Shares swept away as debt storm returns to eurozone

SHARES on both sides of the Atlantic tumbled yesterday on fears over the health of the European and American economies, writes Hugo Duncan. Stock markets in Europe fell by as much as 3pc after Spain was dragged back to the front line of the sovereign debt crisis stalking the region. The FTSE 100 index plunged 2.3pc – wiping £35bn off the value of Britain’s leading companies – on its worst day of 2012. European Central Bank chief Mario Draghi did little to improve the mood with a warning that the eurozone economy and financial system remain fragile. Investors on Wall Street dumped shares after the US Federal Reserve said it was unlikely to provide anymore stimulus to boost the economy. Will Hedden, a sales trader at IG Index in London, said ‘a somewhat perfect storm of reasons to exit the market’ gave ‘traders plenty of reason to head for the Easter Holiday door a little early’. Every blue-chip stock in London fell as the Footsie shed 134.57 points to close the day at 5703.77. The euro fell against the pound and to a three-week low against the US dollar, while the Dow Jones Industrial Average lost more than 1pc of its value in New York soon after the opening bell. The sell-off came after a disappointing auction of Spanish debt reignited concerns about the debt storm battering the eurozone. Madrid sold €2.6bn (£2.15bn) of bonds to investors – but it was at the lower end of what it hoped for and the Spanish government was forced to pay a higher rate of interest to attract buyers. It was the first bond auction since Mariano Rajoy’s administration admitted in its budget that public debt will hit a new record high this year. Spanish 10-year bond yields – the benchmark government borrowing cost – rose to 5.62pc in a sign of dwindling confidence in plans to get the public finances back under control.