Stocks have mixed fortunes despite Greece vote result
European and US stocks were mixed yesterday and Spanish bond rates hit a record high despite a Greek vote result welcomed by investors,who were nonetheless turning their attention to a key G20 summit.
Asian markets surged on the receding risk of a Greek eurozone exit after parties that accepted austerity measures came out on top in a legislative poll.
But the global rally lost steam, especially in southern European trading as investors worried about whether Spain and Italy would avoid bailouts that could stretch the currency union to the breaking point.
“For the second week in succession, euphoria over apparent progress in the eurozone has lasted for only a few hours,” noted Chris Beauchamp, a market analyst at IG Index trading group.
“In summary, we are really no further along than last Friday, and markets have reflected this; last week’s relief rally lasted barely a day, this one has been even briefer.
The euro gave up early gains, and slid to $1.2572 in afternoon European trading from $1.2644 late on Friday in New York.
London’s FTSE 100 index of leading companies closed with a gain of 0.22 per cent at 5,491.09 points and in Frankfurt, the DAX 30 added a modest 0.30 per cent to 6,248.20 points.
But in Paris the CAC 40 slipped by 0.69 per cent to 3,066.19 points, Madrid’s Ibex 35 was down by a sharp 2.96 per cent at the close, and in Milan the FTSE Mib index closed with a loss of 2.85 per cent.
Most US stocks were lower in midday trading, with the Dow Jones Industrial Average dropping 0.23 per cent to 12,737.28 points.
The S&P 500 gave up a slight 0.04 per cent to 1,342.25 points but the Nasdaq gained 0.23 per cent to 2,885.95 points.
“Greek elections? That’s yesterday’s news. Today’s crisis is a spike in Spanish bond yields,” said Dick Green of Briefing.com.
The rate which Spain must pay to borrow for 10 years spiked briefly to a record above seven per cent after initially dipping in response to the Greek election.
The sudden rise was a sign that dangers of debt contagion within the eurozone remained despite the Greek vote in favour of rescue terms. And in Berlin, European Central Bank executive board member Joerg Asmussen warned that easier terms for Greece such as a mooted extension of the aid reimbursement period would entail higher costs.
“As long as a country has a primary deficit, an extension of fiscal targets automatically means there is are additional external financing needs,” Dow Jones Newswires quoted Asmussen as telling an event hosted by Germany’s Green party.
The Spanish 10-year bond yield spiked to 7.241 per cent, the highest level since Spain joined the eurozone, from 6.838 per cent late on Friday, before settling back later to 7.117 per cent.
The gap with the yield on German 10-year bonds, the eurozone benchmark, also widened to a record 5.89 percentage points at one point during trading.