World stocks tumble as Greek riots turn deadly

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By The Staff

LONDON (AP) — World stock markets fell further Wednesday while the euro slid to a fresh 13-month low as three people died in a blaze at an Athens bank during rioting against austerity measures imposed as part of an international bailout package for heavily indebted Greece.

The FTSE 100 index of leading British shares was down 96.41 points, or 1.8 percent, at 5,314.70 while Germany's DAX fell 69.95 points, or 1.2 percent, to 5,936.91. The CAC-40 in France was 68.31 points, or 1.9 percent, lower at 3,620.98.

No relief came at the U.S. open despite better than anticipated jobs data — the Dow Jones Industrials average fell 80.49 points, or 0.7 percent, at 10,846.28 while the Standard & Poor's 500 shed 12.63 points, or 1.1 percent, to 1,160.97.

Meanwhile, the euro slid to $1.2859, its lowest level since late April 2009.

The selling pressure accentuated as Greek fire officials confirmed that three people died in a blaze at an Athens bank during a 100,000-strong protest in the city against spending cuts aimed at saving the country from bankrupted.

The main reason behind this week's sharp stock market declines has come despite the weekend's €110 billion ($143 billion) bailout package for Greece — the deal has done little to assuage market fears that the crisis will spread to other countries like Portugal and Spain.

The rioting reinforced concerns that the Greek government might not be able to deliver on its side of the bargain however sincere the government led by Prime Minister George Papandreou.

"The escalation of public protests in Greece clearly reflects that the country is not swallowing the bitter pill of austerity," said Jane Foley, research director at Forex.com.

"These conditions suggest it is probably impossible for Greece to achieve its dual aim of slashing its budget deficit and simultaneously meeting all of its debt obligations," she added.

As if developments in Greece weren't bad enough, investors were reminded of the precarious situation in Portugal, after Moody's Investor Services warned that the country faced a possible two-notch downgrade in its current credit rating of Aa2 some time over the next three months.

"The review for possible downgrade will consider a repositioning of Portugal's ratings to reflect the potentially lasting deterioration in the government's debt metrics," said Anthony Thomas, a senior analyst at Moody's.

The possible debt downgrade has come as yields on Portuguese and Spanish ten-year bonds have pushed higher as investors worry that the countries could be next in the firing line — both have hefty borrowing levels that need to be brought down this year at the same time as debts have to be repaid.

Stocks were down 3.8 percent in Portugal and 5.3 percent in Greece.

Dominique Strauss-Kahn, managing director of the IMF, did his best to dampen speculation that Portugal, in particular, is next in line for a bailout, but Axel Weber, the president of Germany's Bundesbank central bank, warned of "grave contagion effects" in the euro area.

As a result, a number of analysts are beginning to think that the European Central Bank will have to get more involved in the crisis to keep Spain and Portugal from being dragged into a debt crisis quagmire like Greece, where market fears led to interest demands so high Athens couldn't borrow any more.

The idea being openly discussed is that the ECB may support bond prices — and the balance sheets of banks holding them — by buying government bonds even though the bank's constitution says it can't directly bail out profligate governments.

Earlier in Asia, a number of markets slid as investors responded to the sharp declines recorded Tuesday in Europe and the U.S. — Hong Kong's Hang Seng index closed 2.1 percent lower at 20,327.54.

Elsewhere, Australia's index skidded 1.3 percent, while Indonesia's main market dropped 2.6 percent and Taiwan sank 3 percent. China's benchmark Shanghai index, meanwhile, recovered early losses to rise 0.8 percent.

Markets in Japan, South Korea and Thailand were closed for holidays.

Benchmark crude for June delivery slid $1.34 to at $81.40 a barrel in electronic trading on the New York Mercantile Exchange.


Associated Press Writer Alex Kennedy in Singapore contributed to this report.