European stocks tumbled yesterday as investors reacted to eurozone debt tension, unexpectedly weak Chinese economic growth and US consumer confidence with renewed fears of a slowdown.
London’s benchmark FTSE 100 index of top companies finished down 1.03 per cent at 5,651.79 points, while Frankfurt’s DAX dropped 2.36 per cent to 6,583.90 points and Paris’ CAC 40 fell 2.47 per cent to 3,189.09 points.
Milan’s FTSE Mib index dove 3.43 per cent to 14,359 points and Madrid shed 3.58 per cent to 7,250.6 points.
In foreign exchange deals, the euro declined to $1.3081 from $1.3188 late in New York on Thursday.
“European indices are weaker ... with Spanish and Italian markets coming under the greatest selling pressure,” commented analyst David Morrison at the trading group GFT.
“Sovereign bond yields for both countries are higher, and the euro has so far failed to break back above 1.32 against the US dollar.”
He added: “Investors were rattled by the news that Spanish bank borrowing from the European Central Bank rose dramatically last month.”
Borrowing by Spanish banks from the ECB hit a new record in March at €227.6 billion as they snapped up emergency cheap loans, official data showed.
The figures from Spain’s central bank are a sign of weak confidence in Spain’s troubled financial sector, with commercial banks turning to the ECB because they are struggling to borrow on interbank lending markets.
Spanish banks have found it hard to borrow money from peers in other eurozone countries because many in Spain are heavily exposed to the real-estate sector, which has been in a slump since a bubble burst in 2008.
Italy and Spain remain in the market spotlight amid fears that the pair could be sunk by the long-running eurozone debt crisis, which has already resulted in vast EU/IMF bailouts for Greece, Ireland and Portugal.
The yield on Spanish 10-year bonds jumped to 5.956 per cent from 5.802 per cent on Thursday, once again nearing the critical six percent threshold which many economists consider unsustainable. The yield on Italian 10-year bonds rose to 5.513 per cent from 5.394 per cent.
Asian markets mostly rose yesterday, after a strong rally on Wall Street on Thursday, as dealers shrugged off news that China’s economy grew at its slowest pace in almost three years in the first quarter of this year.
Asian investors took their cue from a Wall Street surge on Thursday that was driven by hopes the Federal Reserve will introduce fresh stimulus measures after a second straight week of rising jobs claims.
The mood was also lifted by news that a North Korean rocket launch, which had raised regional security tensions, had failed.
In midday trading the Dow Jones industrial average was down 0.52 per cent at 12,919.22 points. The broader S&P 500 index had shed 0.70 per cent to 1,377.92 points, and the tech-heavy Nasdaq fell 0.94 per cent to 3,026.90 points.