Share prices dropped sharply after US President Barack Obama proposed new limits on top bank risk profiles, spurring safe-haven US Treasury purchases but undercutting gains for the US dollar.
Obama said he is ready to fight the financial sector and its lobbyists for rules that would bar banks from owning, sponsoring or investing in hedge funds or private equity funds for their own profit, causing a bank share sell-off. For more see.
Europe's stock markets, closing just as the announcement was made, fell in concert with already weak US stocks after a surprise increase in US weekly jobless claims reduced optimism about economic recovery from the global financial crisis.
Goldman Sachs Group, one of Wall Street's top earners, lost 4.12 percent to $160.87 per share. The firm, along with many of the other top US banks, has been roundly criticised for paying large bonuses. Goldman, earlier on Thursday, reported better-than-expected fourth quarter net income of $4.95 billion.
J. P Morgan shares fell 6.59 percent to $40.54. At the close, the Dow Jones industrial average fell 213.27 points, or 2.01 percent, at 10,389.88 while the Standard & Poor's 500 Index lost 21.56 points, or 1.89 percent, at 1,116.48. Both indexes had their worst one-day percentage loss in nearly three months. The Nasdaq Composite Index dropped 25.55 points, or 1.12 percent, at 2,265.70.
The pan European FTSEurofirst 300 fell 1.56 percent to a one-month closing low of 1,036.07. Mining companies Anglo American, BHP Billiton and Rio Tinto fell between 3.12 and 6.15 percent.
The global trading day didn't start out as gloomy. Tokyo's benchmark Nikkei 225 stock index rose 1.22 percent, buttressed by gains in technology shares and a stable yen.
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