The Spanish Bank deal has little effect.
The
European Finance ministers have agreed to lend Spain $125bn to recapitalize its
banks (The actual amount has not yet been finalized).
The
global markets have responded positively on Monday as global stock markets
opened higher, although short lived. New York’s Dow Jones rose by 0.7% but
closed at 1.1% lower. London’s FTSE 100 opened positively but closed at a loss
of 2.7 points. French and German Indices remained stable while Nikkei (Tokyo)
and Hang Seng (Hong Kong) closed up 2.0% and 2.4%.
Meanwhile,
Fitch cut the credit ratings of two Spanish banks, Santander and BBVA, by two
notches from A to BBB+. Last week, the rating agency reduced Spain’s bond
rating. Fitch said that the current reduction is a reflection of its past week’s
actions.
Global
oil prices also fell amid fears of the Eurozone debt crisis and decrease in petroleum
demand. US light crude fell by $1.40 while Brent crude fell by $1.47.
The
Italian bond yields rose from 5.7% to 6% while Spanish bond yields came closer
to 6.5%. In other words, Spain is still finding it difficult to borrow money,
despite the bank bailout. Its lenders are still not confident, even though the
EU has agreed to inject $125bn into the economy.
Greece’s elections
Another
important factor that threatens the stability of the Euro is the Greek national
elections, scheduled for next week, 17th June, which could
potentially result in Athens leaving the Eurozone. The EU finance ministers are
well aware of the situations therefore, the Spanish bank deal, when finalized,
would be designed to be long term oriented.
Fitch’s Forecast for Spain
The ratings agency gave a
gloomy prediction for Spain as the country will “remain in recession through the remainder of this year and 2013
compared to the previous expectation that the economy would benefit from a mild
recovery in 2013 which directly affects the banks' volumes of activities in
Spain".
What is the Spanish Bank Deal? Click here to view the summarized post
What is the Spanish Bank Deal? Click here to view the summarized post
