MARKETS WERE SPOOKED today by scenes of violent protests on the streets of Athens and Madrid, which reignited concerns over Europe’s ability to implement the measures needed to deal with its big debts.
A day after US stocks suffered their biggest retreat in three months on comments from a leading official at the Federal Reserve, investors have grown jittery. The euro was also down, further below $1.30, while oil prices retreated toward $90 a barrel, further indications of investor unease.
A general strike in Greece turned violent after demonstrators protesting against planned government spending cuts threw petrol bombs. A day earlier, clashes broke out at a similar demonstration in Madrid, which is also preparing new austerity measures.
“The prospect that Spain might prove as truculent as Athens on the subject of reforms is a particularly uncomfortable one, since it risks making the Greek situation look like a mere sideshow,” said Chris Beauchamp, market analyst at IG Index.
“Oh, and the Greeks are on strike again, just to underline this point.”
In Europe, Spain’s IBEX index led the list of fallers, trading 3.9 per cent lower at 7,856, while the yield on the country’s 10-year bond edged up to 6 per cent.
Elsewhere, Germany’s DAX was 2.1 per cent lower at 7,269 while the CAC-40 in France fell 2.6 per cent at 3,422. The FTSE 100 index of leading British shares was down 1.7 per cent at 5,758.
The falls marked a sharp end to weeks of upbeat investor sentiment. Markets have been buoyant since the European Central Bank unveiled in August a plan to lower the borrowing rates of countries like Spain and Italy and prevent a breakup of the 17-country eurozone.
Fresh stimulus measures from major central banks also boosted sentiment.
On Wall Street, the Dow Jones industrial average was down 0.3 per cent at 13,412 while the broader S&P 500 index fell 0.7 per cent to 1,432.
The declines come on top of Tuesday’s falls, when US stocks were hammered by a warning from the Fed’s Charles Plosser that the central bank’s efforts to support the world’s biggest economy would likely fall short of its goals.