29/05/2012 - 06:59

European stocks waver on Spanish banks

29/05/2012 - 06:59


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European stocks waver on Spanish banks

Most European stock markets have fallen on bank strains in Spain, but avoided a deep slump after opinion polls pointed to a win for pro-austerity conservatives in the upcoming Greek election.

The European single currency rose to $US1.2543 from $US1.2515 late in New York on Friday, when it briefly hit a 22-month low point of $US1.2496 on eurozone debt worries.

The eurozone bond market was under renewed tension owing to concerns about the Spanish banking sector and despite more optimistic sentiment about Greece.

At the close on Monday, London's FTSE 100 index firmed by a slight 0.09 per cent to 5,356.34 points, Frankfurt's DAX 30 dropped 0.26 per cent to 6,323.19 points and in Paris the CAC 40 fell 0.16 per cent to 3,042.97 points.

Madrid shares plummeted by 2.17 per cent to 6,401.2 points, a nine-year low point, as troubled Spanish lender Bankia lost 13.38 per cent after it sought a record 19-billion-euro ($A24.5 billion) state bailout.

Spanish banks are at the heart of fresh market fears that the eurozone's fourth-largest economy might have to seek an international financial bailout.

Spanish Prime Minister Mariano Rajoy acknowledged on Monday that the state was struggling to borrow as its risk premium shot to a euro-era record.

Amid the bank tensions, the interest rate on Spanish 10-year government bonds surged to 6.479 per cent.

The interest rate or yield indicated by trading in the 10-year bonds had ended on Friday at 6.311 per cent.

A rate above six per cent for a country such as Spain is widely considered to be in a danger zone and close to a level at which a government can no longer afford to finance its debt.

The rise in the Spanish yield took the gap with the rate paid by Germany to a record 5.115 percentage points.

The German 10-year bond, the Bund, is the eurozone benchmark because Germany benefits from the most confidence among investors.

Italy, another heavily indebted eurozone nation, borrowed 4.25 billion euros on Monday, also at increased rates.

In the United States, Wall Street was closed for the Memorial Day holiday.


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