Amid Concerns About Italy, Stock Market Nose Dives

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As fears about the debt crisis in Europe intensified, investors showed how little they like economic uncertainty. Stock prices took a nose dive around the world. The Dow fell 3.2 percent and other indexes were down even more. The stock sell-off followed a steep rise in Italian interest rates.

GUY RAZ, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Guy Raz.

ROBERT SIEGEL, HOST:

And I'm Robert Siegel.

Economic uncertainty, that's a phrase we've heard a lot lately. And today, as fears about the debt crisis in Europe intensified, investors showed how little they like it. Stock prices took a nose dive around the world. The Dow fell 3.2 percent, and other indexes were down even more. The stock selloff followed a steep rise in Italian interest rates. Here's NPR's Jim Zarroli.

JIM ZARROLI, BYLINE: In recent days, investors have grown a lot more worried about Italy's ability to pay off the debt it owes, and they pushed interest rates up to levels not seen since the euro was created. Today, rates rose a lot more to more than seven and a half percent. David Kelly, chief market strategist at J.P. Morgan Funds, says those are the kinds of rates that have been seen in Greece, Ireland and Portugal.

DR. DAVID KELLY: But those are small countries. And Italy has got a huge amount of debt, and so interest rates goes up on its debt and then it makes the whole debt situation in Europe look a lot more scary.

ZARROLI: Stocks fell in Italy with the main Italian stock market losing nearly four percent of its value. They were also down in Europe as a whole, and the selling continued when the U.S. markets opened. As usual, investors poured money into what they consider safe havens, like U.S. and German government debt. The yield on the 10-year Treasury note dropped below two percent.

Nariman Behravesh, chief economist at IHS Global Insight, says the turmoil today has been made worse by political speculation about the fate of the euro. German politicians have been openly talking about ways to make the Eurozone smaller.

DR. NARIMAN BEHRAVESH: So all of a sudden, the whole discussion has changed, the risk profile of a lot of these countries has changed, a lot of debate and uncertainty about which countries are going to be in the Eurozone, which countries won't be in the Eurozone. So this is an incredibly uncertain environment, and politicians are adding to that uncertainty.

ZARROLI: The problem is that many European banks own huge quantities of debt issued by troubled countries like Italy and Greece. And if those countries can no longer pay what they owe, the financial system as a whole will take a hit. Many investors saw what happened in 2008 when the collapse of Lehman Brothers caused havoc that extended around the world, and they're worried the same thing could happen again.

The prospect that a big country like Italy could be unable to pay its debts is especially scary. And as today's market plunge showed, many investors are unwilling to wait around and see what will happen. Jim Zarroli, NPR news New York.

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