Spain dithers: Stocks fall, borrowing costs rise

Stock markets fall as investors grow nervous about Spain's delay in asking for a bailout. Spain's bond yields rise, but bond auctions generate strong response.

|
Andrea Comas/Reuters/File
Spanish Prime Minister Mariano Rajoy looks on during a parliamentary session at Spanish parliament in Madrid last week. As Mr. Rajoy studies the conditions necessary to apply for European aid, stock markets are getting nervous about the nation's rising debt load.

Global markets mostly fell Tuesday as investors worried about the global growth outlook and Spain's apparent delay in accepting a financial aid package.

Spain's markets have improved in recent weeks on expectations that the government will get some form of rescue loan from the 16 other eurozone countries. But Madrid has not made any formal request yet, likely wary of the policy conditions that would come attached.

The delay pushed the country's bond yields sharply higher on Monday, suggesting an increase in investor concern about the government's finances. The yields eased back somewhat on Tuesday after a bond auction was well-received. The sale of 12- and 18-month debt saw strong demand and resulted in lower interest rates than in the previous such auctions.

The auction result helped markets, but tensions remained — by midafternoon in Europe, Spain's main stock index was still down 1.4 percent.

"Investors appear to be turning nervous," said Kintai Cheung, analyst at Credit Agricole CIB.

Elsewhere, Britain's FTSE 100 closed down Tuesday down 0.4 percent to 5,868 and Germany's DAX shed 0.7 percent to 7,347. France's CAC-40 lost 1.15 percent to 3,512.

Wall Street had a muted opening, with the Dow up 0.04 percent to 13,475 and the S&P 500 losing 0.3 percent to 1,457. Asian indexes closed mostly lower.

Analysts say the stock losses are also a pull-back from highs hit last week, when the U.S. Federal Reserve triggered a market rally with the announcement of new stimulus measures. Faced with a struggling recovery in the world's biggest economy, the Fed announced plans to buy $40 billion of mortgage bonds a month for as long as necessary as part of a strategy to boost borrowing and spending. The Fed also extended its pledge to keep short-term interest rates low until 2015, a year longer than its previous target.

The size of the program buoyed confidence in the global economy, and stocks rallied. Since then, however, investors have begun to re-examine the big picture and to see substantial headwinds on the horizon.

"I think the outlook in the near term for the global economy is still fairly negative," said Peter Elston, strategist at Aberdeen Asset Management in Singapore. "I suspect that further weakness is just around the corner, which might explain the greater than expected easing by the Fed."

Losses began earlier in the day in Asia. Japan's benchmark Nikkei 225 index fell 0.4 percent to 9,123.77. Hong Kong's Hang Seng lost 0.3 percent to 20,601.93 and Australia's S&P ASX/200 fell 0.2 percent to 4,394.70.

Benchmarks in Singapore, Indonesia and Taiwan also fell. Mainland China's Shanghai Composite Index fell 0.9 percent to 2,059.54 while the smaller Shenzhen Composite Index lost 0.6 percent to 859.44.

Bucking the trend was South Korea's Kospi, which gained 0.1 percent to 2,004.96.

Benchmark oil for October delivery was down 61 cents to $95.98 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.38, or 2.4 percent, to finish at $96.62 a barrel on the Nymex on Monday, when trading was marked by huge volatility.

In currencies, the euro fell slightly to $1.3047 from $1.3107. The dollar fell to 78.58 yen from 78.74 yen.

Pamela Sampson in Bangkok contributed to this report.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Spain dithers: Stocks fall, borrowing costs rise
Read this article in
https://www.csmonitor.com/Business/Latest-News-Wires/2012/0918/Spain-dithers-Stocks-fall-borrowing-costs-rise
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe