90 seconds at 9 am: Stocks fall sharply; Spanish and Italian bond yields rise; China slows; commodities fall

Here's our summary of the key news overnight in 90 seconds at 9 am, including news that the world equity markets are falling, and falling quite sharply. The Dow is down over 1.5% in late trading, and the Americans are following European markets which are down about 3%. The Italian stock market was down almost 5%.

A surge in Spanish and Italian bond yields fueled concern Europe’s debt crisis is worsening. Borrowing costs in Spain approached 6% even after the Spanish government announced new budget cuts. And as we reported yesterday, the implications for the more than 400 bps spread between Italian and German 10 year bonds is now sinking in, and this is undermining market confidence.

The situation is not helped by more signs of weakness in China. They reported an unexpected trade surplus in March, but that was because imports slowed markedly. Chinese exporters are being hit hard by Europes woes, and the IMF is downgrading its growth forecasts for China.

And important political moves are occurring in China with the completion of the purge of Bo Xilai and the arrest of his wife on murder charges.

All this gloom has had markets retreating from 'risk' and that means our dollar has fallen overnight. It now buys US0.8130, down almost 1 cent from its high yesterday. The New Zealand dollar has pulled back from most other major currencies, and the TWI is currently at 72.75.

Reflecting these risks, gold was up, but oil was down - Brent crude was down almost 2.5% - and copper was also down, almost 2%.