US growth and eurozone woes hit stocks - Financial Times

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Monday 16.35 BST. Investors dumped European banking stocks and sharply pared positions in growth-focused assets as worries about the eurozone debt crisis and the US economy continue to batter sentiment.

Germany’s Dax index fell 5.1 per cent to its lowest level since November 2009 on a cocktail of concerns and the FTSE Eurofirst 300 lost 3.8 per cent as financials took a severe beating. Investors are piling into the perceived haven of German sovereign debt, forcing Bund yields to record lows.

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The FTSE All-World equity index is down 2 per cent, following a rotten session in Asia and there is broad softness in commodities, where copper is off 1.7 per cent to $4.05 a pound and Brent crude is lower by 1.3 per cent to $110.86 a barrel.

Corporate and sovereign credit default swap indices in Europe widened, and gold is benefiting from the tension, rising 0.8 per cent to $1,899 an ounce.

Wall Street is closed on Monday for the labour day vacation, but in electronic trading the S&P 500 futures contract is down 2 per cent.

The action at the start of the week is primarily focused on two themes: the hangover from an extremely disappointing US jobs report on Friday and nervousness ahead of a week of eurozone fiscal and political wrangling.

The latter is delivering one of its regular pulses of intense stress and appeared to be the main driving force going into the European close.

Fiscal vacillation in Rome and doubts about Greece’s latest bail-out tranche are again causing tremors. Italian 10-year yields have risen for the 11th consecutive session, up 28 basis points to 5.57 per cent, even as the European Central Bank is seen standing as a backstop. Vague talk of an imminent downgrade for Italy is doing the rounds – unsubstantiated, it should be stressed.

The ECB will meet on Thursday to discuss monetary policy and the Italian debt purchase programme is likely to be on the agenda. Read More ...