Ibex hits yearly low as global markets plunge

The European Central Bank (ECB) on Thursday tried to temper fears over Spain's economy when its president suggested that the entity may be willing to purchase Spanish bonds. The ECB reportedly did not come to Spain's rescue on Thursday, but it seemed the speculation was enough to help Spain sell 3.3 billion euros in bonds.

But the markets were volatile. The blue chip Ibex-35 saw its worst loss of the year, and Spain's risk premium broke the 400- point mark for the third day in a row, closing at 398 points above the German benchmark bund.

The falls came on the heels of forecasts that another recession may be just around the corner.

Spanish Prime Minister José Luis Rodríguez Zapatero called the debt auction "satisfactory" and asked his economic team to keep in constant touch with their European counterparts to avoid more market turbulence.

At the beginning of the day, Spain seemed to have surpassed the market tests by selling 3.3 billion euros in bonds with maturity in three and three-and-a-half years.

The sell-off was preceded by comments from ECB president Jean-Claude Trichet, who announced that the European Central Bank would reactivate its dormant bond-buying program in financially troubled euro-zone nations. But according to Bloomberg and AFP, which cite ECB sources, the central bank only purchased bonds from Portugal and Ireland — two nations that have already received hefty bailout packages.

However, the move wasn't enough to save the European stock markets from losing ground. The Ibex 35 shed 351.20 points, or 3.89 percent, to close at 8,686.50 points — a new record low not seen since the beginning of June 2010.

Markets across the globe also reported losses on forecasts that the United States and Europe are heading toward a new recession.