European stocks, euro slump ahead of summit
European stocks tumbled and the euro slid yesterday ahead of a major EU summit this week that analysts said was unlikely to deliver concrete steps to extinguish eurozone debt fires.
London’s benchmark FTSE 100 index fell 1.14 per cent to 5,450.65 points, while in Frankfurt the DAX 30 dropped 2.09 per cent to 6,132.39 points, and in Paris the CAC 40 sank 2.24 per cent to 3,021.64 points.
Madrid dropped 3.67 per cent, Milan tumbled 4.02 per cent, and Athens plunged 6.84 per cent.
In foreign exchange deals, the euro dropped to $1.2486 from $1.2569 late on Friday in New York. The dollar fell to 79.51 Japanese yen from 80.43 yen.
Spanish and Italian bond yields rose also reflecting rising concerns, with the rate of return demanded by investors to hold Spanish 10-year debt rising to 6.501 per cent in late trading compared to 6.317 per cent at Friday’s close.
The yield on 10-year Italian bonds rose 5.916 per cent from 5.787 per cent.
Meanwhile, the yield on German 10-year bonds, considered a safe-haven investment in the eurozone, fell to 1.482 per cent to 1.580 per cent.
“In the absence of any economic data overnight in Asia and during today we are seeing the troubles of the eurozone resonating throughout the market as the main focus yet again,” said Spreadex trader Jordan Lambert.
“Naturally investors will earnestly look towards the two-day EU summit later this week for some kind of crisis-ending solution, although judging on the effectiveness of the numerous prior summits many will not be building their hopes too much.”
Europe’s leaders gather for a summit in Brussels on Thursday and Friday under intense global pressure to head off a potentially catastrophic economic collapse.
Greece was to use the meeting to request revisions to its EU-IMF bailout deal. Greece’s newly elected government wants the bailout conditions eased, including a delay in a deficit reduction deadline to 2016 from 2014.
And this as the relentless two-year sovereign debt crisis has infected Spain, the eurozone’s fourth-largest economy, and is threatening Italy, its third-largest, after bailouts for Greece, Ireland and Portugal.
Spain formally requested a rescue loan of up to €100 billion from its eurozone partners in a letter released yesterday.
No new figures were included in the letter, after conclusions by independent consultants last week said stricken Spanish banks could need up to €62 billion to survive a severe, three-year financial slump.
“Given that economic activity in Spain remains muted... it seems likely that this so called adverse €62 billion figure could well rise rapidly,” said Michael Hewson, a senior analyst at CMC Markets trading group.
“Furthermore uncertainty re-mains as to how the bailout will be applied and under what conditions, due to disagreements amongst EU leaders as to how the Spanish bank sector should be restructured.”