Debt Crisis: Stocks and euro hit record lows after Spain’s Valencia calls for aid
US and European stocks slid on Friday and the euro hit record lows against several currencies after Spain's heavily indebted Valencia region called for aid, increasing investor fears that the Spanish government is moving toward a full-blown bailout.
The risk premium on Spanish government debt hit a euro-era high as its borrowing costs climbed back above the 7pc threshold considered unsustainable.
Little relief is seen any time soon.
The euro plunged to record lows against the Australian, Canadian and New Zealand currencies and hit multi-month lows against the yen and the Norwegian and Swedish crowns.
The euro fell as low as $1.2143, its weakest level against the dollar since mid-June 2010. It last traded at $1.2160, down 1 percent, as a sell-off against sterling and the Swedish crown exacerbated the euro's slide.
"The market got a little bit of a curve ball thrown at it with the Valencia news," said Matthew Lifson, senior currency trader and market analyst at Cambridge Mercantile Group in Princeton, New Jersey. "We were drifting and everything was looking OK and this news comes out and it just gives people more reason to sell the euro."
US equity markets opened lower and European stocks extended losses to set fresh session lows after the European Central Bank said it would stop accepting Greek bonds as collateral, adding to concerns about the euro zone debt crisis.
The Dow Jones industrial average was down 81.36 points, or 0.63pc, at 12,862.00.
The Standard & Poor's 500 Index was down 8.41 points, or 0.61pc, at 1,368.10.
The Nasdaq Composite Index was down 24.51 points, or 0.83pc, at 2,941.39.
The FTSEurofirst 300 traded 1.4pc lower at 1,049.27 points.
"The news from Europe continues to be a smouldering mess, and it will be a long convoluted process before things are resolved there," said John Kattar, who helps oversee $1.7bn in assets as chief investment officer at Eastern Investment Advisors in Boston.
German bond prices jumped and U.S. Treasuries rose as investors clamoured for safe-haven assets.
German 10-year bond yields fell 6 basis points to 1.16pc, and the benchmark 10-year US Treasury note was up 14/32 in price to yield 1.4635pc.
The US dollar index rose almost 0.7pc to 83.474.
Oil fell toward $106 per barrel as a firmer dollar spurred a dip from an eight-week high hit in the previous session due to supply worries linked to tension in the Middle East and hopes of an economic stimulus in the United States.