There was a huge sell off on Europe’s stock markets on Friday after Spain’s heavily indebted Valencia region asked for a central government bailout, and Madrid cut the country’s economic growth forecast for this year and next rekindling concerns about Spain’s financial health and the eurozone debt crisis
The index of the region’s top 50 shares slumped 2.8 percent while Madrid’s bourse suffering its biggest one-day drop in two years – down 5.8 percent.
Spanish borrowing costs also headed higher – interest on its 10-year government bonds moved further above the seven percent level that markets view as too expensive to be sustainable.
Investors took profits from the recent rally before the weekend, and in some cases summer holidays.
The biggest losers were banks and insurers, which will suffer through their bond holdings and loans if the eurozone crisis intensifies.
The euro hit record lows against several currencies – at one stage it was at its worst against the dollar in over two years.
The firmer dollar pulled down oil prices.