Stocks fell, Italian bonds dropped for an 11th day and the cost of government and bank default insurance rose to records on concern Europe’s debt crisis will worsen. The euro weakened, while the dollar and gold gained.
The MSCI All-Country World Index sank 2 percent at 11:50 a.m. in New York. Banks led the Stoxx Europe 600 Index down 4.1 percent in the biggest two-day slump since March 2009. Italy’s 10-year bond yield rose 29 basis points in the longest sequence of gains since the euro’s debut in 1999. The German bund yield fell to a record low of 1.85 percent. Rates on two-year Greek debt exceeded 50 percent for the first time. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose 18 basis points. The euro weakened for the fifth day versus the dollar, the longest since January.
German Chancellor Angela Merkel’s party lost weekend elections in her home state, stoking concern opposition is growing to bailouts for debt-saddled European nations. The U.S. filed 17 lawsuits against banks on Sept. 2 to recover $196 billion spent on mortgage-backed securities bought by Fannie Mae and Freddie Mac. Citigroup Inc. cut its 2011 global economic growth forecast today to 3.1 percent from 3.7 percent. U.S. markets are closed today for the Labor Day holiday.
