Insurance stocks continued to slide today as panic gripped global stock markets, with investors running scared over the prospect of Italy needing a gigantic bailout to prevent a catastrophic default.
In just a few hours, Aviva dropped 2.18%, Allianz plunged 3.8% and AXA was down 1%. The FTSE was down 2.5% this morning. The Dow Jones yesterday experienced its biggest drop in three years.
The markets have turned with vengeance on Italy, with bond yields remaining dangerously high above 6%. Italy’s GDP figures released today show growth at 0.3% per quarter, meaning an annual growth rate of 0.8%.
The combination of low growth and high debt interest payments have sparked real fears Italy will have to default on its debts over the next few years or the eurozone will have to expand its bailout funds to a gigantic two trillion euros.
French leader Nicolas Sarkozy and German Chancellor Angela Merkel were due to have an emergency telephone conversation today.
Italy is the third biggest debt market in the world, behind the USA and Japan. A disorderly default would spark mayhem.
Investors and economists agree the positive is that unlike 2008, corporate balance sheets are much stronger, as companies have shrunken debt and laid off workers.
