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Markets slump amid fears over eurozone debt crisis.

Summary: Some Au50 billion has been wiped from the value of London's blue chip index as part of a collapse in markets across the globe.

Some Au50 billion has been wiped from the value of London's blue chip index on Thursday, as fresh eurozone and US debt fears sparked a collapse in world markets.

The FTSE 100 Index closed down 3.4 per cent, or 191.4 points, at 5393.1 in its biggest fall of the year and its biggest daily drop since March 2009.

It follows a fall of 2.3 per cent on Wednesday, meaning that Au85 billion has been wiped off its value in the past two days alone.

It was a similar story on markets across the globe, as the Dow Jones Industrial Average in the US fell nearly 3 per cent, the DAX in Germany fell more than 3 per cent and the CAC 40 in France fell nearly 4 per cent.

The latest stockmarket sell-off was sparked after the cost of borrowing for the Spanish government rose sharply in a debt auction - signalling lenders have a lack of confidence in the country's ability to handle its debts and avoid a bailout.

In response to the financial bloodbath, European Commission President Jose Manuel Barroso warned that the sovereign debt crisis is spreading and called for European leaders to give their "full backing" to the eurozone and boost the size of their financial rescue fund.

In a letter to EU leaders Mr Barroso said: "I... urge a rapid re-assessment of all elements related to the EFSF, and concomitantly the ESM, in order to ensure that they are equipped with the means for dealing with contagious risk."

He was swiftly rebuffed by the Dutch and the Germans, with a German finance ministry spokesman claiming it was unclear how re-opening the debate about financial backstops so soon after last month's emergency summit could help calm markets.

European policymakers tried to quell the severity of the eurozone debt crisis with the European Central Bank starting to buy government bonds after a four-month break and announcing longer-term funding for liquidity-starved banks.

Despite their efforts, Italian and Spanish bond yields resumed the climb towards danger levels.

Independent Television News Limited 2011. All rights reserved.

Independent Television News Limited 2011. All rights reserved.

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Publication:Independent Television News Limited (ITN)
Date:Aug 5, 2011
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