Spain's to blame for world market slump

@CNNMoneyInvest July 12, 2012: 3:16 PM ET
stocks europe asia world markets

Click on chart to track markets

NEW YORK (CNNMoney) -- The Spanish government's abrupt plan to slash more spending did not go over well with overseas investors on Thursday.

London's FTSE (UKX) was down 1% at the close, the DAX (DAX) in Frankfurt was lower by 0.5% and the CAC 40 (CAC40) in Paris fell 0.7%. Spain's IBEX dropped 2.6%.

Spanish Prime Minister Mariano Rajoy announced a new round of austerity measures Wednesday in a speech to parliament, vowing to cut the country's costs by €65 billion, or about $80 billion, in less than three years. He pledged to do this by raising taxes and reducing government spending, requiring further austerity measures.

This was an unexpected move from the Spanish government. It had been saying there wouldn't be any need for austerity, but then suddenly "sprung all this new austerity on the Spanish public," said Tommy Molloy, chief dealer at FX Solutions in Saddle River, NJ

That prompted thousands of protestors -- including miners opposed to cutting of coal subsidies - to pour into the streets of Madrid, where they fought with armored police. Protestors flung rocks, while the police responded with clubs and rubber bullets. More than 70 people were injured, including riot 33 cops and 43 protesters, according to CNN.

Molloy said that Europeans were shocked by news footage of violent protests in Spain, a country haunted by high unemployment, particularly among its youth. He said the "sinister tone" of "blood on the street in Spain" reminds Europeans of similarly violent anti-austerity protests in Greece.

"To see Spain going down the same road as Greece was a cold shower for everyone," he said.

The violent street protests in Spain only add to the general feeling of uncertainty among European investors. Molloy said that investors are constantly worried about the possibility of new measures being handed down by European leaders, particularly Germany.

A German court is currently debating the future of Europe's bailout fund - a process that could take three months.

The Spanish contagion has spread throughout world markets. The Hang Seng (HSI) in Hong Kong was down 2% at the close, while Tokyo's Nikkei (N225) was lower by 1.5%. The Shanghai Composite (SHCOMP) was the exception, finishing up 0.5%.

On Wall Street, the Dow Jones industrial average (INDU), Nasdaq 500 (SPX) and Standard & Poor's (COMP) were all lower, as the pressure of investor anxiety outweighed the benefits of a better-than-expected jobless claims report. To top of page

Index Last Change % Change
Dow 17,098.45 18.88 0.11%
Nasdaq 4,580.27 22.58 0.50%
S&P 500 2,003.37 6.63 0.33%
Treasuries 2.34 0.01 0.39%
Data as of 2:34pm ET
Company Price Change % Change
Bank of America Corp... 16.09 0.08 0.50%
Apple Inc 102.50 0.25 0.24%
Intel Corp 34.92 0.27 0.78%
Facebook Inc 74.82 0.96 1.31%
General Electric Co 25.98 -0.03 -0.12%
Data as of Aug 29
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.07%4.28%
15 yr fixed3.18%3.26%
5/1 ARM3.36%3.43%
30 yr refi4.05%4.21%
15 yr refi3.17%3.18%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.