European stocks slide on Spain bank bailout concerns

European stocks slid Thursday in anxious trade before Spain announced the cost of bailing out its banks and amid a slew of data that suggested a slowdown in the global economy.

London's benchmark FTSE 100 index closed down 0.99 percent at 5,566.36 points.

In Frankfurt, the DAX 30 dropped 0.77 percent to 6,343.13 points, while in Paris the CAC 40 slid 0.39 percent to 3,114.22 points.

Madrid's IBEX 35 index gave up 0.33 percent while Milan bucked the trend to edge 0.14 percent higher amid renewed talk about having the EU rescue funds buy government bonds.

In foreign exchange deals, the euro fell to $1.2582 from $1.2702 late on Wednesday in New York.

The dollar rose to its highest level against the yen for a month, climbing to 80.33 yen before pulling back to 80.20, still up from 79.56 late on Wednesday in New York.

"Financial markets are under pressure again, with clients reducing appetite for risk -- preferring traditional safe havens like core government bonds versus equities and riskier currencies like the euro," said Ishaq Siddiqi, a market strategist at ETX Capital trading group in London.

After European markets closed, Spain's central bank said that new stress tests showed the country's banks need between 16 and 62 billion euros in extra capital to stabilise them in the financial crisis.

The deputy governor of the Bank of Spain Fernando Restoy announced the estimates, the result of tests by the US audit firm Oliver Wyman and German firm Roland Berger, at a news conference.

The result was in line with market expectations of a capital shortfall of 60-70 billion euros.

Ahead of the announcement, Spain showed it could still tap the bond market at a pivotal time by easily raising 2.22 billion euros in a mixture of two-, three and five-year bonds. But it had to pay soaring rates to lure investors.

Asian stock markets meanwhile mostly closed lower on disappointment at the US Federal Reserve's muted stimulus measures to kickstart the world's biggest economy, while European concerns also remained in focus.

Adding to selling pressure were preliminary numbers from banking giant HSBC showing China's manufacturing activity hit a seven-month low in June.

Sydney's stock market fell 1.09 percent, Seoul gave up 0.79 percent and Hong Kong tumbled 1.30 percent. Tokyo closed up 0.82 percent owing to a slightly weaker yen, traders said.

Meanwhile, eurozone private sector activity sank to the lowest level for three years in the second quarter, suggesting gross domestic product is likely to have fallen by 0.6 percent, a key survey showed.

The Purchasing Managers Index (PMI) compiled by business research firm Markit was stuck at 46 points in June, the same level as May, indicating another month of contraction in activity.

"The downturn is gathering pace and spreading across the region," said Markit chief economist Chris Williamson.

On Wednesday, the US central bank dissappointed investors when it said that it would extend its operation of lengthening the maturities of US government bonds it holds instead of launching a third round of monetary stimulus -- or quantitative easing.

The Fed, after a two-day meeting, also predicted US growth would be even worse than thought this year, forecasting 2012 growth of between 1.9 and 2.4 percent -- a half point cut from predictions made as recently as April.

Meanwhile new claims for unemployment benefits in the United States were nearly flat at 387,000 last week, showing little change from recent poor data.

US stocks were down in midday trading, with the Dow Jones Industrial Average sliding 0.74 percent to 12,823.10 points.

The broader S&P 500 dropping 0.98 percent to 1,342.37 points while the tech-heavy NASDAQ composite index shedding 1.25 percent to 2,893.77 points.

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    0.9327-0.0006-0.06%
    AUDUSD=X
    0.5551-0.0004-0.07%
    AUDGBP=X
    0.6749-0.0006-0.08%
    AUDEUR=X
  • Commodities
    Commodities
    NamePriceChange% Chg