ONE has to wonder what on earth European Commission President Jose Manuel Barroso was thinking when he stood up yesterday and declared developments in the sovereign bond markets of Italy and Spain were "a cause of deep concern".
Conditions in the bond and equity markets were troublesome enough before he let fly.
And, by the time he got to his second sentence about the bond market developments being “clearly unwarranted”, those self-same financial markets had homed in on the “deep concern” comment and their attention was not going to be shifted.
Mr Barroso said the tensions in bond markets “reflect a growing concern among investors about the systemic capacity of the euro area to respond to the evolving crisis”.
This was far from calming language either. Not one for subtlety, Mr Barroso’s arguments about co-ordinated moves to solve the eurozone debt troubles which kicked off in Greece seemed to fall on deaf ears.
So it was little surprise that, when Wall Street opened shortly afterwards, at 2.30pm London time, the Dow Jones Industrial Average plunged swiftly and was before long showing losses of more than 350 points.
It had all started calmly in the London stock market, after a plunge of 133.88 points on Wednesday.
The FTSE-100 was, for a short period yesterday morning, showing solid gains. Shares in Lloyds Banking Group opened 3% up on the back of first-half results. But it was not long before the FTSE-100 found itself back in negative territory and sliding sharply as eurozone fears resurfaced.
Things got a lot worse after the statement, and the FTSE-100 ended the session down 191.37 points on the day at 5393.14.
This was its biggest daily fall since the height of the economic crisis in March 2009, and wiped nearly £50 billion off the value of the UK’s top 100 shares.
Financial markets have shown recently they stand ready to pounce on any signs that the eurozone debt crisis is spreading. And, in many ways, they have through their actions been responsible for its spread.
So it was hardly surprising Mr Barroso’s statement, which highlighted the potential for the very contagion with which financial markets are obsessed, sent share prices plunging and exacerbated Italian and Spanish market troubles.
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