Fears of debt contagion intensified Thursday, sending U.S. and European markets into a dramatic tailspin.
The Dow Jones Industrials fell 4.3%, the S&P 500 4.78% and the Nasdaq dropped 5.08%. Italy’s Milan bourse plunged 5.2%, France’s CAC-40 fell 3.9%, and London’s FTSE and Germany’s DAX indexes lost 3.4%.
The DAX index has shed 100 billion euros so far this week, roughly matching the value of the second Greek bailout agreement reached two weeks ago.
Meanwhile, the troubles in Europe are having a strange spillover effect in the U.S., where Treasuries have rallied and short-term securities are at near zero yields.
In response, the Bank of New York has informed its large depositors it will charge them interest to hold their deposits. That investors have to pay a financial institution to hold its money may be emblematic of the havoc in the financial markets and a precursor of further crisis.
Thursday’s market stress coincided with the European Central Bank’s (ECB) meeting, where policymakers left its main lending rate unchanged at 1.5%, but failed to convince investors it had the will or the means to fight the growing debt spiral.