Markets Fall Amid Portugal Political 'Crisis'

European stock markets have taken a tumble as the survival of Portugal's coalition government is thrown into doubt.

Portuguese share prices plummeted 6% in early trading on Wednesday and other major bourses, including the FTSE 100, fell sharply amid growing uncertainty that the recession-hit country's bailout reform agenda can remain on track.

Foreign Minister Paulo Portas resigned on Tuesday night, a day after the shock departure of Finance Minister Vitor Gaspar.

Values correct at 09:24 BST

Prime Minister Pedro Passos Coelho has defied calls to follow suit but the resignations at the top of the government have left investors digesting concerns over not only the coalition but Portugal's ability to pursue the austerity measures demanded by creditors.

Portugal is implementing the savings in return for continued support on its 78 billion euros (£66bn) international bailout but there has been a fierce public backlash against the austerity drive in what is one of the poorest countries that uses the euro.

The yield on Portugal's benchmark 10-year bond spiked well above 7% - another sign of unease - with a 10-year borrowing rate of about 8% widely considered unsustainable.

Spanish and Italian yields jumped too while nervousness over the state of Greece's next tranche of bailout money also caused jitters.

"With disorder and uncertainty over the political situation in Egypt threatening stability in the Middle East, and a Greek deadline looming to prove it can action its bailout conditions before receiving the next tranche of aid, volatility is likely to be high," Mark Ward, head of trading at Sanlam Securities, said.

It came after Asian stock markets had dropped overnight as official figures showed that growth in China's services sector sagged to its weakest pace in nine months in June, adding to signs of a slowdown in the world's second-largest economy.

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