Global stock markets suffer hangover from euro bailout

The exuberance that saw astonishing gains in shares and the euro on news of the 750 billion (£650 billion) bailout package for troubled eurozone states slammed into reverse, amid concerns the weakest countries would be unable to cut their debts enough to stave off eventual catastrophe.

European stock markets were down by between 1% and 4% and the euro fell 0.40 cents to $1.4806. In the US, the Dow Jones Industrial Average this evening was down about 64 points at 10,721.

Greece was expected to submit its request for the first instalment of its 110 billion aid package from the European Union and International Monetary Fund, applying for 14.5 billion from the EU and 5.5 billion from the IMF. It will be used in part to refinance an 8.5 billion bond maturing on May 19.

The eurozone plan brought on by the Greek financial collapse impressed markets with its sheer size - it was the biggest since G20 leaders threw money at the global economy following the collapse of Lehman Brothers in 2008 - and sparked a spectacular rally in world stocks, the pound and the euro yesterday.

Yet markets turned cautious in Asia this morning, with investors concerned that the plan was not a long-term solution to problems plaguing the 11-year-old single currency.

Moody's credit ratings agency warned that it might cut Greece's debt rating to junk status, noting the contagion effect of the crisis on other eurozone members. It may also downgrade Portugal's debt rating.

"Contagion has spread from Greece - historically a weaker credit in the context of the euro zone - to sovereigns with stronger credit metrics like Portugal, Ireland and Spain," Moody's said.

The International Monetary Fund said that even though Greece's public debt was sustainable over the medium term, the nation still faced plenty of risks.