FTSE tumbles 2% on Spanish and US fears

Global markets fell this morning over fears the new Spanish government - instated over the weekend - will not be able to pull back its domestic economy from the brink of default.

Mariano Rajoy led Spain's centre-right Popular party to the biggest election victory in its history on Sunday, beating the incumbent Socialist party.

Referring to Spain's debt crisis, Rajoy told the nation the task was "immense" and there would be "no miracles", the FT reported.

London's stock market fell immediately after opening this morning to 5,249.95, a drop of 2.11% or 111.28 points. Germany's Dax dropped 86 points, or 1.49%, to 5,713 while France's Cac 40 fell 40 points, or 1.36%, to 2,956.

Meanwhile, an apparent failure by US politicians to agree on deficit reduction plans also hurt market sentiment.

The US congressional deficit reduction committee was set to formally announce its three month long effort to bridge partisan differences on taxation and spending today.

However, reports say it has failed to reach a solution, prompting fears Moody's and Standard & Poor's could make downgrades.

Asian markets also closed lower with the Nikkei 225 dropping 0.32% to 8,348 and the Hong Kong Hang Seng down 1.44% to 18,225.