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European, US stock markets mixed as retail sales also fall

Global stock markets were mixed yesterday, with shares up in Asia, but most of Europe and the US down on concern over eurozone debt and disappointing US retail sales data.

In London, the benchmark FTSE 100 index added 0.18 per cent to close at 5,483.81 points, but in Frankfurt, the DAX 30 dipped 0.14 per cent to 6,152.49 points and in Paris the CAC 40 slid 0.55 per cent to 3,030.04 points.

A London trader said the mood was cautious ahead of Greek elections on Sunday that might indicate whether the 17-nation eurozone was headed for a deeper crisis.

A victory by the far-left Syriza party could see Greece reject terms of its latest rescue package, worth €130 billion, in which case funds from the European Union and International Monetary Fund might dry up.

In comments on a €100-billion bailout of Spanish banks meanwhile, Capital Spreads trading group head Simon Denham said bond traders were “unconvinced that last weekend’s bailout will be enough to prevent the (Greek) contagion from spreading.”

In foreign exchange deals, the euro nonetheless rose to $1.2592 from $1.2502 late on Tuesday in New York. US stocks were mixed halfway through the day, with the Dow Jones Industrial Average showing a slight loss of 0.13 per cent to 12,557.94 points, while the broader S&P 500 slid 0.14 per cent to 1,322.34 points.

The tech-rich Nasdaq Composite was essentially unchanged at 2,843.76.

“Optimism spurred yesterday on hopes of additional help for the economy from the Federal Reserve has been curtailed,” said Charles Schwab & Co. analysts.

“Domestic economic data showed that retail sales fell for the second straight month and prices at the wholesale level fell by its largest amount in nearly three years,” they added.

In Madrid, Spanish Prime Minister Mariano Rajoy pressed the European Central Bank to make absolutely sure that businesses and households continued to have access to crucial cash supplies.

Spanish 10-year government bonds yields – the rate of return earned by investors – spiked to a record 6.834 percent on Tuesday, the highest level since the eurozone was founded.

Any yield above six per cent is judged unsustainable for the long term and now indicated the market was increasingly sceptical that the EU bank bailout accord can resolve Spain’s problems.

The country was hit again on Tuesday when Fitch downgraded 18 Spanish banks, a day after it cut those for the country’s two biggest lenders, Santander and BBVA.

Italy has also seen its bond yields soar but Prime Minister Mario Monti was relaxed about Rome’s standing on international markets at a “crucial” time for the eurozone, despite rising risks from crisis contagion.

“We are relaxed over Italy’s standing on the international stage and on the markets,” he said in a speech to the cabinet, explaining that Italy had a lower public deficit and unemployment rate than many other EU countries, and “stable” banks which were not exposed to the real estate crisis threatening Spain.

Italy raised €6.5 billion with a 12-month bond issue yesterday but had to pay an interest rate of 3.972 per cent, compared with the 2.34 per cent at a comparable an auction on May 11, the Bank of Italy said.

German Finance Minister Wolfgang Schaeuble told the Italian daily La Stampa there was no danger of Italy succumbing to the debt crisis if it continued to implement structural reforms and growth measures.

In Asia, stock markets mostly closed higher, taking their cue from gains on Wall Street on Tuesday.

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