Portugal’s 10 year bond yields went above the 8 % and stock markets across Europe is indecisive as deepening political turmoil in the bail-out euro zone member is threatening to reignite the bloc’s financial crisis.

The signs that Chinese growth is impeded also weighed on shares while oil leaped to a 14-month high on fears that unrest in Egypt would raise tension in the Middle East that could disrupt crude supply of oil. Moreover, US stock index futures pointed to early declines for Wall Street, with traders gazing their sights on a trio of economic data which could give some insight into the strength of the closely-monitored payroll report.

The possibility of further resignations from the Portuguese government after this week’s surprise departure of its finance minister reigned over European trading. Portuguese 10-year bond yields topped 8 % and its stock market dropped 6 %, leading the top of the list among the fallers across Europe and Asia.

Both the Italian and Spanish yields also went up and the cost of insuring marginal debt against default skyrocketed, with nervousness over the contestation whether Greece will receive its next tranche of bailout funds adding to the already existing fears that debt crisis will be ignited.

China contemplating

The sessions got off to a rough start, with Asian stock market falling after official figures showed growth in the service sector drop to its weakest pace in well over 9 months.

The growing unrest in Egypt and apprehensions of it possibly disrupting Middle East supplies drove oil prices higher for the third consecutive day. Traders are also expecting data that will show a sharp drop in crude oil stocks held by top consumer, the US.

US position lifted

Countering the softer China numbers, U.S. traders prepared for a shortened pre-July 4 session in which the payrolls data this week benefited falls from unemployment.

The first rise in European retail sales in four months and more than one year at its peak for Markit’s final composite Eurozone simply could not overcome the concerns over the predicament of Greece and Portugal. Investors were instead looking forward for traditional safe-haven assets such as German bonds, the US dollar and the Japanese yen.

The US dollar hit a one-month high against a tub of major currencies before a slight dip, but stayed on course following a recent string of generally solid US economic data which was highly indicative that the Fed could scale back its stimulus later this year.

The dollar index, which measures the greenback’s value against a bin of currencies rose to as high as 83.635, its highest since May this year, while Portugal’s problems pushed the Euro further down to $1.2923, its lowest in over a month.

The Euro is by far a slow grind lower, being fairly resilient against the dollar and the market will initially see this as a precautionary insight although the fact remains that the euro is still negative.