Here's my summary of the key news overnight in 90 seconds at 9 am, including news US stock markets gave up their early gains to close down around 1.2% as the early euphoria over Spain's bank bailout faded.
There was disappointment that the Spanish bailout actually meant the Spanish government was borrowing from the European rescue funds to inject 100 billion euros of capital into its banks. See more here at Bloomberg.
This leaves the Spanish government even more indebted and also pushes regular bond holders down the queue in favour of the European rescue funds.
This meant the yield on the 10 year Spanish bond yield actually rose 29 basis points to 6.52%, a level widely seen as unsustainable. The bailout was supposed to take the pressure off Spain's bond market and reopen the market to the Spanish government.
Meanwhile, German 10 year bond yields fell to 1.3%, widening the gap to over 5.4% and indicating that capital flight from Southern Europe to Germany was continuing despite the latest bailout reached after a 19th crisis meeting in 3 years.
Also concerns grew over Italy, which reported data showing its economy contracted. Investors fear it will have to go where Spain goes. See more here at Bloomberg.
Italian bond yields also rose overnight by 24 basis points to 6.04%, suggesting the capital flight is continuing .
Italy has 2 trillion euros of debt.
The New Zealand dollar fell under 77 USc in morning trade as investors took risk off the table. Investors are worried the Euro crisis is far from over and will suppress any recovery.
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