Global stock markets and the euro slid today as investors took a dim view that a plan last week to enforce greater fiscal discipline in the euro zone was enough to quell a two-year-old debt crisis.
Initial market enthusiasm on Friday faded due to the legal uncertainty surrounding the pact and the absence of a sufficiently strong financial backstop for the single currency.
The euro fell 1 per cent and borrowing costs for Italy and Spain rose as a plan to increase fiscal unity in the European Union did not restore financial market confidence.
Italian 10-year bond yields traded to yield 6.76 per cent, up from about 6.38 per cent on Friday, while investors rushed to the safety of US government debt. The price of the benchmark 10-year US Treasury note was up 17/32, pushing its yield down to 2.0 per cent.
"The pattern is to get optimism leading into these meetings, and almost inevitably we get disappointment," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "Nothing really has changed."
The FTSEurofirst 300 index of top regional shares in Europe fell 1.1 per cent to 975.05 and Wall Street opened lower about 1 per cent lower.
The Dow Jones industrial average was down 118.22 points, or 0.97 per cent, at 12,066.04. The Standard & Poor's 500 Index was down 15.57 points, or 1.24 per cent, at 1,239.62. The Nasdaq Composite Index was down 37.50 points, or 1.42 per cent, at 2,609.35.
Brent crude slipped below $108 per barrel.
"The austerity measures will have a profoundly negative impact on economic growth and will make 2012 a very challenging year in economic terms," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.
Spot gold prices fell $43.20 to $1,667.10 an ounce.
Reuters
