Stock and bond markets rocked by fears of Italian and Spanish debt spirals

The Telegraph ^ | 4/10/2012 | Louise Armitstead

[bruinbirdman]

Global stock and bond markets suffered a rout as traders fled the renewed spectre of a eurozone default and fresh evidence of a global recession.

Italy's leading MIB index plunged 5pc and Spain's Ibex fell 3pc amid fears that the eurozone's third and fourth biggest economies were in the grip of a deadly and uncontrollable spiral of debt and recession.

The borrowing costs of both "sinner states" soared. The yield on Italy's benchmark 10-year bonds jumped to 5.7pc, heading into the danger zone that is considered unsustainably high. The equivalent Spanish debt climbed to 6pc. Meanwhile, the yield on safe-haven German bunds was pushed to an almost record low of 1.6pc. UK gilts benefited, too, dropping to 2pc.

The yields reflected a level of fear on the bond markets not seen since the fraught period before Christmas when traders bet that the eurozone could collapse.

France's CAC index fell 3.1pc, Germay's DAX dropped 2.5pc and in London more than £33bn was wiped off the value of Britain's biggest companies as the FTSE 100 fell 2.2pc. In the US, the Dow fell 1.7pc - its worst day so far this year.

Traders returning from the long Easter weekend were initially reacting to poor Chinese trade data and gloomy comments about the recovery by Ben Bernanke, the chairman of the US Federal Reserve.

But alarm spread following reports that Italy would be forced to cut its 2012 growth forecasts, coupled with mounting concerns over Spain.

Business paper Il Sole said it had obtained a report showing that Italy's economy was likely to contract by between 1.3pc and 1.5pc this year - far more than Italian prime minister Mario Monti's 0.4pc prediction.

Miguel Ordonez, head of the Bank of Spain and member of the European Central Bank, was quick

[txrefugee]

Wonder when the ostriches on Wall St. will recognize that the debt situation in the U.S. is far, far worse than any other country on the globe. It’s amazing that anyone would buy tickets to board this rapidly sinking ship.

[Paladin2]

I chalk it up to Santorum dropping out.

[Farmer Dean]

I chalk it up to socialist governments looting their counties treasuries for years until there is nothing left.

[rbg81]

Actually, believe it or not, Japan’s debt sitution is worse than ours. Of course, we have BHO in the White House, so....maybe its a toss-up?

[the invisib1e hand]

three pops to a top. gawd i hope i get another shot at it.

[tet68]

If only Newt had dropped out earlier this
wouldn’t be happening. /s

[rbg81]

In the short term, this will benefit the US, as it still has “safe haven” status. In fact, we’ll probably be the last to lose that status. But, watch out what THAT happens.

[Slip18]

Is everyone forgetting it’s tax time? Gotta pay our share. [/sarc]

[RayChuang88]

It doesn't take much to figure out why we have a big debt problem: the income tax code has resulted in Americans participating in the underground economy to the tune of over US$1 trillion and American residents and businesses offshoring possibly as much as US$15 TRILLION in liquid assets to keep it out of reach of US tax authorities.

This is why it's time to gut the current income tax system and at least implement the 17% no-loophole flat-rate income tax proposed by Steve Forbes, a plan that encourages keeping as much savings and capital investment in the USA for tax reasons. Implementing such a major tax overhaul will bring back most of that US$15 trillion, and you know what happens when you an over US$10 trillion liquidity boost to the US economy....

[Errant]

Fear or realization?

[Neidermeyer]

In response to the neverending crisis how is that barbarous relic doing lately?

[backwoods-engineer]

I think the fertilizer is in firm contact with the fan-blades, and the whole contraption is aimed right across The Big Pond at us.

[Vince Ferrer]

In the short term, this will benefit the US, as it still has “safe haven” status. In fact, we’ll probably be the last to lose that status. But, watch out what THAT happens.

This is the single biggest reason why we need to drill baby, drill. By the end of 2012, we will be exporting as much oil as Iraq. Building an infrastructure where commercial trucks and trains use NG instead of oil puts our commerce under much steadier footing.

Back in 2008 I didn't see anything that would stop the collapsing bubble. But oil and gas are capable of healing a lot of our mistakes, if we take advantage of it now. Being energy independant, when China, Japan and Europe are not, will do wonders to prop up the currency

[mylife]

The Hang Seng is taking a beating

[bruinbirdman]

"Fear or realization?"

Realization.

EU is pretty much milked.

ECB will print. They are trying to hold off till November.

yitbos

[bruinbirdman]

"The Hang Seng is taking a beating"

NIKKEI and TOPIX doing worse Wednesday.

yitbos

[Freddd]

America’s Debt Is Greater than Entire Eurozone’s (and U.K.’s) Combined Debt.