Business, Finance & Economics

European stocks fall sharply

European stocks fell sharply on Monday, amid fears about Europe's sovereign debt crisis and economic growth in Europe and the U.S.

The Stoxx Europe 600 index fell 4.1 percent to close at 223.45, The Wall Street Journal reports. Italy's FTSE MIB index fell 4.8 percent to 14333.91. The French CAC 40 index dropped 4.7 percent to 2999.54. And the Spanish IBEX 35 index fell 4.7 percent to 8066.50.

The yield on the benchmark 10-year German government bond plunged to well below 2%, a new record, while Italian yields rose on fears the government's commitment to austerity and reform is weakening.

According to the Journal, European bank stocks dropped on concerns about growth and a recent massive lawsuit brought by Fannie Mae and Freddie Mac over mortgage securities.

The Guardian had more about the context of Monday's market turmoil.

As pressure mounted on Italy to meet its budget commitments, the yield on its bonds jumped to new highs, while news that Germany's ruling party lost another regional election in the state of Mecklenburg-Western Pomerania – chancellor Angela Merkel's fourth straight regional election defeat this year –cast doubt over Europe's ability to agree on a solution to the debt problems. This follows Friday's news that European Union officials had interrupted talks on an aid package for Greece as it had fallen behind in cutting its budget deficit.

"The same old worries and uncertainty that have been haunting the markets over the past year and a half returned today, reminding investors that the European debt crisis is still the biggest single threat to the global economy," Angus Campbell, head of sales at Capital Spreads, told The Guardian. "The political losses for Germany's leader over the weekend have thrown into question the ability of the eurozone's biggest economy and ultimate paymaster to be able to ratify all the bailouts that have been gifted around in recent months."

Chris Weston, an institutional trader at IG Markets, pointed across the Atlantic, at the worse-than-expected jobs report released by the U.S. government on Friday.

"That US non-farm payroll reading certainly left traders with little to celebrate on Friday, pushing markets on both sides of the Atlantic sharply lower as a result," he said. "This has certainly set the pace for Asian markets too and with Wall Street closed today for Labour Day, it seems unlikely that there will be much appetite to start taking on any risk just yet."