Stocks fall in Europe, Asia over worries about Italy
Stocks drop 1 percent or more on major European indexes because of concerns about Italian debt. Japan limits losses with yen intervention. US stocks expected to open lower.
Global stocks gave up some of their recent gains Monday amid concerns over Italy's ability to get a handle on its colossal debt pile, while the yen slid in the wake of another attempt by the Japanese monetary authorities to weaken the currency.Skip to next paragraph
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Last week, stocks enjoyed one of their best weeks in months as investors breathed a sigh of relief that eurozone leaders finally presented the broad outlines of a convincing anti-crisis strategy. The three-pronged strategy of boosting the bailout fund, getting private creditors to take a bigger hit on their Greek debt holdings and the banks to raise more capital was largely viewed favorably by the markets, though details need to be ironed out.
Many analysts, however, think that Europe will end up having to do more, especially if bond market investors continue to ask for more in return for buying up Italian debt — a poorly received auction last Friday has fueled concerns over the country.
Italy is the eurozone's third largest economy and only Greece has more debt as a percentage of national income. Its debts dwarf the €1 trillion ($1.4 trillion) Europe's bailout fund will have at its disposal if last week's commitments are delivered.
"We remain sceptical that the plan will prove enough to restore financial market stability for long, with some signs of disappointment already starting to creep into the market as Italian 10 year yields continue to march above 6 percent," said Lee Hardman, an analyst at The Bank of Tokyo-Mitsubishi UFJ.
Investors more cautious view of last week's plan weighed on stock markets Monday.
The strong yen has dented earnings of Japanese corporations such as Nintendo Co. and Toyota Motor Corp. and hurt the economy's recovery from the March 11 earthquake and tsunami. Finance Minister Jun Azumi said monetary authorities could continue intervening.
The dollar surged about 5 percent to above 79 yen for a while, before slipping back to 77.81 yen. Japan's export sector — whose fortunes are largely tied to the relative strength of the yen — rose abruptly. Isuzu Motors Corp. jumped 3.7 percent. Canon Inc. rose 1 percent and Nikon Corp. added 1.8 percent. Nintendo Co. gained 1.5 percent.