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Global Indexes Drop and Euro Falls on Uncertainty in Italy

Indexes across Europe had fallen by 0.5% prior to 5 am EDT, with the Ftse Mib in Milan dropping by 3.5%, the IBEX in Madrid by 2% with smaller declines in Paris, Frankfurt and London

December 10, 2012 – In early Monday trading, the euro fell to a new low of two weeks, while Italian bond prices dropped along with shares across the region after Mario Monti, the Italian Prime Minister announced his resignation and created more uncertainty in the region.

Monti announced he would resign as soon as the budget for 2013 was approved, which raised questions over his successor to run the third largest economy in the euro zone. Elections for a new prime minister are scheduled for February.

Indexes across Europe had fallen by 0.5% prior to 5 am EDT, with the Ftse Mib in Milan dropping by 3.5%, the IBEX in Madrid by 2% with smaller declines in Paris, Frankfurt and London.

The euro fell by more than 0.2% to $1.289 and was nearing its low of two weeks and Italian bonds dropped sharply with the 10-year debt up to 4.82%. Spain’s government bonds also dropped and the cost to insure both Spanish and Italian debt against a default increased.

Compounding the jitters was poor economic data. Industrial output in France was weaker than had been expected during October and Germany’s trade surplus was reduced, due to weak growth in exports, to its lowest point in more than six months. This has pointed to more than just a brief and shallow economic dip as export markets for Germany in the euro zone are struggling.

Balancing the concerns in Europe was data out of China that showed output in factories in the second largest economy in the world had accelerated to a high of eight months during November. Those upbeat figures followed a drop in the unemployment rates in the U.S., which surprised many.

Analyst said it appears that the economy in China has bottomed out. That is in contrast to gloom out of Europe and nevertheless, helped shares in Asia Pacific jump to new 16-month highs.

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