NEW YORK-Europe's latest efforts to quell its financial crisis left investors exasperated yesterday, causing steep losses in stock markets on both sides of the Atlantic. In Europe, Spain formally asked for help to rescue the country's ailing banks, but its request left many questions unanswered, including how much it needs of the US$125 billion loan package offered by other European governments. The uncertainty unsettled markets, pushing borrowing costs higher for Spain's government. Spain's stock market plunged 3.7 per cent. The Dow Jones industrial average dropped 138 points to close at 12,502.66, a loss of 1.1 per cent. The broader Standard & Poor's 500 index fell even more, 1.6 per cent. Big bank stocks slumped. Many analysts expect banks in Europe and the US to suffer from a freeze-up in Europe's financial system if Spain fails to rescue its troubled banks. Spain's banks have been hobbled by loans made during a real-estate bubble, and the government has been inconsistent about how much help it will need to save them.
The leaders of the 27 countries in the European Union meet Thursday and Friday in Brussels for another summit aimed at reining in the crisis, but market players remain skeptical that Germany will sign off on efforts to quell the crisis. The dollar and Treasury prices rose as investors shifted money into low-risk investments. The yield on the ten-year Treasury note fell to 1.61 per cent from 1.67 per cent late Friday. In other trading, the S&P 500 index fell 21.30 points to 1,313.72. All ten of the index's industry groups fell. The Nasdaq composite lost 56.26 points, or 1.9 per cent, to 2,836.16. Energy stocks were also big losers after the price of crude oil fell again. Benchmark US crude lost 55 cents a barrel to US$79.21, continuing a slump that has brought the price down from US$110 in late February. European markets closed sharply lower. Stocks dropped four per cent in Italy and two per cent in both France and Germany. Borrowing costs rose for Spain and Italy. The yield on Spain's 10-year government bond rose 0.16 percentage point to 6.58 per cent. That's dangerously high.
