Global stocks decline as Spain dims sentiment

New York:  Global stocks and the euro eased yesterday after the Spanish economic dynamo of Catalonia said it needed help to refinance its debt, adding to financial troubles in Spain, which is already weighed down by a capital-constrained banking sector.

The euro plumbed a fresh 22-month low against the US dollar after the president of Catalonia, Spain's wealthiest autonomous region, said it is running out of options for refinancing more than €13 billion (Dh61.8 billion) in debt that comes due this year.

The euro fell below $1.25 on trading platform EBS, and equity markets on Wall Street opened lower, following retreating European stock markets.

News of Catalonia's troubles came as Spain's Bankia is set to ask the state for a bailout valued at more than €15 billion, marking another rise in the cost of rescuing the country's fourth-biggest bank.

The major US indices were mixed yesterday as traders again looked to events across the Atlantic amid thin trade ahead of a long holiday weekend.

The Dow Jones Industrial Average and the Nasdaq fell in early trade while the S&P 500 rose modestly.

Tremors in Spain's banking market set the tone.

Bankia trade halted

Spain's stock market suspended trade in Bankia's plunging shares as reports said the struggling lender may seek up to €20 billion from the state to stay afloat.

Bankia requested the suspension ahead of a board meeting to decide on a recapitalisation plan, "in view of the lack of precision on the figures" ahead of its decision, the bank said in a statement.

That fuelled fears of a bank run, which would send ripples through the global banking system.

The Dow was down 23.91 points (0.19 per cent) to 12,505.84 an hour after the open. The Nasdaq was down 4.96 (0.17 per cent) to 2,834.42. The S&P index was modestly in the black, rising 0.34 (0.03 per cent) to 1,321.02.

Dow components Caterpillar, Boeing and American Express were all down close to one per cent. Microsoft, Procter & Gamble and Intel carved out modest gains.

Bond prices rose as yields fell. The yield on the ten year Treasury bond fell 0.01 points to 1.75 per cent, that on the 30 year fell 0.01 points to 2.84 per cent.

Markets already were skittish over a possible Greek exit from the Eurozone, halting a brief equity rally following sharp losses earlier in the week. Bonds prices rose in a bid for safety as investors prepare for what is likely to be volatile trading over the coming month. Traders said the outlook is negative. "Europe is in a recession, China is slowing down and the United States is slowing down as well," said Michel Juvet, chief investment officer at Swiss bank Bordier & Cie.

In Europe, the FTSEurofirst 300 index was down 0.2 per cent at around 980, not far from its May 21 trough of 952.55 points, its lowest point since December 20. MSCI's all-country world equity index fell 0.4 per cent to 300.46. The US Dollar Index off 0.04 per cent at 82.313. The euro was down 0.11 per cent at $1.2521.