Asian stocks jump on Spain bank bailout
HONG KONG: Asian markets and the euro rallied Monday after the eurozone 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.
Tokyo surged 2.42 per cent, Hong Kong opened 2.35 per cent higher, Seoul jumped 1.80 per cent, Shanghai added 0.40 per cent and Taipei gained 1.89 per cent. Sydney was closed for a public holiday.
Shares in Shanghai were underperforming the region after a mixed bag of data at the weekend failed to dispel concerns about the strength of the world’s number two economy.
On forex markets the single currency bought $1.2641 and 100.70 yen against $1.2514 and 99.49 yen in New York on Friday.
The dollar was trading at 79.58 yen from 79.49 yen on Friday.
After an emergency video conference lasting more than two hours on Saturday, eurozone finance ministers issued a statement saying they were “willing to respond favourably” to a Spanish plea for help for its stricken lenders.
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.
Monday’s surge in the share and equity markets mark a rebound from recent weeks as traders have become nervous about Spain’s precarious financial position as well as a possible Greek exit from the euro area.
The deal was hailed by Germany, France, Japan and the United States as well as the International Monetary Fund.
But Goldman Sachs warned that there were still problems in the eurozone’s financial system.
“(It’s a) positive near-term development for Spain, and in particular for its banks. But it does not solve Spain’s overall fiscal 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 debt-riddled 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 eurozone 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 finally sought aid as its borrowing costs on the open markets soared and the price for fixing the banks’ balance sheets, heavily exposed to a property bubble that burst in 2008, spiralled.
In China the government said Saturday that inflation eased to 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 figures 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 first time since the end of 2008.
The news from Europe helped oil post major gains.
New York’s main contract, light sweet crude for delivery in July, soared 2.51 per cent, or $2.11, to $86.21 per barrel in morning trade. Brent North Sea crude for July delivery added 2.67 per cent, or $2.66 to $102.13.
Gold was at $1,600.50 an ounce at 0210 GMT, compared with $1,577.05 late Friday.