The fear that has gripped Europe's sovereign debt market for months took root in its stock markets as investors increasingly worried on Tuesday about uncertain growth prospects for some of the continent's biggest companies.
Spain and Italy watched their borrowing costs drop further in signs of success for a massive central bank move to quell Europe debt's crisis, but stock markets were in turmoil as stronger economies showed worrying signs of slowing.
Germany's stock market was down for the tenth consecutive day and new data from Europe's growth engine showed that export growth — a closely watched economic indicator — is slowing down.
The Federal Statistical Office said exports in June were up by 3.1 percent to 88.3 billion euros ($126 billion) on the year, the smallest increase in 16 months.
"In June we got to feel the first indications of the decreasing global economic dynamism," said Anton Boerner, the head of Germany's exporters' association.
The impact of the slowing U.S. economy "will be felt in the coming months," he added.
Since July 22, the day after eurozone leaders decided to give their bailout fund new powers but refused to expand its size, Germany's main stock index, the DAX has lost more than 20 percent. That's more than the 15 percent drop seen on the FTSE 100 in the U.K., or the 17 percent dive on the French CAC-40.
Closely watched German indicators of consumer confidence and business confidence also declined more than expected last month.
German output grew by 3.6 percent last year, and the government in Europe's biggest economy hopes growth this year will again top 3 percent.
But in France — Germany's biggest trading partner — growth is likely to only be 0.2 percent in the third quarter, the central bank said this week.
The Bank of France' s monthly industrial survey showed both corporate order books and factory utilization rates fallilng for the second month in a row in July.
The benchmark in France recovered from earlier losses and was slightly up in early afternoon trading, but Britain's index was still trading lower, echoing Monday's plunge on Wall Street, where the Dow Jones fell a dizzying 634 points, one of the worst days since 2008.
"Investors are worried about rising global recession risks, the threat of a major bank bust and a loss of confidence in G20 policymakers ability to resolve current economic and financial problems especially in the eurozone," said analyst Neil MacKinnon of VTB Global Securities.
The yield, or interest rate, on Spanish 10-year bonds dropped below 5 percent, after approaching 6.5 percent just a week ago. The yield on Italian equivalents was at 5.1 percent, also more than 1 percentage point below where it was Monday morning before the ECB intervention.
"It is the worst crisis since World War II and it could have been the worst crisis since World War I if leaders hadn't taken the important decisions," ECB President Jean-Claude Trichet said with French radio station Europe 1, defending the bank's decision to further intervene on bond markets.
Trichet didn't directly confirm that the ECB has been buying up the bonds of Italy and Spain, saying only that his banks "is in the secondary market" for eurozone bonds and that it would release the amounts invested on Monday, as it does every week.
The ECB head also indicated that his bank still sees the main responsibility for fighting the debt crisis with eurozone governments and not the central bank.
"I won't say" how long the ECB will buy bonds on the secondary market, Trichet said. "What we expect is that the governments do what we consider to be their job."
He said eurozone countries needed to implement recently taken decisions to allow their bailout fund to buy government bonds on the open market "as rapidly as possible."
Italy and Spain, meanwhile, have to deliver on their promises to cut their budgets as the central bank has demanded, Trichet said.
Despite the ECB's reluctance to take a central role in fighting the debt crisis, analysts have warned that it may not be easy for the bank to halt its bond-buying program once the eurozone bailout fund has been equipped with its new powers.
They caution that the 440 billion euro European Financial Stability Facility does not have enough money to intervene effectively on secondary markets to help large countries like Italy and Spain, and that divisions among countries, which all have to sign off on intervention, could delay any necessary action.
The head of Germany's Free Democrats, the junior partner in Chancellor Angela Merkel's coalition criticized the ECB action, warning that it is not the bank's position to get involved.
"The central bank must remain impartial," said Christian Lindner, 32.
He called for European leaders to avoid knee-jerk reactions that make governments look helpless.
"The markets smell fear and react with speculation," Lindner said.
© Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.