Stocks on both sides of the Atlantic slid amid concern about Europe's debt crisis spurred today by the apparent inability of Italian political leaders to agree on the formation of a new government.

Meanwhile, Cyprus is preparing for a reopening of its banks tomorrow for the first time since the nation reached an accord with the EU for a financial bailout that is partly funded by bondholders and depositors; the country's leaders are discussing limits on the flow of capital.

Cypriot banks will open for six hours tomorrow, starting at noon local time.

A Greek newspaper reported that Cyprus will restrict the flow of cash from the island and may limit the use of Cypriot credit cards abroad. The details came from what officials told Reuters was as yet only a draft government decree.


The euro shed 0.7 per cent against the greenback and fell 0.8 per cent against the yen.

In Europe, the Stoxx 600 Index ended the session with a 0.5 per cent slide from the previous close. Benchmark stock indexes also fell in Frankfurt, London and Paris, closing with declines of 1.2 per cent, 0.2 per cent and 1 per cent respectively.

"A bit of pessimism out of Italy is certainly part of the story and obviously the Cypriot reverberations continue," Eric Lascelles, chief economist in Toronto for RBC Global Asset Management, told Bloomberg News.

"There is a general level of wariness. It's not that there's a likely disaster in the next few days. It's more along the lines that Europe is materially riskier than previously imagined and so exposure to European investment is riskier than first thought," Lascelles said.

Yields on Italy's benchmark 10-year bonds jumped 21 basis points to 4.78 per cent. Demand was tepid for the 6.91 billion euros of debt the country auctioned today. Centre-left leader Pier Luigi Bersani is set to report back to Italian President Giorgio Napolitano tomorrow on his talks with other political parties.

Bond yields in Spain also rose after the government boosted its estimate for its 2012 budget shortfall, a day after that nation's central bank forecast an even deeper contraction this year.

The latest economic data out of Europe did not help the mood either. Confidence in the euro zone's economy shrank more than expected in March. An index of executive and consumer sentiment slid to 90 from 91.1 in February, according to the European Commission.

In afternoon trading in New York, the Dow Jones Industrial Average fell 0.35 per cent, while the Standard & Poor's 500 Index dropped 0.28 per cent, and the Nasdaq Composite Index slid 0.23 per cent.

In the US, an index of pending home sales dropped 0.4 per cent to 104.8 in February, after a revised 3.8 per cent gain in January, according to the National Association of Realtors. Inventory is the key bottleneck.

"Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50 per cent from current levels," NAR chief economist Lawrence Yun said in a statement.