GLOBAL MARKETS:GLOBAL STOCK markets retreated and the euro weakened yesterday as world leaders at the G20 summit failed to reach agreement on boosting the International Monetary Fund's war chest.
Italian bond yields soared to euro-era highs as the country was effectively placed under the supervision of the IMF.
Any initial optimism over news that Greece had abandoned plans to hold a bailout referendum quickly evaporated as the G20 summit in Cannes failed to deliver the progress markets had hoped for. After a brief rally, European equity markets moved into negative territory.
“The uncertainty that reigns will halt any advance in the markets, which are looking for certainty and political response to march on,” a Dublin broker said yesterday.
National benchmark indexes fell in all 18 western European markets this week. The UK’s FTSE 100 Index slid 3.1 per cent over the week, Germany’s DAX Index lost 6 per cent and France’s CAC 40 Index retreated 6.7 per cent. The Iseq index declined 17.6 points yesterday, and finished slightly lower over the week as a whole.
An unexpected fall in the US unemployment rate was eclipsed by concern over the euro zone crisis, which sent the Standard and Poor’s 500 Index towards its first weekly drop since September.
The euro slid against the dollar yesterday. After a volatile session, the single currency finished 0.1 per cent weaker at $1.3793.
Italy’s notional borrowing costs continued to rise, with the country’s 10-year bond yield climbing as much as 21 basis points to 6.40 per cent.
“The Italian bond yield is the only game in town. If this trend continues, we’ve got serious problems. It’s not sustainable,” said David Coombs, fund manager at Rathbone Brothers.
(Additional reporting – Reuters)