European stock markets recovered yesterday from heavy falls last week while the euro bounced higher after hitting a two-month low against the dollar as positive US retail sales data underpinned sentiment.
Rising rates of interest on Spanish sovereign debt were cause for concern on both sides of the Atlantic.
London’s benchmark FTSE 100 index climbed 0.26 per cent to 5,666.28 points, Frankfurt’s DAX 30 rose 0.63 per cent to 6,625.19 points and in Paris the CAC 40 added 0.51 per cent to 3,205.28 points. Madrid dipped 0.57 per cent however, while Milan won 0.36 per cent.
In foreign exchange trading, the euro struck a two-month low point of $1.2995 around 0635 GMT. It later stood at $1.3071, which compared with $1.3078 on Friday.
Unseasonably warm weather in the US boosted construction and helped drive US retail sales in March, Commerce Department figures showed.
Overall retail and food service sales expanded by 0.8 per cent last month, according to preliminary estimates, compared with February’s one per cent expansion.
But sentiment on US stock markets slipped after opening with solid gains.
Rising rates of interest on Spanish sovereign debt were cause for concern on both sides of the Atlantic.
“While the shares are consolidating after the recent losing streak, the concerns that were dominating the scene are still gnawing at the performance of the markets,” said Gekko Global Markets trader Anita Paluch.
Spanish government “bond yields are on the rise again, spurring the fears of the real condition of the eurozone crisis and cooling down the appetite for riskier assets.”
The interest rate which Spain has to pay to borrow rose above six per cent in early trading yesterday on the eurozone bond market. The yield on Spanish 10-year debt bonds climbed to 6.094 per cent from 5.960 per cent at the close of trading on Friday.
The rise in the rate indicated by yields on existing bonds reflects deep concern among investors about the ability of Spain to reduce its annual public deficit. This has re-ignited tensions in the eurozone bond market, just ahead of a French presidential election in which the role of the bond market is a central issue.
A borrowing rate of more than six per cent is widely considered to be close to a level that is unsustainable for a country such as Spain, as was the case for Greece, Ireland and Portugal which had to be rescued by the European Union and International Monetary Fund.
Asian stock markets earlier closed lower yesterday as Spain’s debt troubles added to already downbeat sentiment caused by weak Chinese growth data.
Tokyo fell 1.74 per cent, Seoul shed 0.81 per cent and Sydney lost 0.49 per cent.
In New York, US stocks opened higher yesterday after a second straight weekly decline, lifted by the better-than-expected March retail sales numbers that offset a sharp slowdown in New York manufacturing.
But sentiment then turned softer, and in midday trade the Dow Jones Industrial Average showed a smaller gain of 0.41 per cent to 12,902.80 points.
The broader S&P 500 was off by 0.22 per cent at 1,367.26 points, while the tech-rich Nasdaq had falled by 0.82 per cent to 2,984.70 points.
Early in the day, the US central bank reported that manufacturing activity growth had slowed in New York state in April as companies grappled with higher input prices.
The Empire State Manufacturing Survey’s index plunged to 6.6 points, from 20.2 in March, the Federal Reserve Bank of New York said, well below the average analyst forecast level of 17.5 points.