Asian Stocks Rise as Spain Seeks Bailout, China Inflation Slows (Source: Bloomberg)
Asian stocks rose, extending the first week of gains in six weeks by the regional benchmark index, as investors speculated a bailout for Spain’s banks will help ease Europe’s debt crisis and China’s inflation slowed. Canon Inc. (7751), a camera maker that gets about 31 percent of sales from Europe, rose 2.6 percent in Tokyo. Sharp Corp., jumped 6.6 percent as Japan’s biggest maker of liquid-crystal displays said it will separate its TV-panel unit next month and start selling screens to Foxconn Technology Group by September under a revival plan. Samsung Electronics Co., which counts China as its biggest market, gained 2.1 percent in Seoul. “Without a bailout, Spain would have had a serious liquidity issue,” said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Asia Ltd., which oversees about $10 billion. “In the short term, it’s a relief for Spain and for Europe but it’s not the end solution.
Growth in China has slowed from last quarter but I think policy makers will ensure that more fiscal and monetary measures will be available in order to lift the economy back up again.” The MSCI Asia Pacific Index (MXAP) advanced 1.2 percent to 112.85 at 9:45 a.m. in Tokyo, with about 17 stocks rising for each that fell before markets in Hong Kong and China open. The gauge rose for the first time in six weeks last week as global policy makers in the U.S., Europe and China signaled they would take steps to stimulate growth.
Japanese Stocks Rise on Spain Bank Bailout, China Imports (Source: Bloomberg)
June 11 (Bloomberg) -- Japanese stocks rose, with the benchmark Nikkei 225 Stock Average (NKY) headed for the biggest gain since March, on speculation a bailout for Spanish banks will help stabilize the European debt crisis and after China’s imports grew faster than expected. Canon Inc. (7751), a camera maker that gets 31 percent of its revenue in Europe, advanced 2.9 percent. Fanuc Corp. (6954), a manufacturer of robotics controls for Chinese factories, rose 2.1 percent. Sharp Corp. (6753), Japan’s largest maker of liquid- crystal displays, gained 6.6 percent after saying it will separate its TV panel unit. The Nikkei 225 Stock Average added 2.3 percent to 8,650.51 as of 10:08 a.m. in Tokyo, poised for the biggest increase since March 27. The gauge rose 0.2 percent last week, snapping a nine- week loss. The broader Topix (TPX) Index gained 2 percent to 732.40, with all 33 of its industry groups climbing.
“The bailout will keep companies that borrow from Spanish banks from going down all together,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $70 billion. “In China, overseas demand is stronger than expected, while domestic demand continues to slow. That makes it easy to do more monetary easing because it has a direct impact on domestic demand.” The Topix fell 16 percent from this year’s high on March 27 amid concern the European crisis is deepening and as growth in China slows. Shares on the measure are valued at 0.87 times book value. A number below one means a company can be bought for less than the value of its assets.
China’s Stock-Index Futures Rise on Trade Data, Easing Inflation (Source: Bloomberg)
China’s stock-index futures rose, signaling gains for the benchmark index, as the nation’s trade expanded more than economists estimated and easing inflation provided leeway to policymakers to ease monetary policy. Futures on the CSI 300 Index (SHSZ300) expiring in June, the most active contract, added 0.8 percent to 2,536.60 as of 9:17 a.m. local time. SAIC Motor Corp. (600104) may lead an advance for automakers after passenger-car sales beat analysts’ expectations. China Petroleum & Chemical Corp. and PetroChina Co. may drop after the government cut fuel prices by the most since 2008. “The May economic data are a little better than expected an the government will continue to loosen policies given these figures are still at relatively weak levels,” Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co., said by phone today.
The Shanghai Composite Index (SHCOMP) dropped 11.68 points, or 0.5 percent, to 2,281.45 on June 8. The CSI 300 Index declined 0.7 percent to 2,542.33. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 0.4 percent in New York. The Shanghai measure slid 3.9 percent last week, the most since the five days ended Dec. 16, as concerns about a deeppening slowdown overshadowed the first cut in lending and deposit rates since 2008. About 6.8 billion shares changed hands on the gauge on June 8, 24 percent lower than the daily average this year. Thirty-day volatility was at 15.34, compared with this year’s average of 18.69.
Abu Dhabi Shares Rise Most in 2 Months on Etisalat (Source: Bloomberg)
Abu Dhabi stocks rose the most since March on bets the government may permit foreigners to buy shares of Emirates Telecommunications Corp. (ETISALAT), the largest publicly- traded company in the United Arab Emirates. Saudi shares gained. Etisalat, as the phone company is known, advanced the most since January even after saying it’s not aware of a decision to change the law that governs foreign ownership. The ADX General Index (ADSMI) rose 0.6 percent, the most since March 25, to 2,454.47 at the close in Abu Dhabi. The Bloomberg GCC 200 Index (BGCC200) climbed 0.7 percent after Saudi Arabia (SABIC)’s Tadawul (SASEIDX) rallied 1.3 percent, the most since April 21. Bank Nizwa (BKNZ) jumped 13 percent in the trading debut of the first Omani Shariah-compliant lender.
A law that governs Etisalat may be amended to allow foreign and institutional investors to own the shares, Emarat Alyoum reported last week, citing people it didn’t identify. A change will help widen ownership of shares beyond U.A.E. citizens and give overseas investors’ access to Etisalat, which may post a 26 percent increase in profit this year, according to the mean estimate of eight analysts on Bloomberg. “If the speculation is true, this would be good for the market as it could attract liquidity to the heavy-weighted stock, especially from foreign investors,” said Nabil Farhat, a partner at Abu Dhabi-based Al Fajer Securities, the 21st most active brokerage of 53 by value traded in May, according to the Dubai Financial Market. A change in the foreign ownership structure of the stock may help boost the U.A.E.’s chance of being promoted to emerging market status at MSCI Inc. (MSCI), he said.
European Stocks Post Biggest Weekly Gain in Four Months (Source: Bloomberg)
European stocks posted their biggest weekly advance in four months as China cut interest rates and the European Central Bank said it’s ready to add more stimulus if the economy worsens. Banco Espirito Santo (BES) SA and CaixaBank (CABK) led gains on a gauge of lenders as Spain moved closer toward seeking emergency aid to rescue its banking system. Assicurazioni Generali SpA (G), Italy’s largest insurer, jumped 8.4 percent as it named a new chief executive officer. MAN SE, climbed 5.6 percent after Volkswagen AG increased its stake in the truckmaker. The Stoxx Europe 600 Index (SXXP) advanced 2.9 percent to 241.93 this past week, the biggest jump since Feb. 3. The benchmark measure has still tumbled 11 percent from this year’s high on March 16 on concern Greece may be forced to leave the euro currency union. The selloff has left the gauge’s valuation at 10.1 times estimated earnings of its companies, according to data compiled by Bloomberg.
“The bottom line for this week’s rebound was a technical recovery, backed by high hopes of stimulus in the U.S. and in Europe,” said Trung-Tin Nguyen, a Zurich-based hedge-fund manager at TTN AG. “The recovery could still continue for a little while, but there’s still a lot of noise disturbing the markets, with the Greek elections coming up and Spain’s problems still looming.”
Russia Stocks Have Biggest Weekly Jump in Four Months on Crude (Source: Bloomberg)
Russian stocks had their biggest weekly increase since February as oil climbed on bets Europe’s debt crisis will be contained. The Micex Index (INDEXCF) added 0.4 percent to 1,338.07 by the close in Moscow, bringing its weekly gain to 3.1 percent, the most since Feb. 5. OAO Rosneft, Russia’s biggest oil company, rose 0.7 percent, while OAO Sberbank, the country’s largest lender, added 0.3 percent. Urals crude, Russia’s main export blend, advanced 0.8 percent yesterday to $98.24 a barrel, while oil traded in New York had its first weekly gain in six. Crude rebounded by $1.21 in the last 20 minutes of floor trading as Spain prepared to become the fourth of the 17 euro-area countries to seek emergency assistance. Russia, the world’s biggest energy exporter, relies on oil and gas sales for about 50 percent of its budget revenue.
Rosneft advanced to 198.71 rubles, trimming its weekly drop to 3.5 percent. Sberbank, the biggest holder of Russian retail deposits, climbed to 81.58 rubles, a 3.1 percent weekly increase. Russian stocks trade at 4.9 times estimated earnings, having lost 4.6 percent this year. That compares with a 1.2 percent drop for the MSCI Emerging-Market Index (MXEF) which trades at 9.3 times projected earnings.
Treasuries Drop as Spanish Bailout Call Saps Safey Demand (Source: Bloomberg)
Treasuries fell after Spain became the fourth member of the euro bloc to seek a bailout since the start of the region’s debt crisis, damping refuge demand. Benchmark 10-year yields touched a more than one-week high as Asian stocks rallied after Spain asked euro-region governments for as much as 100 billion euros ($126 billion) to rescue its banking system. The U.S. is scheduled to auction tomorrow $32 billion of three-year notes, followed by $21 billion of 10-year securities and $13 billion of 30-year bonds later in the week. “The news on the Spanish bailout is triggering a relief rally in stocks,” said Hitoshi Asaoka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s third- largest listed bank. “The bias is for Treasuries to be sold to some extent in the risk-on environment.”
The 10-year yield rose seven basis points, or 0.07 percentage point, to 1.71 percent as of 9:30 a.m. in Tokyo, the highest since May 30, Bloomberg Bond Trader data show. The 1.75 percent security maturing in May 2022 sank 5/8, or $6.25 per $1,000 face amount, to 100 13/32. The rate increased 18 basis points last week, the most since the period ended March 16.
Euro Rises to Two-Week High on Spain Bailout Request (Source: Bloomberg)
The euro rose against most of its major counterparts after the region’s governments agreed to provide Spain with a bailout loan, fanning expectations European leaders will step up effort to counter the debt crisis. The 17-nation currency climbed to a two-week high after Spain asked for as much as 100 billion euros ($126 billion) to rescue its banking system, making it the fourth member in the currency bloc to seek rescue. The dollar and yen fell on decreased demand for refuge assets. “Markets were wondering whether Spain was going to drag on for another month or two,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. The Spanish bailout is positive for the euro “because it is evidence that policy makers are willing to act.”
The euro reached $1.2671, the highest since May 23, before trading at $1.2637 as of 9:55 a.m. in Tokyo, 1 percent higher than the June 8 close in New York. It jumped 1.1 percent to 100.60 yen. The dollar added 0.1 percent to 79.60 yen. The MSCI Asia Pacific Index of shares advanced 1.3 percent.
FOREX-Euro falls vs dollar as Spain concerns mount
LONDON, June 8 (Reuters) - The euro fell against the dollar and yen after a Spanish credit rating downgrade added to investor reluctance to take on risk and ratcheted up concern the European debt crisis was intensifying.
"With the negative news on Spain's rating cut it's back to reality for the market. The recovery we saw in the last few days was not a sustainable one," said Lutz Karpowitz, currency strategist at Commerzbank, who forecast the euro would be around $1.20 by the end of June.
Greece Threatens Wall Street Jobs in Third Trading Plunge (Source: Bloomberg)
Wall Street bankers and traders, given hope by a market rebound in the first quarter, are now seeing earnings and paychecks threatened by turmoil in Greece in what is becoming an annual cycle. For a third consecutive year, revenue from investment banking and trading at U.S. firms may fall at least 30 percent from the first quarter, Richard Ramsden, a Goldman Sachs Group Inc. (GS) analyst, said in a note last week. Greece, which gave English the word “cycle,” has been the main reason each year that the second quarter soured after a promising first three months. Deal volume has dropped and equity and credit markets have fallen on concern that Greece may abandon the euro and the European sovereign-debt crisis will spread to nations including Spain. Those economic issues cut profit, bonuses and jobs at Wall Street firms in last year’s second half and threaten to do the same in 2012.
“It’s going to be a tough summer at least, and it does feel like the last couple years all over again,” said David Konrad, an analyst at KBW Inc. in New York. “The bank valuations seem unfairly discounted, but investors are looking at this year and saying, ‘I’m not going to fall for this again.’”
U.S. Retail Sales Probably Fell on Drop in Auto Purchases (Source: Bloomberg)
Retail sales in the U.S. probably declined in May for the first time in a year as slower employment and subdued wage gains damped demand for automobiles, economists said before reports this week. The projected 0.2 percent decrease last month would follow a 0.1 percent gain in April that was the smallest this year, according to the median forecast of 62 economists surveyed by Bloomberg News ahead of Commerce Department figures due June 13. A measure of the cost of living fell last month for the first time in two years, reflecting cheaper gasoline prices, other data may show. Limited payroll growth and unemployment exceeding 8 percent may make it tough for consumer spending to improve after a first-quarter pace that was the fastest in a year. At the same time, lower prices at the gasoline pump are providing relief for Americans and also helping contain inflation, giving the Federal Reserve more room to stimulate the economy should Europe’s debt crisis worsen.
“Retail sales will be quite soft,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. “It is quite evident that the job market is slowing. The Fed is much more worried about the high level of unemployment than about inflation, which is likely to remain moderate.”
China Trade Surprise Signals Domestic Stimulus Focus (Source: Bloomberg)
China’s exports rose in May at more than double the pace analysts estimated while industrial output and retail sales trailed forecasts, signaling that last week’s interest-rate cut was aimed at countering a domestic slowdown. Overseas shipments climbed 15.3 percent from a year earlier, the customs bureau said yesterday, exceeding all 29 estimates in a Bloomberg News survey. Industrial output gained by less than 10 percent for a second month and retail sales increased the least in almost six years excluding holiday-month distortions, statistics bureau reports showed June 9. China’s trade resilience signals Europe’s crisis has yet to spark a collapse in world commerce on the scale of 2008, even as Spain’s banking woes threaten to deepen the trauma. Stronger exports and imports also support the case for Premier Wen Jiabao to adopt a more restrained stimulus than the credit boom officials unleashed in 2008, which stoked a property bubble.
“The better-than-expected trade data should help alleviate ongoing concerns of a sharp growth deterioration in the near term,” said Sun Junwei, a Beijing-based economist with HSBC Holdings Plc. “The key to securing a soft landing pivots on reviving domestic demand and that will necessitate more stimulus but it will be more measured than in 2008 and monetary policy won’t be eased excessively.”
China Slowing Inflation, Output Growth Add Stimulus Pressure (Source: Bloomberg)
China’s consumer prices rose the least in two years in May and industrial output and retail sales trailed estimates, adding pressure for more stimulus after the first interest-rate cut in three years. Inflation slowed to 3 percent from a year earlier, the National Bureau of Statistics said yesterday, compared with the 3.2 percent median forecast in a Bloomberg News survey. Production increased 9.6 percent, lower than a projected 9.8 percent gain, and retail sales climbed 13.8 percent, the Beijing-based bureau said in separate statements. The data add to concern global growth is stalling as Greece teeters on the edge of exiting the euro, Spain seeks a bailout for its banks, and U.S. job growth weakens. Premier Wen Jiabao may introduce additional stimulus to protect a full-year growth target of 7.5 percent even as the nation wrestles with bad loan risks from local government debt.
“These data should defeat any remaining complacency that the policy response has been adequate to maintain steady growth,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “More dramatic easing, especially in housing and local government financing vehicles is urgently needed and necessary to avoid a hard landing in the Chinese economy.”
Wen Stimulus Helps Mid-Size Stocks, Semple Says: China Overnight (Source: Bloomberg)
Chinese small and mid-size stocks are attractive as monetary authorities may cut interest rates once or twice more this year, said David Semple, who oversees $35 billion in assets at Van Eck Associates Corp. Semple, whose Van Eck Emerging Markets Fund has beaten 95 percent of its peers in 2012, said he likes China Minsheng Banking Corp. (1988), Greatview Aseptic Packaging Co., Stella International Holdings Ltd. (1836) and Sitoy Group Holdings Ltd. (1023) The fund has returned 7.6 percent this year, compared with a 1 percent loss for the MSCI Emerging Markets Index. (MXEF) “Larger Chinese companies are fully valued whereas small and mid-caps have outperformed this year, which is where we’ve found our sweet spot,” Semple, Van Eck’s director for international equity, said in an interview at Bloomberg’s office in New York on June 8. “If you want solid domestic demand with growth at a reasonable price, then you end up going down the cap curve.”
Chinese stocks traded in New York rose for the first time in six weeks after the People’s Bank of China on June 7 reduced benchmark interest rates for the first time since 2008 to bolster growth in the world’s second-largest economy. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. advanced 3.5 percent last week, snapping a five-week slump that sent the gauge to an eight-month low on June 4. The index dipped 0.4 percent to 90.27 on June 8.
Singapore’s Exports Rose in May on Sales of Electronics, Drugs (Source: Bloomberg)
Singapore’s export growth quickened in May as shipments of electronics and pharmaceuticals increased. Non-oil domestic exports climbed 3.2 percent from a year earlier, after a revised 1.7 percent gain in April, the trade promotion agency said in a statement today. The median of seven estimates in a Bloomberg News survey was for a 3 percent gain. Growth in overseas shipments may be tempered in coming months as purchasing managers’ indexes in export-dependent Asian economies including China and South Korea signal manufacturing is still slowing, forcing officials to evaluate whether to add stimulus to spur growth. Policy makers across the globe are girding for a deeper impact from Europe’s debt woes, with China and Australia lowering interest rates last week.
“We continue to expect a pickup in activity in the U.S. and China in the second half, which would bode well for Singapore’s exports and production,” Vincent Conti, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd., said before the release. “The policy easing in China will help that process along.”
Australia’s Strong Economy Proving ‘Doomsayers’ Wrong, Swan Says (Source: Bloomberg)
Australia’s economic performance is proving the “doomsayers” wrong, Treasurer Wayne Swan said ahead of a government conference this week to address challenges including an elevated currency and uneven growth. A 4.3 percent expansion in the first quarter from a year earlier and the addition of 38,900 jobs in May were standout achievements, Swan said in his weekly economic note yesterday. Capitalizing on growth opportunities is a topic at Prime Minister Julia Gillard’s economic forum in Brisbane on June 12-13, he said. Public support for Gillard’s government isn’t getting a lift from one of the fastest-growing economies in the developed world, led by the resource-rich regions in the north and west. Consumer confidence is subdued and her governing Labor Party trails in opinion polls as tourism, manufacturing and retail industries across the south and east struggle with the sustained strength of the local currency.
“There are always those who are all too ready to talk down our nation’s prospects,” Swan said. “Over the past week, the doomsayers have been proved to be completely and absolutely wrong.”
Italy Moves Into Debt-Crisis Crosshairs After Spain (Source: Bloomberg)
The 100 billion-euro ($125 billion) rescue for Spain’s banks moves Italy to the frontline of Europe’s debt crisis, putting pressure on Mario Monti’s unelected government to avoid succumbing to a market rout. “The scrutiny of Italy is high and certainly will not dissipate after the deal with Spain,” Nicola Marinelli, who oversees $153 million at Glendevon King Asset Management in London, said in an interview. “This bailout does not mean that Italy will be under attack, but it means that investors will pay attention to every bit of information before deciding to buy or to sell Italian bonds.” Italy has more than 2 trillion euros of debt, more as a share of its economy than any advanced economy after Greece and Japan. The Treasury has to sell more than 35 billion of bonds and bills per month -- more than the annual GDP of each of the three smallest euro members, Cyprus, Estonia and Malta.
Spanish Economy Minister Luis de Guindos said on June 9 that he would request as much as 100 billion euros in emergency loans from the euro area to shore up a banking system hobbled by more than 180 billion euros of bad assets. Mounting concern about the state of Spain’s banks and public finances drove the country’s borrowing costs to near euro-era records last month, dragging up Italian rates in the process.
Spain’s Bailout Defeat Weakens Rajoy’s Deficit Goal (Source: Bloomberg)
Prime Minister Mariano Rajoy’s surrender to European officials on taking a bailout for Spain’s banks may weaken his political authority and his credibility in financial markets. Rajoy’s June 9 request for as much as 100 billion euros ($126 billion) after stating two weeks ago that Spain wouldn’t need a rescue marks a swift reversal for the premier who won the biggest majority in 30 years in November. It may fuel skepticism he can meet his deficit-cutting promises. “The emperor’s clothes are tattered,” Simon Maughan, financial strategist at Olivetree Securities Ltd., said in a telephone interview yesterday. “Unless he uses this money to attack the regions and control the failed cajas what threads he has left will be stripped off him.”
Rajoy is trying to persuade regional leaders and voters to accept austerity, and convince bond investors the cuts will deliver the deficit goals he has pledged. Should he fail, he may have to return for a larger rescue for the Spanish sovereign, potentially draining the euro area’s financial ammunition.
Osborne Says Euro-Zone Crisis Is Killing Off Britain’s Recovery (Source: Bloomberg)
Chancellor of the Exchequer George Osborne said the U.K.’s recovery is being “killed off” by the euro area’s deepening crisis and the economy faces “huge” risks from a disorderly breakup of the region. “Our recovery -- already facing powerful headwinds from high oil prices and the debt burden left behind by the boom years -- is being killed off by the crisis on our doorstep,” Osborne wrote in an opinion article in the Sunday Telegraph, published yesterday. “The risks for us of a disorderly outcome are huge.” The euro-region’s turmoil deepened as Spain on June 9 became the fourth member to seek a bailout since the start of the debt crisis more than two years ago with a request for as much as 100 billion euros ($125 billion) in loans to rescue its banking system. Osborne said that while there were signs a solution will be found for Spain’s banking crisis, “the lesson of the last two years is that treating the latest symptom does not cure the underlying condition.”
Any “further pooling of sovereignty” among European Union members over financial supervision or fiscal policy should be limited to the euro’s 17 member states, Osborne said. Political moves in the U.K. to transfer more power to Brussels would be subject to a referendum, he said.
Spanish Bondholders May Rank Behind Official Loans After Bailout (Source: Bloomberg)
Investors holding bonds issued by Spain and its banks will probably rank behind official creditors in the queue for payment after the nation asked for a bailout of as much as 100 billion euros ($125 billion). The funds will be channeled through the state-run FROB bank-rescue fund and Spain will “retain the full responsibility of the financial assistance and will sign” the agreement with the other partners, according to the statement issued June 9. The document did not make clear whether the European Stability Mechanism, the region’s permanent support fund, which is likely to start operating in July, or the temporary European Financial Stability Facility, will make the loan.
“This is state financing, and the risks of an equity injection into the banks will stay with Spain,” said Alberto Gallo, head of European macro credit research at Royal Bank of Scotland Group Plc in London. “Spain needs a systematic restructuring of its banking system, which could entail haircuts to subordinated bank debt. Official lenders on the other hand are likely to demand seniority.” Spanish Prime Minister Mariano Rajoy has been forced to abandon his attempt to recapitalize the nation’s banks without outside help as the country’s descent into recession obliged lenders to own up to spiraling losses. While Rajoy said yesterday the agreement was “the opening of a credit line,” rather than a bailout such as those received by Greece, Ireland and Portugal, and the conditions of the loan affected the financial industry, the sovereign is ultimately responsible.
Spain’s Bailout Gives Rajoy Best Chance to Fix Banks (Source: Bloomberg)
Spain’s request for as much as 100 billion euros ($125 billion) of European bailout funds should provide the country with enough money to shore up its banking system after three failed attempts in as many years. “Now that they have this money, it will hopefully finally be possible to recognize all the hidden losses and clean up the system,” Luis Garicano, a professor at the London School of Economics, said in a phone interview. The amount sought is about 2.7 times the funds deemed necessary for Spanish banks by the International Monetary Fund in a report released June 8. Spain sought aid for its banks the following day, becoming the fourth euro member to seek a bailout since the debt crisis began almost three years ago.
The rescue request followed weeks of escalating concern that bad loans at Spain’s banks might overwhelm public finances. The Spanish crisis, coinciding with the prospect of Greece exiting the euro after elections on June 17, roiled financial markets around the world, sending the euro to an almost two-year low on June 1 and raising Spanish borrowing costs to near euro- era records.
Spain Seeks EU’s Fourth Bailout With $125 Billion Request (Source: Bloomberg)
Spain became the fourth euro member to seek a bailout since the start of the region’s debt crisis more than two years ago with a request for as much as 100 billion euros ($125 billion) to rescue its banks. Prime Minister Mariano Rajoy, who as recently as May 28 said he wouldn’t seek a bailout, characterized the deal as a credit line for banks and an endorsement of his policies. He spoke to reporters today in Madrid before flying to Gdansk, Poland, for a soccer match between the national team and Italy. “The 100 billion euros is the number that we were looking for so I’m cautiously optimistic,” Olly Burrows, credit analyst at Rabobank International, said in a telephone interview from London. “We still have to find a solution to the sovereign debt crisis: it’s not done yet and we still have to press on with the task of uniting Europe.”
Just seven months after winning a landslide victory,Rajoy was forced to abandon his bid to recapitalize Spanish banks without external help as the Treasury’s access to capital markets narrowed. Foreign investors slashed their holdings of Spanish debt amid concern banks’ bad loans may overwhelm public finances, driving borrowing costs to near euro-era records.
