Markets tumble as European debt concerns grow

Markets got crushed on Friday. Bloomberg reports:

Stocks sank, while the euro touched a ten-year low versus the yen and a six-month low against the dollar, as concern grew about Greece’s debt crisis. European bank and sovereign credit risk reached all-time highs as 10-year Treasury yields slid to a record. Oil fell 2 percent.

The MSCI All-Country World Index retreated 2.9 percent and the Standard & Poor’s 500 Index slipped 2.7 percent to 1,154.23 at the 4 p.m. close in New York, wiping out a weekly gain. The euro sank as much as 2.1 percent to 105.3 yen and fell 1.8 percent to $1.3627 before trimming losses. Ten-year Treasury yields slid as low as 1.89 percent. Credit-default swaps signaled a more than 90 percent probability Greece will default.

Internal disagreement at the ECB that has culminated in the resignation of executive board member Juergen Stark as well as a reported plan by Germany to shore up its banks in the event that Greece defaults provided reminders to investors that the European sovereign debt situation remains precarious.

While markets were mostly focused on Greece and Europe, there were also important economic reports out from Asia on Friday.

In Japan, the government reported that GDP shrank 0.5 percent in the second quarter, worse than an earlier estimate of a 0.3 percent contraction.

In China, inflation eased to 6.2 percent in August from 6.5 percent in July. However, growth in industrial production slowed to 13.5 percent in August from 14 percent in July. Retail sales and fixed asset investment also slowed in August.