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European equity markets have been taking it on the chin over the past few days, and it's a major reason why the market here in the US has been struggling. And it's not just the smaller European countries that are struggling. As shown in the chart below, France's CAC 40 has been cratering through support levels by the day.

Even more worrisome than the decline in European equities is the huge spike we're seeing in sovereign default risk. Below are price charts going back to 2007 for 5-year credit default swaps on France, Italy, Spain, and Portugal. As shown, all of them have recently surged to new highs, which is well above the levels seen last year as well as during the '08 financial crisis. Back in 2007, it cost $2 per year to insure $10,000 worth of French debt for 5 years. At the moment, it costs more than $120. And that's AAA?

Source: European Default Risk Spikes