Spanish credit crisis resurfaces

The wise money markets have dropped more than 1 percent globally in overnight trading as concerns over Spain and the euro economy increase.Spanish credit crisis resurfacesThis has led to the euro to fall back against the dollar to the lowest in the last 2 weeks ever since it broke the 1.30 barrier closing overnight at 1.2950.

Once again the troubled Spanish economy continued to be the major focal point as investor fears loom over the recession in the region.

Ever since Moody’s downgraded the 5 regions including Catalunya, the 10 yr yields rose 13bps to 5.62 percent.

GDP figures from the region also came in poorly as it showed the economy shrank by 0.4% in the third quarter reinstating fears that the recession will inevitably last until the end of 2012.

However, the bond auction saw Spain sell €3.53 billion worth of short term 3 yr debt.

Investors had priced in the fact that a Spanish bailout request was inevitable, but the reluctance to ask for further aid by Spain has sent the markets into fear resulting in the euro facing weakness.

From the US markets, poor corporate earnings provided the catalyst for a general move away from riskier assets.

This brought about early weakness in the dollar however it did manage to gain some strength on the back of poor news from Spain.

Corporate earnings in the UK continued to frustrate investors as UK Stocks tumbled the most in almost a month.

We expect third quarter GDP figures from the UK tomorrow and the bleak outlook is driving most investors towards the Greenback.

This has prompted a slump in Sterling to close yesterday below the psychological 1.60 level.

Bank of England governor Mervyn King, in a speech in Cardiff insisted that he is ready to inject further stimulus if the recovery falters. Investors continue to take direction from broader equity markets which have plagued risk sentiment for the time being.

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