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Global equity markets have been shaken as the Eurozone debt crisis worsens. This has been the worst one-day performance for global equities since the Japanese earthquake.

 Eurozone finance ministers met in Brussels yesterday and in the announcement that followed they said they were ready to pass new measures to stop the crisis spreading. They are considering lowering the interest rates that debt laden economies pay on their debt plus lengthening the maturities of their loans.

 However, this did little to prevent equity markets from plummeting on the news that the IMF has distanced itself from a second joint bailout package for Greece. Christine Lagarde commented “as regards to a possible new program, in my view we’re not at the stage of discussing the conditions and terms and length and volume, and nothing should be taken for granted.”

 Attention turned to Italy, the Eurozone’s third largest economy, where borrowing costs have soared to record amounts. Italy’s government is moving ahead with plans for an austerity budget to reduce its deficit. However, markets were further unsettled when Berlusconi indicated that the austerity plan might not have full cabinet support. Overnight, there has also been a rumour circulating that 6 Spanish banks have failed the stress tests. The official results of the stress tests are out on Friday but this has only helped to kick the euro when it’s down.

 Unsurprisingly we have seen the Euro weaken heavily on the news and safe haven currencies such as the Yen, Swiss Franc and US Dollar gain greater strength.

 At 9.30am today we have UK consumer price inflation which is expected to match last month’s reading of 4.5%. Second quarter earnings reports will continue to filter through from the US but we suspect that even very positive figures will do little to supress risk aversion.