CTVNews.ca Staff
Stock markets on both sides of the Atlantic Ocean slumped Wednesday, as investors waited for Italy and Greece to provide clarity on the future leadership of their respective governments.
The Toronto stock market was down 1.9 per cent, or 237.55 points by early afternoon, as the TSX energy, mining and financial sectors all were on the decline.
The Canadian dollar fell a full cent to 98.19 cents US.
The returns in Toronto were better than in the United States, where the Dow Jones industrial average and the Nasdaq composite index both dropped more than 3 per cent.
European markets also suffered losses Wednesday, with Germany's DAX falling 2.3 per cent and France's CAC-40 seeing a similar drop of 2.4 per cent.
The benchmark index in Italy was worst off, dropping 4.7 per cent below its previous close.
Italy was the source of one of the two main crises afflicting markets, as lawmakers continued to push for Premier Silvio Berlusconi to leave office and make way for a successor.
But as the day went on, there appeared to be little clarity on who would take over for Berlusconi, who appeared to have thrown in the towel on a run for office in the next election.
"All it does is add more uncertainty," Chris Kulk, an investment adviser at Scotia MacLeod in Montreal, told The Canadian Press.
"The bottom line is, if you need to negotiate with someone, who do you negotiate with?"
A similar problem existed in Greece, where the country's two main political parties have spent three days trying to decide who will take over for Prime Minister George Papandreou.
Papandreou rapidly lost support in Greece after he recently suggested holding a referendum over a pending bailout from the European Union.
As of Wednesday, a deal to structure a new interim government was said to be close, but details had not been finalized by the early evening in Athens.
Having Greece or Italy fall into bankruptcy would be disastrous for the European economy and the rest of the world.
Both countries are heavily indebted, but Italy has a massive debt load worth US$2.6 trillion and its bond yields are now at the highest point in year.
The combination of these political and economic challenges has made it very difficult for Italy to borrow money, said Dawn Desjardins, the assistant chief economist at RBC Economics.
"Investors are definitely talking with their feet, meaning that they are not putting their funds into the Italian bonds,"
Desjardins told CTV News Channel on Wednesday.
With files from The Associated Press and The Canadian Press
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