North American stocks opened lower, pressured by a continued lack of confidence in Europe's economic recovery amid the latest political and regulatory developments in Italy and Cyprus. A plunge in Greece's stock market this morning is also rattling nerves about the euro zone.
In early trading, the S&P/TSX composite index was down 59 points, or 0.4 per cent, at 12,647. The S&P 500 was down 12 points, or 0.7 per cent, at 1,552. The Dow Jones industrial average was down 120 points, or 0.8 per cent, at 14,442.
European stocks are lower across the board, with Germany Dax down 1.2 per cent, Italy's FTSE MIB down 1.4 per cent, and France's CAC40 down 1.6 per cent. But it was the troubled nation of Greece that was seeing by far the steepest losses in equity values, with the Athens Stock Exchange general index down by about 5 per cent. The euro was trading at a four-month low against the U.S. dollar.
The selloff in Europe, and now in North American, appears to have been ignited by renewed worries over Italy's problematic political state. Pier Luigi Bersani, the head of Italy's centre-left alliance, reportedly turned down the idea of forming a coalition government. Recent elections in Italy were inconclusive and required a coalition of political parties to govern. The issue had faded into the background over the last few weeks, but prospects that Italy could be heading toward another election, creating uncertainty over how the nation will pull itself out of its debt woes, continues to undermine confidence in the euro zone.
Market players are also monitoring the situation in Cyprus today as well. The country's banks are expected to reopen Thursday, and later today Cypriot authorities are expected to detail capital controls that are aimed at staving off a run on its banks. It's a rare step for a euro zone country to be taking, but the island nation's bailout earlier this week has calmed contagion fears for now.
New data today showed that economic sentiment in the 17 countries using the euro decreased by a worse-than-expected 1.1 points in March to 90.0. That followed fourth straight months of gains.
The S&P 500, the U.S. benchmark index, closed Tuesday just a couple points shy of its record closing high of 1,565.15 from October of 2007. It has come within spitting distance of that level several times in recent days, but hasn't quite pierced it. Investors are growing concerned that the market is poised for a correction before the resistance level can be broken.
In economic data today, U.S. pending home sales in February fell 0.4 per cent from January. The decline wasn't a huge surprise given the wintry weather conditions in much of the country; economists were expecting a drop of 0.3 per cent.
In individual stock action, Cliff Natural Resources plunged 11.5 per cent at the open. The stock was downgraded today to "underweight" from "equal weight" at Morgan Stanley, which is concerned about the negative impact new iron ore supplies will have on the market.