I / London May 17, 2012, 20:42 IST
Europe's main stock markets tumbled today and the euro hit a new four-month dollar low as worries spiked over the eurozone debt crisis that is plaguing Greece and now circling Spain.
In afternoon deals, London's benchmark FTSE 100 index dropped 0.92% to 5,355.57 points and Frankfurt's DAX 30 slid 0.45% to 6,355.84 points.
In Paris, the CAC 40 shed 0.92% to 3,020.55, while Milan's FTSE Mib tumbled 1.44% and Madrid's IBEX 35 slumped 1.39%. In foreign exchange deals, the European single currency nosedived to a new four-month low at $1.2667. It later recovered to USD 1.2696, still down from $1.2715 late in New York yesterday.
"Markets are worried about eurozone bank deposit runs and an escalating banking crisis," VTB Capital economist Neil MacKinnon told AFP. Shares in Spain's state-rescued lender Bankia plunged today on the back of newspaper reports that clients had withdrawn more than one billion euros in the past week, while Greeks have also reportedly stepped up pulling funds out of their banks.
Spain's daily newspaper El Mundo reported that Bankia managers told the board the bank had lost a "similar amount" of deposits this week as the 1.16 billion euros withdrawn by clients in the first quarter of the year.
Spain's fourth-largest bank had 112 billion euros in deposits from clients at the end of the first quarter.
It shares plunged by over a quarter at one point but later recovered to show a loss of 13.9% at 1.425 euros in afternoon trading. In another gloomy omen, official data confirmed that Spain sank into recession with a 0.3-per cent contraction in the first quarter of 2012, matching the decline of the previous quarter.
Spain raised 2.494 billion euros in a sale of three- and four-year government bonds today, but was forced to pay higher rates in a sign of mounting concern over the country's debt position.
Meanwhile, Germany's benchmark 10-year bond saw its own rate reach a new record low of 1.420% as investors fled to financial safe-havens. "As we have said all along, the biggest risk is Spain," said research director Kathleen Brooks at trading site Forex.Com.
Investors remain extremely anxious that the eurozone debt crisis, which resulted in bailouts for Ireland, Greece and Portugal, could also sink Italy -- and particularly Spain.