LONDON (Dispatches) -- Fears of deflation in Spain and renewed concerns that tough new austerity measures across Europe would damp growth spooked investors in the region on Friday, sending the euro to new 18-month lows, share markets tumbling and gold to a new high.

The euro, which had been trading 0.3 percent higher against the dollar at $1.2570 in early trade, fell through last week’s 14-month lows of $1.2510 to $1.2465, its lowest against the dollar since Nov. 2008 and a decline of 0.5 percent.
Gold rose above €1,000 a troy ounce for the first time and hit a fresh record high in dollars terms on Friday amid the fresh turmoil in financials market. The nominal all-time high of $1,248.95 a troy ounce was up 1.4 per cent on the day. It also hit new highs in Swiss franc and sterling terms.
There were further signs that last week’s turmoil on concerns over Greek contagion had caused investors to seek safe havens.
After a week of EU’s $1-trillion rescue fund to control its financial markets, EU leaders are using the debt crisis to launch painful reforms. Spain and Portugal have bitten the bullet since then by announcing austerity plans, by adopting tighter budget discipline.
The policy announcements this week by the two vulnerable countries in the 16-state euro zone pointed to the new sense of urgency in the EU, which represents 500 million people.
Core consumer prices in Spain, excluding energy and fresh food, fell 0.1 per cent from a year earlier, the National Statistics Institute in Madrid announced on Friday. The surprise fall, following a 0.2 per cent rise in March, marked the first annual decline in data going back to 1986.
Fears that deflation would exacerbate Spain’s debt problems sent financials sharply lower, with the European banking sector down 3.4 per cent in early trade led by Société Générale in France, down 5.9 per cent.
The decline in European stock markets – already under pressure on continued concerns over government deficit reduction challenges – followed falls in Asia as markets were weighed down by financials and the technology sector. The Eurofirst 300 index was 1.9 per cent lower.
In a sign of further steps being taken by China to damp an overheating property market in urban centres, the China Securities Journal reported that Shanghai’s municipal government was putting up nearly 40 lots of land for sale in the city’s most extensive release yet.
Nymex crude was down $1.62 to $72.95 a barrel, its fourth straight day of losses and lowest level for over three months, as inventories at Cushing in Oklahoma remained at record highs.
Photo: A teller counts euro banknotes inside a branch of National bank of Greece in Athens February 10, 2010. (Photo: John Kolesidis/Reuters