Online spread betting markets remained alert this afternoon as investors fretted that policymakers were not acting fast enough to address a deepening Eurozone crisis.
Many fear that this may see Greece default on its debt, and potentially engulf Europe’s banking system and other larger economies.
By 4pm (London time), the Dow Jones was down 1.04% at 10,874.18, while the S+P 500 was 1% lower at 1142.86. In London, the FTSE 100 lost almost 2% and was down at 5114.11.
Greece to run out of cash in October
Fears over debt-laden Greece haunted the FX spread betting market this afternoon after Athens announced it has only enough cash to operate until next month. This highlighted the country's need to qualify for the next tranche out of its ongoing bailout.
Greece's international lenders threatened last week to withhold the sixth bailout payment of about €8 billion because of the country's repeated fiscal slippages.
The Greek government announced on Sunday a new property tax to make sure it will meet its budget targets and qualify for the next payout.
Greece is due to resume suspended talks with international lenders on Wednesday. However, Berlin has little confidence that Greece will meet its fiscal commitments and has begun to prepare for Greece to default, ring-fencing Athens from the rest of the Eurozone.
France and Italy fight back
Risk aversion returned in full force today as fear increased after markets speculated that France's top banks and Italy's credit rating will be downgraded by ratings agency Moody's.
On 17 June Moody's announced that it had placed Italy’s credit rating and French banks under reviewed over a 90 day period, with the deadline approaching at the end of this week.
However, both France and Italy retaliated this afternoon. French bank stocks tumbled this morning due to mounting speculation over their exposure to Greek debt and fears that the state might need to intervene to prop up their capital. This afternoon, French finance minister, Francois Baroin, tried to convince investors that French banks were solid enough to withstand any crisis situation that might arise in Greece.
Italian Prime Minister, Silvio Berlusconi, on the other hand hoped to calm fears by promising that an austerity bill would be approved quickly without further changes. The €54 billion package, aimed at balancing the budget by 2013, is in the final stages of a parliamentary approval process after weeks of changes to the measures.
He also announced he would 'urgently' travel to Brussels to reassure European leaders over the chaos around the deficit-cutting measures tomorrow.
M&A announcement fails to boost markets
Colfax, global supplier of a range of fluid handling products, said today it will buy toolmaker Charter for £1.53 billion in cash and shares, after beating off rival bidder Melrose with a 910p per share offer.
Charter shares were up 5.7% at 850p this afternoon while shares in Melrose, which had seen two approaches rejected by Charter, were up 4.4%, indicating that the bid battle may not be completely over.
Colfax's owners may face a struggle to win over shareholders who think Melrose would do a better job of turning Charter around.
Additional M&A news, which saw the S+P 500 enter positive territory for a short-lived period, was news of semiconductor provider Broadcom, agreeing to buy NetLogic Microsystems for $3.7 billion.
Broadcom announced it will pay a premium of 57% over NetLogic's Friday close of $31.9 per share, at $50 per share. NetLogic's shares rose 51% in pre-market trading this afternoon.
The companies said the transaction has been approved by their respective boards and it is expected to be finalised in the first half of 2012.
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'Greek Debt Fears Haunt FX Spread Betting Markets', Article by IG Index, last update: 12-Sep-11
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