Europe stocks waver amid eurozone woes

European stock markets fell in choppy trade yestersday as the euro hit another record low versus the dollar on persistent eurozone tensions with Spanish borrowing costs still at danger levels. Markets in London, Frankfurt and Paris ended lower after struggling all session to find direction. In Spain and Italy, the focal point for most trader worry these days, share prices suffered badly. “It seems markets this week have recognised that Spain is following Greece’s path, with Spain’s bond yields at levels that forced policy makers to step in to help Greece and Portugal,” said Ishaq Siddiqi market strategist at ETX Capital. At the close, London’s benchmark FTSE 100 index of top companies was down 0.63% at 5,629.09 points, Frankfurt’s Dax 30 fell 0.45% to 6,390.41 points while in Paris the CAC 40 dropped 0.87% to 3,074.68 points. Madrid stocks meanwhile plummeted 3.58% to their lowest level since April 2003. Milan shares ended down 2.7%. Europe’s main indices had already lost between 2% and 3.2% on Monday over speculation that embattled eurozone Spain could soon require a full state bailout. The euro yesterday fell as low as $1.2059, its lowest level since 11 June 2010, before recovering slightly to $1.2066 from $1.2137 in New York late Monday. The dollar eased to ¥78.21 from 78.37. US stocks also fell yesterday on mixed corporate earnings reports and eurozone worries, with the Dow Jones Industrial Average down just 0.92% and the tech-rich Nasdaq losing 0.52% in midday trade. In Paris, “traders mostly stood aside, worn out by a flow of never-ending bad news,” said Alexandre Baradez of Saxo Bank. Spain had to pay higher rates yesterday to raise €3.05bn ($3.72bn) in short-term funds, coming under pressure again on the markets on concerns that Madrid will need a full sovereign debt bailout. The Treasury said it sold 3-month bills at 2.434%, up from 2.362% at the last similar auction in late June, with 6-month bills rising sharply, to 3.691% from 3.237%. It said bids came to €9bn euros, reflecting strong demand for the debt, which carries very high rates for such short maturities. Spain’s long-term borrowing costs have soared in recent days to well above the danger line of 7%, hitting levels that forced Greece, Ireland and Portugal to seek EU-IMF bailouts. The yield or rate of return on the benchmark 10-year Spanish government bond was higher again yesterday, at 7.621%. Compounding problems, debt-laden Catalonia, the second biggest Spanish region, will join the likes of Valencia and likely others to ask the federal government for funds, the region’s finance minister told BBC radio on Tuesday. The eurozone crisis took another twist on Monday as Moody’s made a first step toward stripping Germany of its coveted triple-A credit rating, cutting the outlook for Europe’s largest and most pivotal economy to “negative.” Delivering a stark warning that no one is immune from the eurozone’s rolling crisis, the ratings agency lowered Germany’s credit outlook from “stable” to “negative” after the close of European trading. Top-rated Netherlands and Luxembourg were similarly cut. Moody’s said all three faced risks from Greece leaving the eurozone and from the need to stump up cash for potential bailouts for Spain and Italy. In Germany, the finance ministry immediately shot back by saying the country remained the “eurozone’s anchor of stability”. Dick Green at Briefing.com said: “Germany isn’t really of concern, but the agency understandably noted that rapidly deteriorating conditions in Spain and Greece have implications for Germany’s financial health.”