Global stocks and the euro slid as Italian borrowing costs reached a breaking point, and investors feared it could be facing a debt crisis similar to that of Greece.
US markets followed their European counterparts sharply lower amid rumors over the strength of the Eurozone after Italian debt yields jumped as high as 7.4 per cent, the level at which other troubled Eurozone countries sought rescues.
At the close the Dow Jones Industrial Average was down 387.9 points at 11 782.23. The S&P 500 lost 46.74 to 1 229.18 and the Nasdaq Composite dropped 105.84 points to 2 621.65.
World stocks as measured by MSCI were down 1.8 per cent, while in Europe the FTSEurofirst 300 lost 1.7 per cent.
This morning, Asia markets fell as rising Italian borrowing costs washed fresh waves of anxiety about the euro-zone debt crisis over the region.
Hong Kong’s Hang Seng Index plunged 4.5 per cent, South Korea’s Kospi lost 3.9 per cent, and Japan’s Nikkei Stock Average dropped 2.8 per cent. Australia’s S&P/ASX 200 index gave up 2.8 per cent and China’s Shanghai Composite fell 1.1 per cent.
The US dollar is currently trading at 1.35 to the euro, 1.59 to the pound and will buy 77.68 Japanese Yen or 8.01 South African Rand.
Domestic markets South African markets fell yesterday, dropping 2.3 per cent as fears about the outlook for Italy’s debt crisis pushed investors to sell off recent gainers such as miners and banks.
At the close, the JSE all-share index was down 2 per cent to 32,017.01 points, with platinum tumbling 2.93 per cent; resources lost 2.59 per cent, but gold was flat. Banks were down 1.86 per cent, financials slid 1.52 per cent and industrials lost 1.79 per cent.
South African bonds weakened further in late afternoon trade as the Moody’s Investors Service outlook downgrade weighed on the market.
Yesterday, Moody’s changed its outlook on SA’s A3 local-and foreign-currency government debt ratings to negative from stable. The main drivers of the downgrade were a concern on politics and on the potential impact of lower economic growth.
By the close, the R157 bond was trading at 6.465 per cent from its previous close of 6.360 per cent. The R207 was bid at 7.820 per cent and offered at 7.825 per cent from a previous close of 7.700 per cent and the R186 was trading 8.280 per cent from its close of 8.170 per cent.
Brent crude oil gained yesterday, as cooling Chinese inflation suggested Beijing had room to ease monetary policy, soothing fears of a sharp slowdown in the world’s second largest oil consumer.
Spot gold is currently trading at US$ 1758.00/oz and platinum at US$ 1613.50/oz. Brent crude oil is currently trading at US$ 112.36 per barrel.