US shares fall sharply, prompted by US credit downgrade

European exchanges gave up early gains while New York's Dow Jones index opened lower after rating agency Standard & Poor's downgraded the US credit rating from AAA to AA+ on Friday.

The ECB later intervened to address concerns the debt crisis is spreading to Spain and Italy. However yields on Spanish and Italian bonds fell sharply after the bank's move.

By 3:38 pm on Monday, the FTSE 100 had dropped down 177 points, or 3.3%, at 5069. By 4:30 pm, it had dropped  142 points in all to 5104.

By the time the market closed, the blue chip index has fallen 178.04 points to 5,068, a decline of 3.39% on Monday alone.

Today's selloff has wiped off another £46.3bn off the value of the FTSE 100, the Guardian reports.

Since the US debt ceiling deal was signed, the FTSE has shed 746.24 points in all, a 12.8% decline over six trading sessions.

On Wall Street, the Dow shed 359 points, again over 3%, to 11082. The Nasdaq dropped by 4%.

Bank of America was down 9.7% and Citigroup was nearly 7% lighter.

London only had two shares in positive territory - bullion producer Randgold, and insurer Old Mutual.

Mining groups Kazakhmys fell 9.6%.

The drops were attributed to the US credit downgrade, which destroyed confident in US markets.

The German DAX also dropped by 5% in late-afternoon trading.

The index plunged through the 6,000 point mark for the first time since early September 2010.

The Athens stock market also suffered considerably, closing at a 14-year low just before 4pm.

The ATG index fell 6% and ended at 998 points.

The White House had soundly criticized Standards & poor for the credit downgrade, accusing it of making errors in its calculations.

However S&P Chambers responded in a press conference that they made two projections using two sets of figures and the row makes little difference to long-term figures.

Using what he described as the "right figures", America ends up with debts of $14.5 trillion in 2015 if things don't change, instead of $14.7 trillion under S&P's disputed data.

That's not enough to save the AAA rating, S&P said.