Member Article

Eurozone worried once again driving markets lower

Not even the winning of the Spanish general election by the centre-right People’s Party and the promise of drastic austerity measures by the new leader Mariano Rajoy was sufficient to calm eurozone tensions today. Despite warning of hard times ahead, there was little in the way of details and Spanish 10 year bond yields rose as equity markets across Europe fell.

Sentiment was also hurt by the lack of progress made by the US bipartisan deficit reduction committee, which is expected to announce today that it failed to find common ground on $1.2 trillion worth of budget cuts over the next decade. Moody’s contribution didn’t help either, the ratings agency warning that it could downgrade France’s Aaa rating due to elevated borrowing costs and a deteriorating growth outlook. Finally China rubbed salt in the wound as the Chinese Vice Premier Wang Qishan stated that a long term recession was “certain” and the country would therefore focus its resources on domestic problems. The comments came overnight and dashed hopes that the Chinese would invest in the European Financial Stability Facility, previously seen as a possible solution to leveraging the regions bailout fund.

The sell off was typical of those seen earlier in the year, with banks and mining companies among the worst performers due to their exposure to peripheral European debt and commodities, the latter also hit hard. London’s blue chip index soon found itself lower by more than 2%, although ended the day 2.6% lower, a 140 point loss that saw it close at 5222. US indices were off a similar degree, whilst those in France and Germany lost in excess of 3%.

This was posted in Bdaily's Members' News section by John Dance .