Investors pushed global equities and the euro lower on Monday as Dutch political turmoil and disappointing euro zone data revived fears the region's debt crisis could keep much of Europe mired in recession through the year.
Shares of Wal-Mart Stores Inc., the world's largest retailer, and its Mexican subsidiary, Walmex, sank on a report of bribery allegations.
Dutch Prime Minister Mark Rutte tendered his government's resignation Monday in a crisis over budget cuts, creating a political vacuum in a country that strongly backed an EU fiscal treaty and lectured Greece on getting its finances in order.
The crisis in the Netherlands – traditionally one of the euro zone's most stable members – added to uncertainties after Socialist challenger François Hollande led President Nicolas Sarkozy in the first round of French presidential elections.
Data showing a slump in the euro zone's private sector in April dampened hopes the region will emerge from recession soon.
U.S. stocks fell more than 1 per cent on the euro zone anxiety before recovering slightly.
"Clearly there is political uncertainty, but what always magnifies or amplifies political uncertainty is when there is growth uncertainty as well," said Paul Zemsky, head of asset allocation at ING in New York. "It's the worst of both worlds today."
Shares of Wal-Mart sank 4.66 per cent after The New York Times reported company officials stymied an internal investigation of allegations of extensive bribery at its Mexican subsidiary, Walmart de Mexico, known as Walmex.
Walmex shares plunged 12 per cent on the Mexico City exchange.
The Dow Jones industrial average ended down 102.09 points, or 0.78 per cent, at 12,927.17. The Standard & Poor's 500 Index was down 11.59 points, or 0.84 per cent, at 1,366.94. The Nasdaq Composite Index lost 30.00 points, or 1.00 per cent, at 2,970.45.
In Toronto, the commodities-heavy S&P/TSX Composite Index fell 158.33 points, or 1.3 per cent, to 11,988.95.
European shares fell to a three-month low. The FTSEurofirst index of top European shares closed down 2.32 per cent at 1,021.76.
World shares, measured by the MSCI world equity index , were down 1.36 per cent.
Euro zone banks, which own the bulk of the region's debt, sank nearly 4 per cent to levels last seen in late November, before the European Central Bank's first offering of ultra-cheap three-year loans.
"Euro zone economic momentum is weakening, and it is going to be more difficult for governments to reach fiscal targets in a weak growth environment," said Emmanuel Cau, a strategist at JPMorgan.
The euro fell against both the U.S. dollar and the yen, dropping 0.50 per cent against the greenback to $1.3155 and 0.89 per cent to 106.80 yen.
"The failure of Dutch austerity talks suggests that early elections are likely and bring into question the AAA status of the country – one of the last few remaining in the euro zone," said Eric Viloria, senior currency strategist at Forex.com.
Dutch and peripheral euro zone bonds sold off, driving Spanish yields back above 6 per cent and taking the spread of Dutch bonds over German benchmarks to the highest in three years.
"It's beginning to look like the perfect storm," said Stewart Richardson, chief investment officer at RMG. "If there is a Dutch election coming up soon, it just adds to the whole cocktail of worries for the market."
Voters in Greece also go to the polls on May 6, and the only two major parties that back the EU/IMF bailout plan are just ahead, according to the latest polling.
The benchmark 10-year U.S. Treasury note was up 6/32, the yield at 1.9366 per cent.
U.S. crude oil futures ended lower on the revived euro zone fears, while a North Sea production problem and worries about Iran and potential supply disruptions limited losses.
U.S. June crude fell 77 cents, or 0.74 per cent, to settle at $103.11 a barrel, having traded from $101.82 and $103.90.
Gold fell in quiet trade, down to $1638.40 an ounce.
Gold watchers are expected to turn their attention to the Federal Reserve's two-day policy meeting from Tuesday, at which the potential for more monetary easing is expected to be addressed.