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Police have used batons and water cannons in clashes with angry investors in the capital of Bangladesh after the country's stock market saw the biggest one-day fall in its 55-year history.

It follows losses of about 6.7% in trading on Sunday.The benchmark index had climbed by 80% in 2010 but has lost more than 27% since early December.

Trading was also halted on the country's other main index, the Chittagong Stock Exchange.

"There are up to 5,000 investors holding protests on the streets in front of the exchange building. Some of them have been violent," police inspector Azizul Haq told the AFP news agency.

"They have started vandalising government property, which forced us to use batons against them."

The BBC's reporter in Bangladesh, Akbar Hossain, confirmed that the baton charging had taken place and that there were protesters on the streets.

The rising value of the stocks in recent years has attracted about three million small-scale or retail investors in Bangladesh, he added.

Shares have become a popular investment for ordinary people, often providing higher returns than bank deposits and savings.

However, regulators have also taken measures in recent weeks to limit the proportion of deposits that banks can invest into the stock market - after concerns that shares were overvalued.

The move forced big institutional investors to withdraw from the market, triggering panic among individual investors.

"Market insiders say small investors were looking for an exit point from the market through selling their shares," our correspondent said.

Investors and police had also clashed in mid-December following a market slide.

Italy’s debt-to-GDP ratio is 118% (2009).Greece got in trou­ble at 116%. Italy’s deficit is smaller and has a high sav­ings ratio.How­ever,nobody focuses on that as Spain is in the lime­light with a debt-to-GDP ratio under 60%.Should aus­ter­ity mea­sures result in a nom­i­nal GDP contraction in Italy,its debt stats will worsen very rapidly.

Italy is the ele­phant in the room not Spain.

Since mid-October, Ger­man 10-Year Gov­ern­ment bond yields are up .64%. In the same time­frame, Ital­ian 10-Year Gov­ern­ment bond yields are up 1.04%.

The flight-to-safety diver­gence increased start­ing around Decem­ber 16, 2010. Since then, Ger­man bonds yields are off .16% while Ital­ian bond yields rose .14%.

Government Bond Spreads as of January 7, 2011

On Jan­u­ary 7, 2011 the German-Italian spread gov­ern­ment bond spread is 1.88% and ris­ing. Table is cour­tesy of the Finan­cial Times.

Note:As of back in May 2010,Italy owed France a whop­ping $511 bil­lion, 20% of the French GDP.More­over,nearly 1/3 of Portugal’s debt is held by Spain.Mean­while Spain owes huge amounts to Ger­many, France, and the UK.

Critical Court Ruling Coming Up................

In Feb 2011 the Ger­man court gives its ver­dict on the con­sti­tu­tion­al­ity of the bail-out. Fifty aca­d­e­mics and politi­cians sued the gov­ern­ment over it.Feb­ru­ary is crunch time.

If Italy were to go into a nom­i­nal GDP reces­sion on account of its aus­ter­ity pro­grams,its debt-to-GDP ratio would likely be 130% by 2012.It’s dif­fi­cult to see how the mar­ket would ignore that.

Also check out Italy’s debt com­pared to Ger­many. Here is the offi­cial EU Gross Gov­ern­ment Debt Fig­ures by coun­try.Note that as of 2009, Italy’s Debt is 1.763 Tril­lion EUR,about the same as Ger­many. Obviously the Ger­man econ­omy is far bigger.

2011 Italian Debt Issuance

Inquir­ing minds are read­ing Ital­ian Pub­lic Secu­ri­ties By Matu­rity to see how much debt Italy will need to rollover in 2011.

A quick look at page 3 totals approx­i­mately 281 bil­lion in euro debt rollovers. Assume a 5% bud­get deficit on a GDP of roughly 1.5 tril­lion euros and you end up with 281 + 75 bil­lion or roughly 356 bil­lion euro total debt issuance.

Will the mar­ket accom­mo­date that issuance at a good inter­est rate? If not, the “Invis­i­ble Ele­phant In The Room” will quickly make its pres­ence known in a rather rude manner.

On the Daily notice the spacing between the 20 and 50ma, also the euro usd is below all the Moving averages which is a bearish sign, watch the 1.2796 area for support as it is the 61.8 fib retrace, Notice the 1hr chart, this is the daily overlayed on it and shows the same  H and S Pattern

Any Comments or views would be appreciated