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 the economic contraction is accelerating.

It got worse when the cabinet of Dutch Prime Minister Mark Rutte tendered its resignation after his coalition partner - the Freedom Party - walked out of negotiations over austerity measures proposed in the budget.

There was also concern among investors that fellow German ally Nicolas Sarkozy had lost the first round of the French presidential election to his socialist rival.

The three pieces of news combined to spark a sell-off of risky assets.

Doug McWilliams, Chief Executive at the Centre for Economics and Business Research told Jeff Randall Live there is a risk markets could "destabilise the Eurozone while we continue to live on the hot money that's being pumped into the system."

In London, the FTSE 100 share index had plunged 2.2% by late afternoon, 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 end the close partnership with Germany's Angela Merkel.

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.