The plot thickened overnight amid continued economic turmoil from the European region. Equities suffered deep losses with the usual suspects Greece and Spain remaining the primary stumbling block on reports banks are receiving a spate of withdrawals before the crisis threatens to take a deeper turn for the worst. Earlier rumours of an imminent downgrade of Spanish banks proved to be true with Moody's downgrading 16 Spanish banks including the UK arm of Spain's largest bank Santander.

It's clear the market is now focused on the dangerous precedent of a Greek Euro-zone exit and the repercussion for other vulnerable nations such as Portugal, Spain and Italy. The borrowing costs of vulnerable nations continue to reflect the risk of further turmoil in the region with a Spanish action overnight showing a considerable premium of yields from recent auctions. Official GDP data overnight also confirmed Spain has fallen into a recession with first-quarter contraction of 0.3 percent - in line with estimates.

Uninspiring data across the Atlantic also assisted the general risk-off tone to gather pace with weekly jobless claims, leading indicators and the Philadelphia Fed manufacturing gauge all falling short of estimates.

The bid for safety dominated currency markets with the US dollar and Yen maintaining an upward trajectory at the expense of risk currencies with the Euro and commodity bloc currencies falling in unison. The Euro sunk to four-month lows breaking the 1.27-figure to lows of $US1.2666. The Aussie dollar has periods of support overnight but failed to maintain upside momentum with price action falling below the 99-handle before finding bottoming out around the 99.82 US cent region. At the time of writing the Australian dollar is buying 98.9 US cents.