Asia down but Europe steadied as ECB intervenes on bond markets

8th August 2011

In Asia last weeks fall continued with markets down by around 2 per cent as CNN reports here.

However markets in Europe recovered as the European Central Bank intervened to buy the debt of Italy and Spain.

The Japanese Nikkei lost 2.2 per cent, South Korea ended down 3.8 per cent, Australia fell 2.7 per cent. China's Shanghai composite index fell 3.6 per cent and the Hong Kong Hang Seng dropped 3.2 per cent.

The action by the ECB helped shore up European markets this morning as BBC reports here. The Spanish and Italian markets rose 3.7 and 4.7 per cent while their bond yields fell easing concerns about the two countries being able to service their debts at least in the medium term.

The FTSE was up one per cent though it lost around 10 per cent the previous week. Germany's index – the Dax – was up one per cent though it had lost around 13 per cent last week.

The Telegraph reports on the dramatic reaction on Europe's bond markets with the yield, or interest investors charge to hold the debt, on Italy's 10-year government bonds falling by 78 basis points to 5.3pc, and Spain's by 86 basis points to 5.17p.

However the debate is still continuing about whether Europe can reform enough to satisfy markets long term. Italy promised at the weekend to accelerate its structural reforms and Spain is expected to announce more cuts today. But all eyes are on the European Financial Stability Fund and whether it will have the funds and the mandate to see off further cuts.

Sign up for our free email newsletter here, for your chance to win an iPad 2.  

Leave a Reply

Your email address will not be published. Required fields are marked *