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Investors take fright as violence flares in Greece
RBS bears brunt of wide market sell-off as court filings are published showing traders openly discussed manipulating Libor rates.
Violent protests in Madrid yesterday and Athens today have prompted investors to sell off riskier assets, pushing global equity markets into the red, and dragging the euro further down from its mid-September highs.
RBS (RBS.L) bore the brunt of the sell-off in London, falling 15p or 5.8% after new revelations about the bank's role in Libor rate-rigging. Bloomberg today published details of filings from a Singapore court hearing showing conversations among traders at the bank who boasted of manipulating Libor rates.
'Nice Libor,' trader Tan Chi Min told colleagues in an instant message in April 2008. 'Our six-month fixing moved the entire fixing, hahahaha,' added Tan who is suing RBS for wrongful dismissal after being fired last year for allegedly trying to manipulate Libor, according to Bloomberg.
Protests spook investorsGreek police fired tear gas at protestors who were throwing petrol bombs near Athens' parliament as a one-day strike against austerity cuts turned violent. Yesterday in Madrid police fired rubber bullets in an attempt to disperse protestors also fighting austerity who tried to surround Spain’s parliament building, amid resurgent demands for independence for Catalonia, the wealthy autonomous region where a snap election was called yesterday.
Spain’s markets have been hit particularly hard today, amid resurgent concerns over the current plan to recapitalise Spain’s banks – raised by Germany, Holland and Findland yesterday – and ahead of the approval of the 2013 Budget in parliament tomorrow. Investors are also nervous ahead of the result of stress tests of Spain’s banks on Friday.
‘The protestors definitely don’t want any more austerity, Spain’s economy is already mired in recession and the unemployment rate is nearly a quarter of the workforce,’ commented Kathleen Brooks of Forex.com.
‘However, there is also a deeper concern: that the Budget won’t be warmly accepted by the markets, which could then force Madrid to request financial aid complete with more austerity conditions in the coming weeks.’
Spain’s Ibex index dropped 3.8%, while the yield on 10-year government bonds – a proxy for investor sentiment over Spain’s economic future – rose sharply to above 6%.
Markets across Europe were reeling. The FTSE 100 dropped nearly 100 points to 5,763, a decline of 1.65%. Germany’s Dax was down 2%, while the French Cac was 2.5% lower.
The euro fell 0.4% to $1.284, while the price of oil also declined, with Brent crude futures off by 1.4% to $108.
US markets were lower, but faring better than their European counterparts, with the Dow off by 0.2% and the S&P 500 down 0.6%
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