European shares fell to their lowest close in more than two years today amid worries the euro zone debt crisis was deteriorating, with political discord in the region, and that major economies were headed for recession.
Banks exposed to the euro zone peripheral among the worst performers. The STOXX Europe 600 Banking Index fell 2.1 per cent and hit a fresh 29-month low. French banks BNP Paribas and Société Générale fell 5.2 and 6.3 per cent respectively.
The pan-European FTSEurofirst 300 index of top shares fell 0.7 per cent to end the session unofficially at 904.07 points, its lowest close since July 2009.
However, Switzerland's share benchmark climbed 4.4 per cent after the country's central bank set an exchange rate cap on its soaring franc to stave off a recession.
"We're still in the eye of the storm," said Richard Batty, strategist at Standard Life Investments.
"Investors are concerned about the tier two economies, such as Italy, and its ability to get its budget through parliament, and come up with a fiscal consolidation plan to make its debt sustainable."
Globally, stock markets fell on fears of the European debt crisis worsening, as the Swiss franc lost nearly 10 per cent against the euro after
Switzerland's central bank sought to slow the safe-haven rush into its currency, which it worries could hurt its economy.
Nervous investors channelled cash into less risky assets as doubts resurfaced over Italy and Greece's willingness to implement tough budget and debt measures demanded by other euro zone members, while Germany hardened its stand against giving them more aid.
The Swiss central bank set a limit of 1.20 francs to the euro in an attempt to keep its currency strength from damaging the economy. Global investors have poured money into the Swiss franc seeking a relatively safe asset.
The move took some of the shine off gold, but it was not far below its record high above $1,900 an ounce.
US and German government debt, perceived as safer assets amid the turmoil, rallied and pushed benchmark yields to historic lows.
The pan-European FTSEurofirst 300 was down 0.7 per cent after falling more than 4 percent on Monday on renewed worries about Europe's ability to solve its debt problems.
US and European equities pared their losses, however , after a report showed that growth in the US services sector unexpectedly improved in August.
Reuters
