Markets go wild on European debt worries May 06, 2010 JOHN SPEARS

What was that? For a brief, heart-stopping period, stock markets plunged, currencies went crazy, bonds ran wild and investors ran for cover.

But by the end of the day U.S. stocks had recovered much of their losses, the Toronto Stock Exchange was basically flat losing 32.7 points to close at 11,842.43, and the Canadian dollar, though pummeled, was still intact.

Experts were flustered, but puzzled by the wild action, though they generally pointed to the ongoing Greek debt crisis.

Rumors also circulated that the panicky sell-off had been triggered by a U.S. stock trader mistakenly put in a sell order for 15 billion shares of Procter & Gamble on the New York Stock Exchange, instead of 15 million.

Whether that’s true or not, the stock dived to $40 from $60 within moments just before 2.30 p.m..

The Dow Jones Industrial Index also began a free-fall of about 1,000 points, or 10 per cent, in less than half an hour.

It didn’t stop with stock markets. The U.S. dollar soared, which meant the Euro plunged along with the Canadian dollar.

After rising as high as 97 cents U.S, at one point the Canadian dollar was down almost 4 cents. It finished the day at 95.03 cents U.S.

Pascal Gauthier of TD Economics pointed to the Greek debt crisis as a possible trigger for the turmoil.

Jean-Paul Trichet, who heads the European Central bank, said in Lisbon Thursday that the bank’s governing council had not discussed the possibility of buying government bonds. Many analysts have speculated it might do so, as a means of providing debt-crushed governments with financial support.

“There might have been expectations that the bank might take some measures, though we were of the view that they would not,” Gauthier speculated.

He warned that other days like this could loom ahead.

“On the fiscal side, those economies that were fragile to begin with before the recession like Greece, Italy, Spain are going to be vulnerable, and markets are going to be nervous,” he said.

“This is going to stay with us. This isn’t just a one-day thing.

Camilla Sutton, currency strategist at Scotiabank, said no one was attacking the Canadian dollar. Instead, investors ran for the safety of U.S. investments.

“This story is about the U.S. dollar,” she said. “What we’re seeing is a very strong, strong U.S. dollar, because very quickly people are closing out foreign positions and moving into the deepest capital markets in the world: The U.S. and the U.S. treasury market.”

The Canadian dollar was simply trampled by the rush into the U.S., she said.

Dow Crashes 1000 pts in 15 minutes

Today when the DOW Jones Industrial Average plunged about 1,000 points, possibly due to a trading error and the biggest single-day loss since 1987, I sat here still as can be, letting out a huge exhale.

Earlier today, the Dow Jones Industrial Average fell almost 1,000 points (9%), the biggest intraday loss since the market crash of 1987. CNBC is reporting that a trading error may be at least partially to blame for the dramatic drop. There's heavy speculation that a trader for Citigroup typed a "b" for billions instead of an "m" for millions when entering a trade for Procter & Gamble. Oops!

The stock market was already on edge because of the financial crisis in Greece. Images of mobs demonstrating in Athens were fueling an underlying panic. There's a growing fear that a financial collapse in Greece could trigger a wave of financial trouble across Europe (and possibly even the world). Then that little typo, and BAM!, the wheels were set in motion for a spectacular and frantic 30 minutes of trading.

Cable news channels, like CNBC, Bloomberg and the Fox Business Network struggled to keep up with the story as it unfolded live on air. Financial websites crashed under the stress of the traffic. And Jim Cramer, of Mad Money, predictably shouted "buy, buy, buy."

When the dust had settled, the market made a bit of recovery, closing down "only" 348 points. Financial regulators are actively investigating that little trading error to try to piece together exactly what happened, with a spokesman for NYSE reporting no erroneous trades. One thing is likely: lots of traders are having a stiff drink right about now.

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