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Investors channelled cash into less risky assets as doubts resurfaced over the political will of Italy and Greece to push through tough budget measures, and as Germany hardened its stand against providing more aid. The worries over the European debt crisis renewed fears that the global economy could fall into recession.
The S&P 500 is now down 14.5 per cent from its highest point in 2011, reached at the end of April. Though investors have periodically taken heart from signs that Europe has carved out a plan to deal with its festering crisis, confidence has been repeatedly walloped every time there is a development showing that the problems have not been solved.
The CBOE Volatility Index, or Vix, a measure of expected market turbulence, posted its biggest gain in nearly two weeks, climbing 9.4 per cent to 37.08. "Right now there is a tremendous amount of uncertainty", said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut. "There is a decent chance that we are in a bear market."