European markets jump after Spanish bailout

Europe’s major markets climbed on the first day of trading after Spain was granted a €100bn bailout for its banking sector over the weekend.

The FTSE 100 rose 1.6% to 5,521 at the start of the session in London, while the French Cac 40 was more than 2% higher, and the German Dax was up 2.2% to 6,266. The Euro Stoxx climbed 2.42% to 2,195.

Shares of Santander surged 9.3% to €5.30 and BBVA gained 8.5% to €5.59 in Madrid after Spain’s bailout request.

News of the rescue deal lifted Asian markets overnight, with the Nikkei up almost 2% and the Hang Seng up 2.23%.

The euro strengthened almost 1% against the dollar before falling back as markets digested the news of the rescue package.

In the bond markets, the yield on Spanish 10-year bonds dropped below 6%.

Gilt futures slipped in early trade after the bailout deal bolstered demand for riskier assets and weighed on safer, core European government bonds.

The yield on the 10-year gilt was five basis points higher at 1.678%, leaving the spread against bunds at around 30 basis points.

Meanwhile oil rose to a five-month high, with crude oil futures up almost 3%, the largest gain since 3 January, up $2.54 to $86.64 a barrel.

Spanish Prime Minister Mariano Rajoy hailed the rescue package as a victory for the government, in that it has managed to avoid a wider bailout for the country.

He told reporters in Madrid at the weekend: “If we had not done what we have done in the past five months, the proposal yesterday would have been a bailout of the kingdom of Spain,” he said. “It was the credibility of the euro that won.”


This article was first published on Investment Week


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