Europe close: Spanish medicine not working

Date: Monday 11 Jun 2012

- Most markets down despite Spanish bailout
- Spanish banks downgraded
- Sell off of Italian banks

FTSE-100: -0.05%
Dax-30: +0.17%
Stoxx 600: Flat
Cac-40: -0.29%
Ibex 35: -0.40%
FTSE MIB: -2.76%

The idea of the €100bn bailout of the Spanish banking system announced on Saturday was to calm European debt markets and instill confidence in the shattered psyche of investors.

It does not appear to have worked, most major equity markets have fallen through Monday while yields on Italian and Spanish bonds have risen.

By the close across Europe the yields on benchmark 10-year Italian bonds had gained a whopping 24 basis points or 0.24% to hit 6.01%. Spanish yields fared even worse, rising 28 basis points, to 6.49%.

To make matters worse Fitch ratings cut the credit ratings of Spain’s two biggest banks, Santander and BBVA over concerns that the country will struggle to escape its current recessionary cycle.

COMPANIES

The weakest sector on the Stoxx Euro 600 was real estate, down 1.24% but banks weren’t far behind, falling 0.7%.

Italian bank UniCredit sank a worrying 8.8% on fears over the status of Italian debt in the wake of the Spanish bailout. In Paris, Credit Agricole and Societe Generale both fell while in Germany Commerzbank (-1.85%) was amongst the fallers.

OTHER MARKETS

By 17:00 in London the euro was down 0.12% against the dollar at $1.2502.

Futures contracts for front month delivery of Brent crude had dropped 0.93% by 16:53 to $98.54 per barrel.

BS

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