Asian stock markets, euro jump on Spain bank bailout
HONG KONG — Asian markets and the euro rallied yesterday after the euro zone agreed to lend Spain up to $125 billion to save its banks, but analysts warn the deal is just a sticking plaster for Europe's wider problems.
The weekend also saw China release a mixed bag of data that, despite not being as bad as expected, was unable to soothe dealers concerns over the world's second biggest economy. But it did provide hope that Beijing will introduce more easing measures.
Tokyo surged 1.96 per cent, or 165.64 points, to 8,624.90 and Seoul jumped 1.71 per cent, or 31.40 points, to end at 1,867.04.
Hong Kong climbed 2.44 per cent, or 451.29 points, to 18,953.63 and Shanghai gained 1.07 per cent, or 24.41 points, to 2,305.86.
Sydney was closed public holiday.
On forex markets the single currency bought $1.2630 and 100.50 yen against $1.2514 and 99.49 yen in New York on
for
a Friday.
The dollar was trading 79.57 yen from 79.49 yen.
After an emergency video conference lasting more than two hours on Saturday, eurozone nance ministers issued a statement saying they were "willing to respond favourably" to a Spanish plea for help for its stricken lenders.
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Spain's Economy Minister Luis de Guindos insisted the handout was not a rescue but a loan that imposes conditions on the banks.
However, it marked a dramatic climbdown for Madrid, which recently denied it needed any outside aid.
EU Economic Affairs Commissioner Olli Rehn said the Spain deal was critical to reassure jittery markets.
"It is a very clear signal to the market, to the public, that the euro (area) is ready to take decisive action in order to calm down market turbulence and contagion," Rehn said.
Stock markets in Europe opened sharply higher yesterday.
In the rst few minutes of trade Madrid soared 5.8 per cent, with Bankia — the lender that asked the government for billions of dollars in aid — rocketing almost 20 per cent.
London's FTSE rose 1.80 per cent, the Paris CAC 40 surged 1.98 per cent and Frankfurt added 2.04 per cent.
Yesterday's surge in the stock markets marked a rebound from recent weeks as traders have become nervous about Spain's precarious nancial position as well as a possible Greek exit from the euro area.
The deal was hailed by Germany, France, Japan, China and the United States as well as the International Monetary Fund.
"Sentiment is in a risk-on mode and the news is giving the market a sense of relief," Kengo Suzuki, currency strategist at Mizuho Securities, said.
But Goldman Sachs warned that there were still problems in the euro zone's nancial system.
"(It's a) positive near-term development for Spain, and in particular for its banks. But it does not solve Spain's overall scal and macroeconomic challenges, which remain substantial", Goldman said in a research note.
It added that the region's crisis "continues to be addressed on a country-by-country basis rather than at a systemic level".
Yuji Saito, director of foreign exchange at Credit Agricole Bank in Tokyo, said questions also remained about details of the bank deal, as uncertainty looms over Greek elections aimed at ending a political stalemate in the debtriddled nation.
"The agreement won't solve the debt concerns completely because the question remains how and who will give money to Spain, and of course the Greek election next week," Saito told Dow Jones Newswires.
Despite efforts by policymakers, the euro zone crisis has now spread to the region's fourth-biggest economy — Spain's is twice the combined size of those of Greece, Ireland and Portugal, which have also needed a bailout.
Spain nally sought aid as its borrowing costs on the open markets soared and the price for xing the banks' balance sheets, heavily exposed to a property bubble that burst in 2008, spiralled.
In China the government said on Saturday that in ation eased to a slower-than-forecast 3.0 per cent in May while industrial output grew at 9.6 per cent year-on-year, also weaker than expected.
And on Sunday gures showed that exports and imports shot up 15.3 per cent and 12.7 per cent respectively last month.
The numbers will give policymakers room to ease monetary policy further and come days after Beijing cut interest rates for the rst time since the end of 2008.
The news from Europe helped oil post big gains.
New York's main contract, light sweet crude for delivery in July, soared $1.63 to $85.73 per barrel in afternoon trade. Brent North Sea crude for July delivery added $2.63 to $101.10.
Gold was at $1,697.50 an ounce at 0810 GMT, compared with $1,577.05 late on Friday.
In other markets, Taipei rose 1.72 per cent, or 120.58 points, to 7,120.23.
Taiwan Semiconductor Manufacturing Co ended 3.21 per cent higher at Tw$80.4 while Hon Hai Precision added 2.57 per cent to Tw$83.8.
Wellington gained 0.14 per cent, or 4.77 points, to 3,454.24.
Manila closed 1.64 per cent higher, adding 81.78 points to 5,075.85.
First Gen Corp rose 1.8 per cent to 16.28 pesos and Metropolitan Bank gained 1.6 per cent at 87.80 pesos. — AFP