Stock markets plunge on solvency fears

European bourses plunge on sovereign debt fears, US markets hit multi month lows, ECB and BOE leave policy unchanged, borrowing costs surge in Italy as solvency fears grow, gold prices slump on margin hike rumour. Latest Premium trades to follow ahead of the US close. Euro 1-month volatility underscores further losses in the sport rate. Ashraf will bring that up in the upcoming Premium trades.

European markets plummeted with miners and banks dragging markets lower. Italian markets have led the falls, down over 500 points on the day as banks got slammed.

US markets are intensifying the losses with the Dow Industrials Index testing the 55-week MA and the March lows. Talk amongst three former FOMC members for further stimulus saw a late rally in the US last night; however this late rally was completely wiped out this morning.

The impact of this morning's currency intervention by the Bank of Japan has diminished as USDJPY drops back below 79. The announcement of an additional 10trn yen of stimulus also helped, however the failure to overcome the 80 level could well see the dollar slip back.

The Bank of England unsurprisingly left interest rates unchanged for the 29th month in a row, as did the ECB leaving interest rates unchanged at 1.5%.

The biggest problems remain the borrowing costs of Spain and Italy with this morning's Spanish auctions seeing higher yields, while Italian yields continue to rise despite Berlusconi's attempts to calm the markets last night.

Trichet's comments this afternoon did see a pop higher in the euro when he suggested that the bond buying program could restart at any time, however unless politicians get serious about the deteriorating situation in Europe's bond markets the fear premium will continue to hold sway. Italian government officials courting Asian investors to buy Italian bonds were told that if the ECB won't buy your bonds, why should they? With Bundesbank President Jens Weidmann said to be vehemently opposed to bond purchases this sorry saga looks as if it still has some way to run.

Gold prices have plunged after making new highs today on rumours of a margin hike; however it remains likely that that dips could well be sought after on the back of uncertainty in Europe.