The tentative agreement to raise the US debt ceiling brought some calm to the financial markets after last week's sharp downturn. But the joy was brief, and after a hopeful opening on Wall Street, the weak manufacturing data out of the US made short shrift of the early gains.
In the afternoon, the European benchmark bourses went into red territory, posting significant losses in Milan and Madrid, the latter seeing its worst trading day so far this year. The blue-chip Ibex 35 lost 3.21 percent, the greatest daily decline since the ratings agency Fitch downgraded Spain's triple A rating in June 2010.
Meanwhile, pressure in the debt markets against the peripheral euro-zone countries stepped up, bringing risk premiums to new heights in Italy (355 basis points) and matching the record in Spain (375), in the umpteenth Black Monday since the beginning of the market crisis. Investors took refuge in the German 10-year government bonds, whose yield dropped to 2.48 percent, while the Spanish yield rose to 6.14 percent.
This massive investment in German bunds drove the Spanish risk premium to 375 basis points, up 20 from Friday and equal to the record posted on July 12.