Tuesday, 12 July 2011

Markets fall again on European contagion concerns

Europe continues to search for a solution to the sovereign debt problem. Reuters reports:

Euro zone finance ministers promised cheaper loans, longer maturities and a more flexible rescue fund on Monday to help Greece and other EU debtors in a bid to stop financial contagion engulfing Italy and Spain.

After talks following another day of turmoil on financial markets, ministers from the 17 countries that share the European currency vowed to safeguard stability in the euro area and promised new measures shortly, but set no deadline...

The euro zone ministers gave no indication that they had broken a stalemate over how to make banks, insurers and other funds share the cost of additional funding for Athens.

But they tasked a working group to propose ways to finance a new multi-year programme for Greece, reduce the cost of servicing its 340 billion euro debt -- nearly 160 percent of annual output -- and improving its sustainability.

However, markets are getting impatient. From Bloomberg:

Stocks sank the most since March while Spanish 10-year bond yields topped 6 percent for the first time since 1997 amid concern Europe’s debt crisis will spread. The euro tumbled, while U.S. Treasuries rallied.

The MSCI All-Country World Index of shares in 45 nations tumbled 2.1 percent, the most in four months, as of 5 p.m. in New York. The Markit iTraxx SovX Western Europe Index of default swaps jumped to an all-time high as Italy’s stock index tumbled to the lowest level in two years. The euro sank 1.7 percent to $1.4029 and reached the weakest price since May. Oil fell 1.1 percent while yields on 10-year Treasuries posted the biggest two-day drop in more than a year.

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