Spanish bailout fears stalk global markets

LONDON (AP) — Stocks took a battering while the euro slid to a two-year low against the dollar on Monday as fears over Europe’s debt crisis returned to haunt markets.

Spain is the epicenter of the current bout of fears, with investors increasingly concerned that the country will not be able to turn its public finances around without outside help. Greece remains in the spotlight with investors increasingly skeptical about its future within the 17-country eurozone.

The catalyst to the day’s dramatic falls was the sharp increase in the yield on Spain’s benchmark 10-year bond to well above 7 percent. If it remains around that level, investors believe the eurozone’s fourth-largest economy will likely need a financial rescue like Greece, Ireland and Portugal.

Spain’s 10-year borrowing rate rose 0.21 percentage points to close at 7.43 percent; it traded as high as 7.51 percent — its highest since the euro was established in 1999.

Coupled with worries that the financial firewall Europe has built up to deal with its debt crisis is insufficient and growing concerns of the financial health of regions within Spain, markets have started the week on a sour note.

In Europe, the FTSE 100 index of leading British shares closed down 2.1 percent at 5,533.87 while Germany’s DAX fell 3.2 percent to 6,419.33. The CAC-40 in France lost 2.9 percent at 3,101.53.

While markets were tanking, Spain and Italy announced temporary bans on the short-selling of stocks.

— whereby investors are prohibited from selling stocks they don’t already own.

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