World Markets Advance After Spanish Bank Rescue

Posted June 11th, 2012 at 10:20 am (UTC-5)
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Investors have pushed stock markets higher across Asia and Europe following an agreement by eurozone countries to provide up to $125 billion to rescue Spain's ailing banks.

Markets in Britain, Germany and France jumped about 2 percent in early trading Monday, although later edged off their high points. Shares in Spain — led by financial stocks — surged nearly 4 percent. U.S. stock indexes were slightly higher in early trading.

Japan's Nikkei index closed up 2 percent, and Hong Kong's Hang Seng gained 2.4 percent.

One economic analyst, Miguel Murado, says the Spanish banks have become the focal point of Europe's governmental debt crisis, rather than the financial state of the governments themselves.

“The banks now have become the driving force in this crisis. No longer rationality or the reckoning of the actual state of accounts for the different countries, but actually events that are driving the markets in one direction or another and, yes, we still have to see, we are not out of the woods at all.”

Analysts say the bailout deal reached Saturday is an important step in shoring up Spain's banks, but cautioned it is not a definitive solution for the country's economy as a whole. Robert Halver of the Baader Bank said the rescue package has just given the eurozone a bit more time to resolve the crisis.

“Spain's problems have not been solved, they have just been moved. The clock for the the eurozone has turned back from five-to-12 to 10-to-12 so we won a little bit of time, but the main problem is still the Spanish economy and its inability to carry out reforms and that is something that needs to be worked on.”

In securing the bank rescue, Spain became the fourth eurozone nation to need a bailout, after Greece, Ireland and Portugal. On Monday, Cyprus, one of the smallest of the currency bloc countries, said it, too, could need assistance, possibly within days.

Investor relief on the Spanish deal could be short-lived, as voters in Greece prepare for new parliamentary elections Sunday, after last month's vote proved inconclusive. A new government could become the first country to quit the 17-nation euro currency union rather than face austerity measures demanded by the International Monetary Fund and Greece's creditors across Europe.