Forex Pros – European stock markets fell sharply on Tuesday, as mounting fears that the euro zone’s debt crisis would spill over to large economies such as Italy and Spain prompted investors to shun riskier assets.
During European morning trade, the EURO STOXX 50 plunged 2.15%, France’s CAC 40 tumbled 2.3%, while Germany’s DAX 30 retreated 2.3%.
International Monetary Fund Chairwoman Christine Lagarde said earlier that the IMF was not ready to discuss terms of a second bailout package for Greece.
Dutch Finance Minister Jan Kees de Jager said that a selective default on Greek debt could no longer be ruled out, adding to investors nervousness over the region’s debt woes.
Meanwhile, the cost of insuring Italian government debt against default rose above 6% on Tuesday for the first time since the inception of the single currency, while Spanish government bond yields continued to climb higher.
Shares in Italy’s largest lender Unicredit plunged 7.85%, Banco Popolare di Milano sank 6.6%, while Intesa Sanpaolo lost 5.5%. UniCredit shares have lost more than 30% since the start of July.
Other bank stocks also tumbled across the region, with Spanish lender Banco Santander dropping 3.1%, while French lenders BNP Paribas and Credit Agricole sank 4.9% and 5.1% respectively.
Meanwhile, shares in French telecom-equipment manufacturer Alcatel-Lucent slumped 4.9% after Deutsche Bank downgraded the stock to ‘hold’ from ‘buy’, saying “key momentum indicators” for the firm are starting to slow down.
In London, the FTSE 100 dropped 1.7% as shares in holiday-travel company Thomas Cook Group plummeted 28.3% after issuing a profit warning, citing a bigger-than-expected impact from the unrest in the Middle East and North Africa.
U.K. lenders were also sharply lower, with Barclays tumbling 4.1%, Lloyd’s Banking Group down 2.9%, while Royal Bank of Scotland declined 1.5%.
The outlook for U.S. equity markets was downbeat. The Dow Jones Industrial Average futures pointed to a loss of 0.9%, S&P 500 futures dropped 1.1%, while the Nasdaq 100 futures indicated a decline of 0.95%.
Later in the day, the U.S. was to publish official data on its trade balance, while the Federal Reserve was to publish the minutes of its June policy-setting meeting.
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