European stock markets slumped and the euro dropped under $1.28 for the first time in four months yesterday owing to concerns over fallout from the Cyprus bailout and a disappointing bond sale in Italy, analysts said.
In London, the FTSE 100 index of leading companies dipped 0.11% to close at 6,387.56 points.
In Frankfurt, the Dax 30 lost 1.15% to 7,789.09 points, while in Paris the Cac 40 sank 0.99% to 3,711.64 points.
Madrid fell 1.13% and Milan lost 0.92%. The Athens stock exchange, a low volume market, plunged 3.99% after Greece’s biggest banks posted heavy losses.
“The market is suffering from poor eurozone data, the situation in Cyprus and the Italian auction that puts the country front stage again,” said Andrea Tueni of Saxo Bank in Paris.
In foreign exchange deals, the euro dropped to $1.2751 — the lowest level since November 21 — before recovering slightly to $1.2772 compared with $1.2861 late in New York on Tuesday.
Gold prices gained to $1,606.70 an ounce from $1,598 Tuesday on the London Bullion Market.
The foreign exchange market “is concerned about medium-term contagion effects” of the Cyprus bailout, said Commerzbank analyst Thu Lan Nguyen.
Troubled eurozone nation Cyprus yesterday scrambled to finalise capital controls to avert a run on banks, a day before they are due to reopen after a nearly two-week lockdown while the island secured a huge bailout.
Elsewhere yesterday, in indebted eurozone member Italy there was weak demand at an auction of 5- and 10-year bonds, with bid-to-cover ratios of 1.2 and 1.3.
Ratios of above 2.0, where submitted bids are double those accepted, are considered strong.
The Italian treasury took in €3.91bn at a rate of 3.65%, a five-month high.
However the yield on 10-year bonds dipped 4.66%, compared with 4.83% at the last similar auction on February 27, with €3bn raised.
The European Commission meanwhile said its key business and consumer confidence index for the eurozone fell 1.1 points in March to 90 points, reflecting a downturn in the manufacturing and service sectors while consumer sentiment was steady overall.
Amid the gloom in Europe, US stocks moved lower yesterday in midday trading.
The Dow Jones Industrial Average gave up 0.27%, the broad-based S&P 500 sank 0.21%, while the tech-rich Nasdaq Composite Index dropped 0.19%.
The retreat followed strong gains Tuesday that resulted in a record high for the Dow and a near-all-time high to the S&P 500.
“Follow-through has been lacking this morning for reasons that are both convenient and clear,” Patrick O’Hare of Briefing.com wrote. “Headlines out of Europe are largely to blame.”