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London - World stocks hit a 1-1/2 week low on Friday, on track for their biggest weekly loss since August 2010, and the euro fell across the board as ratings agency Moody’s’ threat to downgrade Spain rekindled concerns that the eurozone crisis is spreading.
Oil prices and other risky assets also fell as US lawmakers made little progress in breaking the deadlock over raising the debt ceiling and avoiding a default. An emergency meeting is scheduled for Friday to reach a deal on raising the country’s $14.3 trillion debt ceiling by the August 2 deadline to avoid running out of money.
Moody’s placed Spain’s “AA2” credit rating on review for possible downgrade, citing weak growth and funding pressures. This followed Thursday’s disappointing Italian auction which saw 10-year bonds sold at the highest yield in 11 years.
A string of disappointing corporate results in the euro zone also encouraged investors to cut back on risks ahead of the weekend.
“We’re getting a lot of totally unexpected profit warnings from companies that were seen solid, and the market shows no mercy,” Kepler Capital Markets trader Patrice Perois said.
“People are rattled by the whole debt crisis from both sides of the Atlantic, but at the same time, charts show the indexes as not in oversold territory, so there is still room on the downside. This isn’t capitulation yet.”
MSCI world equity index fell 0.5%. The benchmark index is down 6.5% since hitting a three-year high in April. European stocks lost 0.8%.
According to Thomson Reuters data, 51% of DJSTOXX 600 companies reporting second-quarter results have met or beaten expectations.
Emerging stocks were down 1%.
US crude oil fell 0.5%.
Bund futures rose 42 ticks. Spanish 10-year bond yields were 11 basis points higher at 6.16%, back to levels seen before details of the second rescue package for Greece became clear.
Italian 10-year yields were 9 basis points higher at 5.93%, nearing the 6% line many see as unsustainable in the long-term.
The dollar generally benefited from flows out of the single currency, rising 0.1% against a basket of major currencies. Against the safe-haven yen however, it hit a four-month low of 77.43 yen - approaching a record low around 76.25.
The euro fell 0.3% to $1.4287.
Even if lawmakers agree on a last-minute deal it was uncertain whether the United States could retain its triple-A rating that helps make US debt a pillar of the global financial system.
“To be brutally honest, no one really thought we would ever get to this situation,” Ben Potter, strategist at IG Markets, said.
“We’re basically standing on the edge of an abyss, peeking over, with the bottom nowhere to be seen. That’s the situation facing all financial markets heading into a weekend that could prove to be one of the most crucial in history.”
Oil prices and other risky assets also fell as US lawmakers made little progress in breaking the deadlock over raising the debt ceiling and avoiding a default. An emergency meeting is scheduled for Friday to reach a deal on raising the country’s $14.3 trillion debt ceiling by the August 2 deadline to avoid running out of money.
Moody’s placed Spain’s “AA2” credit rating on review for possible downgrade, citing weak growth and funding pressures. This followed Thursday’s disappointing Italian auction which saw 10-year bonds sold at the highest yield in 11 years.
A string of disappointing corporate results in the euro zone also encouraged investors to cut back on risks ahead of the weekend.
“We’re getting a lot of totally unexpected profit warnings from companies that were seen solid, and the market shows no mercy,” Kepler Capital Markets trader Patrice Perois said.
“People are rattled by the whole debt crisis from both sides of the Atlantic, but at the same time, charts show the indexes as not in oversold territory, so there is still room on the downside. This isn’t capitulation yet.”
MSCI world equity index fell 0.5%. The benchmark index is down 6.5% since hitting a three-year high in April. European stocks lost 0.8%.
According to Thomson Reuters data, 51% of DJSTOXX 600 companies reporting second-quarter results have met or beaten expectations.
Emerging stocks were down 1%.
US crude oil fell 0.5%.
Bund futures rose 42 ticks. Spanish 10-year bond yields were 11 basis points higher at 6.16%, back to levels seen before details of the second rescue package for Greece became clear.
Italian 10-year yields were 9 basis points higher at 5.93%, nearing the 6% line many see as unsustainable in the long-term.
The dollar generally benefited from flows out of the single currency, rising 0.1% against a basket of major currencies. Against the safe-haven yen however, it hit a four-month low of 77.43 yen - approaching a record low around 76.25.
The euro fell 0.3% to $1.4287.
Even if lawmakers agree on a last-minute deal it was uncertain whether the United States could retain its triple-A rating that helps make US debt a pillar of the global financial system.
“To be brutally honest, no one really thought we would ever get to this situation,” Ben Potter, strategist at IG Markets, said.
“We’re basically standing on the edge of an abyss, peeking over, with the bottom nowhere to be seen. That’s the situation facing all financial markets heading into a weekend that could prove to be one of the most crucial in history.”
