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European stocks extend losses, euro hits fresh one-year low

European stocks extend losses, euro hits fresh one-year low
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First Published: Wed, May 05 2010. 02 50 PM IST
Updated: Wed, May 05 2010. 02 50 PM IST
London: Global stock markets dropped further and the euro struck a new one-year dollar low on Wednesday as markets feared that Greek’s severe debt problems could spread to other eurozone nations.
“Even as the IMF and the eurozone have virtually finalised an unprecedented three-year financing package of €110 billion for Greece, financial markets remain unimpressed,” said Nouriel Roubini of analyst group Roubini Global Economics.
“The common currency continued to plunge... and long-term government bond yields in Greece and in the periphery countries, including Italy, spiked upward again after a short relief rally before the agreement.”
Financial markets have come under heavy pressure after eurozone finance chiefs had over the weekend approved an unprecedented three-year package of loans for debt-ridden Greece.
Of the €110 billion ($145 billion) to be made available to Greece, the eurozone is set to provide 80 billion and the International Monetary Fund 30 billion.
And in a policy U-turn, the European Central Bank agreed to accept Greece’s junk-rated government bonds as collateral for loans.
In return, the Greek Socialist government will have to impose harsh austerity measures, as it seeks to slash its public deficit from nearly 14% of output last year to less than 3% by the end of 2014.
Greek bond yields, indicating the price the government would have to pay to raise new money on financial markets, rose on Wednesday.
The rate on 10-year paper came to 9.351% against 9.168% on Tuesday.
The equivalent yield on Portuguese bonds rose to 5.435 percent from 5.386 percent, and the yield on debt for Spain, now also being dragged strongly into concern about contagion, edged up slightly to 4.117 percent from 4.113 percent.
In morning trading on stock markets, London’s benchmark FTSE 100 index was down 0.34 percent at 5,392.92 points, on the eve of a general election in Britain.
Frankfurt’s slid 0.16% and the Paris CAC 40 shed 0.28%.
Athens dropped 0.56% and Madrid lost 0.85% as both indices pulled back from initial sharp falls.
Spain’s economy minister acknowledged the country was having a “complicated” time on financial markets.
The fall extended losses from Tuesday when Spain’s Ibex-35 share index closed down 5.41% on the back of rumours denied by the government that the weakened eurozone nation would seek an international bailout like Greece.
“We are having a complicated time on financial markets but, in terms of the economic data, we are recovering, we have positive data and we are far better off than a year ago,” Economy Minister Elena Salgado told Cadena Ser radio.
Salgado said Spain would not be announcing extra austerity measures in response to the loss of confidence among investors but would instead concentrate on implementing the programme it has already approved.
“Rather than announcing new measures, what we have to do is enact what we have already announced,” Salgado said, adding that “markets (had) a speculative component that has been exacerbated by the situation in Greece.”
In foreign exchange trade, the European single currency slid to 1.2935 dollars on Wednesday -- the lowest level for more than a year.
The euro last reached such a level on 22 April, 2009. It recovered slightly later on Wednesday to stand at 1.2985 dollars at about 2:20pm, which compared with $1.2981 late in New York on Tuesday.
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First Published: Wed, May 05 2010. 02 50 PM IST
More Topics: Markets | Europe | Greece | Stocks | Dollar |