Tuesday, 6 September 2011

European stocks plunge

European markets were clobbered on Monday. Bloomberg reports:

Stocks fell, Italian bonds dropped for an 11th day and the cost of government and bank default insurance rose to records on concern Europe’s debt crisis will worsen. The euro weakened, while the dollar and gold gained.

The MSCI All-Country World Index sank 2 percent at 4:31 p.m. in New York. Banks led the Stoxx Europe 600 Index down 4.1 percent in the biggest two-day slump since March 2009. Italy’s 10-year bond yield rose 27 basis points in the longest sequence of gains since the euro’s debut in 1999. The German bund yield fell to a record low of 1.84 percent. Rates on two-year Greek debt exceeded 50 percent for the first time. Gold futures jumped 1.4 percent. Standard & Poor’s 500 Index futures lost 2.3 percent at 6:24 p.m.

The loss by German Chancellor Angela Merkel’s party in weekend elections in her home state fuelled concern of growing opposition for bailouts of debt-saddled European nations.

The current situation reminds Deutsche Bank CEO Josek Ackermann of conditions in late 2008.

Not helping sentiment were negative European economic data on Monday.

In the euro area, the Markit composite purchasing managers index fell to 50.7 in August from 51.1 in July as the services index fell to 51.5 from 51.6 following last week's fall in the manufacturing index.

In the UK, the Markit/CIPS services PMI fell to 51.1 in August from 55.4 in July. This was the second biggest fall on record and the biggest in ten years.

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