Euro's troubles take down global markets; BRIC stocks officially enter 10% correction

05/23/2011 1:40 pm EST


Jim Jubak

Founder and Editor,

Just when you think the euro debt crisis can’t get any worse, it does. Or at least that’s how stock markets see it today.

The bad news from Europe today includes a cut to Italy’s credit rating outlook by Standard and Poor’s and a smashing defeat by Spain’s ruling Socialist party in local elections as voters voiced their opposition to budget cuts.

As of 1 p.m. ET on Monday May 23 the Dow Jones Industrial Average was down 151 points or 1.2%, the S&P 500 was down 1.3%, Germany’s DAX was down 2%, London’s FTSE 100 was down 1.9%, Hong Kong’s Hang Seng index was down 21%, and the Shanghai Composite index was down 2.9%.

Slovakia’s Slovak Share Index was up 0.93%. (The index isn’t especially important but it is the only index I can find that’s in the green today.)

The worry on the news from Italy and Spain is that the euro crisis will spread from Greece, Ireland, and Portugal to take in Spain and Italy. The European Union’s rescue fund would be exhausted if Spain needed a bailout.

Today the euro is down another 0.84% against the dollar to $1.4042.

As has been the pattern lately, with the dollar up, commodities are down. West Texas Intermediate crude oil is down 2.4% to $97.39 a barrel. Copper is down 3.2%.

In general traders and investors are selling risk and buying safety. The yield on the 10-year U.S. Treasury—which falls when Treasury prices rise—fell to 3.11% at of 1 p.m. The yield on the 10-year German bund moved lower as well to 3.01%.

In contrast the yield on a 10-year Greek government debt climbed to 17.03%. The MSCI BRIC Index of the four biggest emerging markets dropped 2.2%. The index is now down more than 10% from its high on April 8.

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