Shares plunge as new dilemma sparks wave of selling
Published 12/07/2011 | 05:00
SHARES around the world plunged yesterday, as new fears that the sovereign debt crisis was spreading to Italy set off a wave of selling across Europe.
The crisis, which has previously been largely confined to the eurozone's periphery, seemed to be moving to a much more dangerous level.
A crisis over Italy -- a member of the G8 and one of the biggest economies in Europe -- would dwarf the bailouts for Greece, Portugal and Ireland.
Yesterday, the yield on 10-year Italian bonds hit 5.68pc -- the highest since 1999 and close to unsustainable levels. Spain, too, was seen to be in trouble, with the yield on its 10-year bond staying close to 6pc.
European markets sank the most in seven weeks, with all 18 indices in western Europe falling. Germany's DAX lost 2.3pc and Britain's FTSE 100 fell 1pc. By late afternoon in New York, the Dow Jones Industrial Average was off 1.4pc.
Dublin's Iseq Overall Index closed down 1.47pc at 2,900.25.
All eyes were on Italy, however, where the FTSE MIB Index slid 4pc. The index has now moved into a bear market.
UniCredit, Italy's biggest bank, tumbled 6.3pc, while the second biggest, Intesa Sanpaolo, plunged 7.7pc.
The euro slumped to a seven-week low against the dollar.
On Sunday night, in a move that bore an uncomfortable similarity to previous episodes of the financial crisis, Italy's regulator ordered short sellers to reveal their positions when they reached 0.2pc or more of a company's capital and then make additional filings for each extra 0.1pc that they acquired.
In a sign that investors were moving further from risk than they have done in months, the German two-year note yield has dropped below the ECB's key interest rate for the first time since January.