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Global markets in tailspin

business Updated: Jun 16, 2011 23:44 IST

Rioting on the streets of Athens and the collapse of the Greek government is taking its toll on the world markets.

World stocks hit a three-month low on Thursday, the euro slumped to a one-month trough and top-rated government bonds rose as concerns intensified the lack of a deal on Greek debt might trigger disorderly market moves.

The MSCI world equity index fell 1% to hit its lowest level since mid-March, while emerging stocks were down 1.6%.

Yields on two-year Greek bonds — or the interest rate the government would have to pay lenders — soared to 28%, suggesting that investors believe the country is on the point of bankruptcy.

The cost of insuring Greek debt jumped 124 basis points (100 basis points is 1 percentage point) on the day to 1,850 bps. Credit default swaps in Ireland and Portugal also hit record highs.

The euro also fell as low as $1.5.

“It’s sell and ask questions later,” said Steven Goldman of Weeden & Co in Greenwich.

Europe’s leaders have failed to resolve the Greek debt crisis. A meeting of eurozone finance ministers broke down without a resolution on Tuesday.

The German government is calling for holders of Greek bonds to be forced to bear some of the costs of a new bailout, but its stance has been publicly contradicted by the European Central Bank, which is concerned about the risk that any restructuring would create mass panic in financial markets.

“Tuesday's latest budget deficit figures confirmed that fiscal consolidation in the country is just plain nonsense,” said Michael Derks of broker FxPro. “We may well have reached the point of no return.”

Reuters & The Guardian