EUROPEAN STOCK markets tumbled and face further volatility as Spain’s economic and banking crisis intensified and there were renewed fears that Greece may exit the euro zone.
Share prices in Madrid fell to a nine-year closing low as the Spanish government tried to reassure investors about the deepening crisis in the country’s banks and sovereign debt position.
Spanish 10-year yields rose 0.24 percentage points to 6.74 per cent, a euro-era record relative to German bunds and close to the 7 per cent level that pushed Greece, Ireland and Portugal into EU-IMF bailout programmes.
The euro fell to the lowest level in almost two years against the dollar as Spain struggled to rescue its troubled banks, adding to signs the euro debt crisis is spreading to the region’s larger economies.
The currency slid for a seventh day versus the yen, the longest losing streak in four months, after Italy sold less than its maximum target at a debt auction. Italian 10-year yields rose above 6 per cent for the first time since the middle of this month.
DUBLIN
THE ISEQ fell 1.5 per cent as packaging group Smurfit Kappa fell 6.1 per cent to €5.23 a share as new data showed a further weakening in container prices.
Independent News and Media declined 7.4 per cent to 25 cent.
Insurance group FBD did not suffer any major impact from its shareholding in the closed stockbroking firm Bloxham, gaining 0.9 per cent to €8.17 a share, though still below its €8.35 a share value before the news of the closure.
Food group Kerry gained 1.1 per cent to €34.65 a share.
International building materials group CRH, the market’s largest stock representing about a third of the index, fell 2.9 per cent to €14.07 a share, while another building materials stock Kingspan fell 1.7 per cent to €6.90 a share.
LONDON
UK STOCKS fell for the first time in five days as borrowing costs climbed at an auction of Italian debt and Spain struggled to recapitalise its banks, adding to concern the euro area debt crisis is spreading. The FTSE fell by 1.7 per cent to 5,297, ending its longest streak of gains this month.
Royal Bank of Scotland, Lloyds and HSBC, Europe’s largest bank, declined more then 2 per cent as the cost of insuring against default on Spanish sovereign bonds rose to a record.
Vedanta Resources and Xstrata led mining shares lower as the price of copper retreated for a second day.
“Everything seems to be going out the window,” Chris Beauchamp, a market analyst at IG Index in London, said.
“Yields have shot up once again; it really looks as if Spain is teetering on the brink. It feels like we are getting to a similar point before we saw the bailout of Portugal and Ireland.”
A gauge of UK bank shares dropped 1.9 per cent even as the European Commission called for direct euro-area aid for troubled lenders and touted common bond issuance as an antidote to the debt crisis now threatening to overwhelm Spain.
EUROPE
MADRID SHARE prices plunged 2.58 per cent to a nine-year closing low as the government tried to contain investor fears about a banking and sovereign debt crisis.
The IBEX-35 index of leading Spanish shares fell to 6,090, the lowest finish since April 1993 as Spanish central bank governor Miguel Angel Fernandez Ordonez resigned a month early amid criticism over the nationalisation of Bankia, Spain’s third largest bank.
German stocks declined as a poll showed Greece’s biggest anti-bailout party leading its rivals, euro-area confidence fell more than forecast and Spain’s default risk rose to a record level.
The DAX Index fell 1.8 per cent in Frankfurt, while France’s CAC-40 fell 2.2 per cent in Paris.
The euro was down around half a percentage point to $1.2433, its lowest since early July 2010.
US
ON WALL Street investors dumped risky assets and embraced safe havens, pushing the yield on benchmark US treasuries to 60-year lows.
Wall Street’s SP 500 index retreated from the previous session’s two-week highs, shedding 1 per cent.
The Dow Jones was down 1.3 per cent at 12,424, while the Nasdaq fell 1.4 per cent at 2,831.
The benchmark 10-year US Treasury note was up with the yield at 1.656 per cent – its lowest in at least 60 years – after bids for US government debt and other low-risk investments intensified on worries that problems in the Spanish banks could have ripple effects elsewhere.
US and German government yields declined as the yield on 10-year Spanish sovereign debt rose to six-month highs on concerns over how Spanish banks will obtain capital to stay afloat.
Crude oil futures in New York fell 2 per cent to below the key psychological support of $90 per barrel.
Additional reporting – (Reuters/Bloomberg)
