Global spread betting markets sank this afternoon as Italian borrowing costs reached breaking point, and investors feared the Eurozone's third largest economy could be facing a debt crisis similar to that of Greece.
By 4pm (London time) the FTSE 100 had plunged 2.14% to 5448.08, while the FTSE 250 was 1.60% lower at 10,252.44. Wall Street tracked London's losses with the S&P 500 plummeting 2.27% to 1246.94 and the Dow down 2.07% at 11,918.76.
Europe becomes 'unpleasant'
Italian borrowing costs reached another record high this afternoon despite Prime Minister Berlusconi's promise to resign.
This failed to raise optimism about the country's ability to deliver on long-promised economic reforms but we also saw LCH Clearnet boost the margin requirement for Italian bonds.
Italian ten-year bond yields shot above the 7% level, which is widely deemed unsustainable, prompting the German chancellor Angela Merkel to call for changes in the EU treaty.
Ms Merkel said the situation in Europe is now 'so unpleasant' that deep structural reforms are required quickly.
She further said that declarations of good intent are no longer good enough and that genuine structural reforms are needed.
Ms Merkel called for the changes after French president Nicolas Sarkozy signalled that some members may have to exit the Eurozone if the entire structure is not to crumble.
The European Central Bank wasted no time intervening to buy Italian bonds in large amounts, although the results were short-lived.
Italy has now replaced Greece at the centre of the Eurozone debt crisis, and is on the cusp of requiring a bailout that Europe cannot afford.
With a debt burden of about €1.9 trillion, Italy is considered too difficult to bail out, and a default could potentially create a credit event worse than the 2008 credit crunch.
Kesa sells Comet
Kesa, the electrical retailer, has announced that it has offloaded its loss making Comet stores to private investment firm OpCapita, ending a sale process that was slowed by the business's pension and property liabilities.
OpCapita will pay Kesa £2 for the business, plus a portion of any future sale that raises more than £70 million.
The deal marks a retreat by Kesa from the difficult UK retail market, particularly for specialist stores.
Earlier this week, Best Buy and Carphone Warehouse said they would shut their 11 'big box' electrical goods stores in the UK, a loss-making joint venture between the two groups.
Kesa's shares rose as much as 7% in early trading this morning but gave up gains by late afternoon to stand 1% lower at 100.6p
General Motors' earnings slow down
General Motors announced this afternoon that its third-quarter earnings fell by 15% as operations outside of North America struggled.
The car manufacturer reported a profit of $1.7 billion or $1.03 a share, down from $2 billion or $1.20 a share, a year ago.
GM made $2.2 billion in North America, but outside the US GM is hampered by broader economic turmoil, currency issues and a need to restructure some of its own operations.
In Europe, GM cut its loss in half from a year ago to $292 million and said it doesn't expect to meet its goal of breaking even in the region this year.
In South America, where GM is working to revive an aged product line-up and where costs have been creeping up, the company lost $44 million, down from a $163 million profit a year ago.
GM's international operations unit, which includes China, India and Russia, made $365 million compared to $516 million a year ago. Shares in the company were down over 8% to $23 this afternoon.
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'Global Spread Betting Markets Sink as Italian Borrowing Costs Soar', Article by IG Index, last update: 9-Nov-11
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