Markets across the globe racked up big losses yesterday and overnight.

And there could be more to come.

Hard on the heels of the sharp downgrade of Greece, and the warning to Italy, Belgium has been joined to the watch list of credit rating groups' dodgy European economies.

Fitch cut Belgium's AA plus rating's outlook to negative from stable because of the continuing political instability has prevented a government from being formed for 11 months.

The change came on the first working day after Fitch slashed Greece's rating to the bottom of the junk pile, and Standard & Poor's changed Italy's outlook to negative.

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Poor local elections in Spain for the national government didn't help, nor did a poor election result in a small state city poll help sentiment in Germany for the Government of Chancellor Angela Merkel.

And weak manufacturing data for China, and then for Europe got investors wondering about the state of the global recovery.

The news pushed European shares lower across the board, while in the US, markets opened weaker and stayed in the red all day.

The dollar rose against the euro and other currencies as investors sought safety away from Europe.

That saw US bond yields fall with the 10 year bond dipping down to a low of 3.08% (a six month low) before ending around 3.13%.

On Wall Street, the Dow fell to its lowest close in more than a month, as investors focused on the continuing crisis in Italy, Greece and Spain.

The Dow lost 130.78 points, or 1.1%, to 12,381.26,

The S&P 500 dropped 15.9 points, or 1.2%, to 1,317.37.

And The Nasdaq Composite fell 44.42 points, or 1.6%, to 2,758.90.

European stocks sank. Britain's FTSE 100 dropped 1.7%, while the DAX in Germany tumbled 2% and France's CAC 40 fell 1.9%.

The Italian FTSE MIB index dropped 3.2% in Monday trading, while the pan-European Stoxx 600 index fell 1.4%.

The Athens market fell 1.2% after a 4.3% fall last week.

The euro again fell against the US dollar for a second day to be down 1.5% since Thursday of last week.

The euro fell under $US1.40 at one stage. It closed at a two month low against the greenback.

So far this month, the euro has dropped 5.2% and the dollar index is up 4.4%

The Australian dollar tumbled 1.2% versus the U.S. dollar to buy $US1.0510.

It's down almost 5% this month.

The strength of the greenback wasn't the biggest factor in commodity markets.

Gold rose, going against the usual trend when the uS dollar rises.

Those fears about Europe proved too strong.

Comex June gold rose $US6.50 to $US1515.40 an ounce.

Comex July silver lost 18c to end at $US34.90.

But oil tumbled 2.6% to just over $US97 a barrel.

Copper fell 3.5%, or 14c to $US3.9775 a pound in New York.

That was partly the rise in the dollar, but investors also worried about the apparent cooling in China.

And the Fitch downgrading on Friday concentrated miunds in the Greek government yesterday, with the result that a new austerity plan was agreed to be the country's cabinet.

The Government said it would start a camnpaign of privatisations of the state owned Postbank, the Telco OTE, as well as ports and other assets to start raising the target of 50 billion euros.

The cabinet also "reaffirmed its determination" to continue its deficit-reduction program by taking additional measures worth more than €6 billion, or 2.8% of GDP, to meet its 2011 deficit target of 7.5% of GDP, according to media reports.

Greece will set up a sovereign-wealth fund to serve as a holding company for state assets and real-estate holdings.

But the plan has to be approved by the parliament and a recent opinion poll said 80% of Greeks were opposed to more austerity and cuts and asset sales.

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