Markets Rally After £81bn Spain Bank Bailout

June 11th, 20125:26 am @


A currency trader monitors exchange rates in a dealing room at the Korea Exchange Bank in Seoul.

Asian markets jumped sharply in early trading

5:11am UK, Monday June 11, 2012

Asian stocks and the euro rose sharply after Spain sought a lifeline for its ailing banks, easing fears that Europe’s debt crisis was about to spin out of control.

The markets rallied after Spain asked finance ministers from the 17 euro-using countries to rescue its banks, which have been crushed by bad real estate loans.

They responded by offering up to $100 billion euros (£81bn) in credit that the Spanish government could funnel to banks.

Japan’s Nikkei 225 index jumped 1.9% to 8,622.58 while South Korea’s Kospi added 1.6% to 2,553 and Hong Kong’s Hang Seng climbed 2% to 18,874.23.

Benchmarks in Singapore, Taiwan, mainland China, Indonesia and New Zealand also rose.

Spanish prime minister Mariano Rajoy

Spanish Prime Minister Mariano Rajoy described the bailout as a ‘triumph’

In currency trading, the euro rose to $1.2633 from $1.2507 late Friday in New York. It rose to 100.49 yen from 99.50 yen.

The next key date for the euro currency union is Sunday, when Greek voters head to the polls.

The election is likely to determine whether the debt-mired country will stick with the common currency.

“Market sentiment has improved on the back of the announcement of Spanish bank aid and a less worrying set of numbers out of China over the weekend,” analysts at Credit Agricole CIB in Hong Kong said in a market commentary.

But the newfound sense of optimism in markets is likely to fade as the Greek election nears, they said.


Spain is the fourth euro nation to seek a rescue. A financial crisis has gripped Spain since 2008, when a real estate bust caused big losses for many banks.

A Spanish bank rescue fund set up in 2009 was running out of money, and the government has already nationalized Bankia, a major bank.

The rescue plan aims to calm investors by taking bank losses out of the equation.

Britain’s Foreign Secretary, William Hague, told Sky News the Spanish loan showed decisive action, which the British Government had for a long time been asking for.

“We welcome what we’ve heard about the eurozone loans to the Spanish banking system,” Mr Hague said.

“We’ve been asking for the eurozone to take decisive measures to stabilise itself… Eurozone countries being prepared to work together in a closer way.”

Meanwhile, Chancellor George Osborne has said the UK’s hopes of economic recovery are being “killed off” by the eurozone crisis.

He said British businesses were being held back because of continuing uncertainty about the future.

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