Ten year Italian bonds rose above the 7 per cent danger level to 7.01. Also, the European Central Bank's balance sheet soared to 3.55 trillion dollars a record as it loaned money to financial institutions to keep credit flowing.
Oil prices also trended lower even though Iran was making noises about blocking oil shipments through the State of Hormuz.
Earlier Italy's cost of borrowing had declined and this helped stock markets improve but the so-called Monti effect after the new technocratic Italian prime minister seems to have worn off. The chief portfolio strategist for Wells Fargo Advantage Funds said: "The banks are not borrowing from the ECB in order to spur lending. It’s to shore up their own balance sheets. That could lead to a credit contraction in the euro zone." Unless the banks feel confident in lending they will simply hoard the money they are being loaned and this in effect defeats the policy of the central bank which was attempting to ease credit. For much more see this article.