Eurozone Crisis: Markets Take Another Hit

European share markets have taken another tumble after the eurozone debt crisis returned to haunt investors on three fronts.

The sell-off was led by dire performance indicators for the single currency bloc, which heightened fears that economic contraction is accelerating.

The falls deepened when the cabinet of Dutch Prime Minister Mark Rutte tendered its resignation after his coalition partner - the Freedom Party - walked out of negotiations over deep spending cuts proposed in the budget.

There was concern among investors too that fellow German ally Nicolas Sarkozy was left fighting for his political life after losing the first round of the French presidential election to his socialist rival.

The three pieces of news combined to spark a rush away from risky assets.

In London, the FTSE 100 share index had plunged 2.2% by late afternoon trading - with banks and commodities seeing the biggest losses.

The falls were steeper across much of Europe.

The CAC 40 in Paris lost 2.8% while the FTSE MIB in Italy and the Spanish Ibex were down by more than 3%. In Germany, the DAX was 3.5% lower.

Of particular concern to investors early on was April's Purchasing Managers' Index for the eurozone's dominant service sector.

It fell to 47.9 from 49.2 in March - a five-month low and below forecasts. A figure below 50 indicates contraction in activity.

In France, an election victory for Francois Hollande over Mr Sarkozy would rip away the partnership between Germany's Angela Merkel and the current French leader.

Mr Hollande plans to slow down his country's deficit reduction plans and has been critical of his opponent's strategy, favouring a more distant relationship with Germany.

©Sky News