Business
Spain and US data pile up misery
The euro slipped along with world stocks as deepening turmoil in Greece and Spain kept investors wary of riskier assets, with weak US economic data adding to the cautious mood.
Worries about the health of Spain's banks also resurfaced after a report that customers at Bankia had withdrawn more than 1 billion euros (HK$9.86 billion) from their accounts in the past week, though the Spanish government said there had been no exit of deposits from the lender.
Spain's borrowing costs shot up at a bond auction yesterday due to the Bankia report and economic data confirming the country was back in recession.
The Spanish Treasury had to pay around 5 percent to attract buyers of three- and four-year bonds.
The longer-dated paper sold with a yield of 5.106 percent, way above the 3.374 percent the last time it was auctioned.
The euro hit US$1.2694, down 0.2 percent, and near a four-month low of US$1.2681 reached on Wednesday.
The Dow Jones industrial average was down or 0.18 percent in late morning trade while the pan-European FTSE 300 index was down 0.9 percent in late trade.
Across the Atlantic, new claims for US jobless benefits last week held at levels suggesting sluggish growth in hiring. Also, the Philadelphia Federal Reserve Bank said its business activity index dropped to minus 5.8 from positive 8.5 in April, falling well short of economists' expectations for an acceleration of activity.
Meanwhile, a Greek exit from the euro zone could expose the European Central Bank and the currency bloc it seeks to protect to hundreds of billions of euros in losses, landing Germany and its partners with a crippling bill, experts warned yesterday.
"In the event of an exit, they [Greece] will default. And the loss given default will probably be very high, high enough to eliminate the ECB's capital," said Andrew Bosomworth, senior portfolio manager at asset manager Pimco.
"They might need recapitalization from governments, who are not exactly in the best position to provide additional capital."
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