World stocks fell sharply, the euro hit a 12-year low versus the yen and Spanish borrowing costs struck record highs Monday on speculation Spain could soon require a full state bailout, traders said.
“There are fears that Spain is edging closer to being forced to seek a full scale bailout, having secured 100 billion euros ($121 billion) to help recapitalise its banks,” said Joshua Raymond, chief market strategist at City Index traders.
All eyes were also on bailed-out Greece, with auditors from the European Union, International Monetary Fund and the European Central Bank due in Athens this week for another inspection of the new government’s economic programme. The report will determine whether Greece will receive fresh loans of 31.5 billion euros by September due under its debt rescue programme. German Finance Minister Wolfgang Schaeuble warned Greece in a newspaper interview Monday that it must redouble efforts to comply with bailout conditions imposed by international creditors.
“If there were delays, Greece must make up for them,” he told the daily Bild. London’s FTSE 100 benchmark index of leading shares dropped 1.61 percent at 5,560.69 points nearing midday. Frankfurt’s DAX 30 index shed 1.40 percent to 6,537.16 points and in Paris the CAC 40 slid 1.69 percent to 3,139.74 points. Madrid’s IBEX 35 index plunged more than 5.0 percent and Athens dived over 6.0 percent.
“After a pretty week of inspiring corporate results, investors are again looking at the markets through the lenses of the euro crisis,” said Anita Paluch, a trader at Gekko Global Markets.
