghai gauge has slumped 16 percent in 2010, Asia’s worst performer, as the government unwound monetary stimulus and stepped up measures to prevent a housing bubble inflated by record lending last year. The index surged 80 percent in 2009.

The property boom at the centre of government and market concerns, though, may already be starting to unwind.

The nation’s home prices may drop 30 percent, according to brokerages including China Jianyin Investment Securities Co. Home sales plunged nearly 40 percent by both units and floor space in 15 major cities last week, extending a streak of declines since mid-April, according to Zheshang Securities Co...

An index tracking 34 property stocks on the Shanghai Composite tumbled 5.2 percent, the lowest close since March 2009. The gauge is the worst performer among the five industry groups this year, declining 27 percent.