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Stocks Drop on Euro Skittishness

Investors skeptical ahead of EU meeting this week.

Worries over Europe’s debt crisis sparked a stock sell-off today.

The S&P Retail Index was down 1.5 percent, or 8.92 points, to 600.29 as trading settled and the Dow Jones Industrial Average ended the day down 1.1 percent, or 138.12 points, to 12,502.66.

The decliners included Quiksilver Inc., 5.3 percent to $2.31; Fossil Inc., 4.6 percent to $73.86; Fifth & Pacific Companies Inc., 3.9 percent to $10.31; J.C. Penney Co. Inc., 3.8 percent to $21.71, and Coach Inc., 3.4 percent to $57.74.

Stocks bounced back some from sharper declines early in the day, but traders never fully recovered from nervousness that depressed European markets. Investors were skeptical that a summit of European Union leaders beginning Thursday will lead to a clear path out of the region’s financial problems.

The FTSE MIB in Milan slumped 4 percent to 13,111.97, while the CAC 40 in Paris dipped 2.2 percent to 3,021.64. The DAX in Frankfurt fell 2.1 percent to 6,132.39 followed by the FTSE 100 in London, down 1.1 percent to 5,450.65.

The declines came after Spain formally requested a bailout for its banks. Cyprus also asked the European authorities for a bailout. The Cypriot government said in a statement that the financial assistance is required to “contain the risks to the Cypriot economy, notably those arising from the negative spill over effects through [the] financial sector, due to its large exposure to the Greek economy.”

Banking stocks such as Deutsche Bank in Frankfurt and Societe Generale, BNP Paribas and Credit Agricole in Paris led the market drop. Among the fashion decliners were Yoox, slumping 6 percent to 11.40 euros; Safilo Group, 4.2 percent to 4.49 euros; Mulberry, 4.5 percent to 14.75 pounds, and Carrefour, 2.8 percent to 14.02 euros. Those stocks that managed to notch gains included Marcolin, up 0.9 percent to 4.69 euros; PPR, 0.4 percent to 111.20 euros, and Hermes, 0.8 percent to 247.65 euros.

The pound traded for $1.56 against the dollar Monday, while the euro traded at $1.26.

Beyond Europe, the global economic trajectory has also become a source of angst.

“For the third year in a row, global growth has started out strong, only to falter by midyear,” wrote IHS Global insight economists Nariman Behravesh and Sara Johnson in a report. “The incoming economic data point to softness in most parts of the world. In Europe, all signs are flashing red. The IHS forecast now incorporates a Greek exit from the Eurozone in mid-2013, and projected growth rates for all regions of the world have been revised downward since last month.”

The economic forecasting firm expects growth in real global GDP to slow to 2.7 percent this year from 3 percent last year.

“Until recently, rising oil prices were viewed as the biggest threat to the global expansion,” the economists said. “Now, the re-escalating euro zone crisis is a bigger danger, followed by the risk of a more pronounced deceleration in the Chinese economy.”