US and European stocks slid today and the euro hit record lows against several currencies after Spain's heavily indebted Valencia region called for aid, increasing investor doubts that the Spanish government can avoid a full-blown bailout.
The risk premium on Spanish government debt hit a euro-era high as its borrowing costs climbed back above the 7 per cent threshold considered unsustainable, with little relief seen any time soon.
The euro plunged to record lows against the Australian, Canadian and New Zealand dollar, while hitting multi-month lows against the yen, and the Norwegian and Swedish crowns.
The euro fell as low as $1.2175, just above a two-year low of $1.2162 hit last week. It was last at $1.2172, down almost 0.9 per cent.
"The market got a little bit of a curveball thrown at it with the Valencia news," said Matthew Lifson, senior currency trader and market analyst at Cambridge Mercantile Group in Princeton, New Jersey. "We were drifting and everything was looking okay and this news comes out and it just gives people more reason to sell the euro."
US equity markets opened lower and European stocks extended losses to set fresh session lows after the European Central Bank said it would stop accepting Greek bonds as collateral, adding to concerns about the euro zone debt crisis.
The Dow Jones industrial average was down 90.67 points, or 0.70 per cent, at 12,852.69. The Standard & Poor's 500 Index was down 9.65 points, or 0.70 per cent, at 1,366.86.
The Nasdaq Composite Index was down 19.71 points, or 0.66 per cent, at 2,946.19.
The FTSEurofirst 300 traded 1.2 per cent down at 1,051.65 points.
German bond prices jumped and US Treasuries rose as investors clamoured for safe-haven assets.
German 10-year bond yields fell 5 basis points to 1.171 per cent, and the benchmark 10-year US Treasury note was up 10/32 in price to yield 1.4753 per cent.
The US dollar index rose almost 0.7 per cent to 83.45.Oil fell toward $106 per barrel on Friday as a firmer dollar spurred a dip from an eight-week high hit the previous session due to supply worries linked to tension in the Middle East and hopes of an economic stimulus in the United States.
Oil prices also eased after hitting an eight-week peak on supply concerns linked to rising Middle East tension, but the rally in soft commodities, which has seen corn and soybean prices soar to record highs, showed no signs of abating.
Brent crude was down $1.58 at $106.22 a barrel at 2.35, but still headed for its longest winning streak since the end of February, having gained about 18 per cent over the four week period.
Reuters