Nervous investors sell euro assets
Published 13/12/2011 | 05:00
INVESTORS voted with their cash yesterday by selling eurozone assets including bonds, the euros and shares. Markets sold off on scepticism that a European deal for greater budget discipline in future can help end the current debt crisis.
The price of government bonds for most eurozone countries fell yesterday, pushing up borrowing costs. Share prices were down across Europe with the German DAX index suffering the heaviest losses.
"The analysis of the euro-region summit is that it simply isn't enough and there are far too many issues to be clarified," said Marc Ostwald, of Monument Securities in London.
The most worrying trend was a rise in borrowing costs for Italy and Spain. Italy's 10-year borrowing costs rose to 6.73pc yesterday -- edging back towards the dangerously high 7pc level.
Similar Spanish government debt rose above 6pc for the first time this month. Italy and Spain are both due to issue debt in the markets this week so rising prices have a real impact on their finances.
The ECB was rumoured to have kept a floor on prices by buying Italian and Irish bonds early yesterday.
However, there was widespread disappointment after the ECB admitted it had bought just €635m of bonds in the markets last week.
It was down from more than €3bn of purchases the week before and massively off from the €20bn-a-week that analysts say must be spent to calm the markets.
Rating agencies added to the gloom. Moody's said yesterday that it would review the credit ratings of all 27 EU members over the next three months.
The chief economist of S&P, Jean-Michel Six, said last week's EU summit agreement was a significant step forward, but not enough to end the debt crisis. S&P said previously that it could cut the rating for all eurozone countries if the summit failed to deliver a solution.
"There is probably yet another shock required before everybody in the eurozone reads from the same page, for instance a major German bank experiencing some real difficulties on the markets, which is a genuine possibility in the near term," Mr Six said.