NEW YORK (AP) - U.S. stocks opened sharply lower Monday, following overseas stocks lower on growing fears that Spain will need a financial bailout.
The borrwing rate on Spain's 10-year debt rose 0.23 percentage point Monday to 7.45% - highest since the euro was established in 1999 and above the level that prompted Greece, Ireland and Portugal to seek international rescues.
"Those levels indicate that Spain may soon struggle to fund itself in the market and therefore unless some positive action is taken, the country will need a full bailout," said Gary Jenkins, managing director of Swordfish Research.
Elsewhere, a forecast from a Chinese central bank adviser that China's economy could grow at a slower pace in the third quarter deepened concerns about the global slowdown.
Coupled with worries that the financial firewall Europe has built up to deal with its debt crisis is insufficient and growing concerns of the financial health of regions within Spain, financial markets started the week on a sour note.
In Europe, the FTSE 100 index of leading British shares was down 1.7% at 5,554 while Germany's DAX fell 1.6% to 6,523. The CAC-40 in France was 2% lower at 3,130.
Stock markets in Spain and Italy were faring worst of all, with Madrid's IBEX down 4% and Milan's FTSE MIB 4.6% lower. Though Spain is at the forefront of concerns at the moment, investors are worried that Italy will be back in the spotlight soon. Its 10-year yield was up 0.28 percentage points to 6.35%.
The euro was also under pressure, trading 0.3% lower at $1.2122. Earlier it had fallen to $1.2081, lowest level since June 2010. The euro has also fallen to near a 12-year low against the yen.
"What participants will be looking for in order to reverse euro selling is a catalyst, and, so far, finding one that will be net positive could prove to be as well hidden as Spain's outlook looks fragile," said David White, a trader at Spreadex.
A forecast from a Chinese central bank adviser that China's economy could wane further in the third quarter also deepened concerns about the global slowdown. China's economic growth slowed to a three-year low of 7.6% in the second quarter.
Japan's Nikkei fell 1.9% to 8,508.32 and Hong Kong's Hang Seng dived 3% to 19,053.47. China's Shanghai Composite Index shed 1.3% to 2,141.40. South Korea's Kospi dropped 1.8% to 1,789.44.
Investors are awaiting quarterly financial results from industry bellwethers around the world - from tech giants Apple, Amazon and Facebook, to automakers and energy firms.
Oil prices took a hit, too, as investors fretted over Europe's debt woes and the global economy, with the benchmark New York rate down $2.52 a barrel at $89.31.