Markets had a rocky start to the week. Stocks fell amid continuing concern over Europe's debt crisis, the S&P 500 falling 0.9 percent and the STOXX Europe 600 plunging 2.5 percent.
In response, Spain and Italy moved to ban short-selling of stocks.
But bond markets were also showing investor unease as Spain’s 10-year yield surged 23 basis points to 7.50 percent after a report that six Spanish regions may ask for aid from the central government. Yields in safe havens moved in the opposite direction, with the US 10-year yield touching an all-time low of 1.40 percent and the two-year German yield hitting minus 0.08 percent.
However, Germany may be losing its appeal as a safe haven. After the market closed, Moody’s said it had lowered the outlooks for the Aaa credit ratings of Germany, the Netherlands and Luxembourg to negative, citing “rising uncertainty” about Europe’s debt crisis.
Even as investors showed increased concern over the euro area, a report out on Monday showed that consumer confidence in the region has also deteriorated. The European Commission reported that its consumer confidence index for the euro area declined to minus 21.6 in July from minus 19.8 in June.
Another economic report on Monday showed why Spain is the focus of concern at the moment. The Bank of Spain reported that the Spanish recession deepened in the second quarter, with the economy shrinking 0.4 percent after having contracted 0.3 percent in the first.
In contrast, the US economy has managed to sustain growth, albeit at a lower-than-usual rate. The Chicago Federal Reserve reported on Monday that its national activity index increased to minus 0.15 in June from minus 0.48 in May. The three-month average rose to minus 0.20 from minus 0.38, indicating, according to the Chicago Fed, that growth was below its historical trend.