Spanish debt auction relief boosts markets

Markets rally on Spanish debt auction relief ahead of key US earnings reports

Associated Press

LONDON (AP) -- Stock markets rallied Tuesday after Spain raised more money than anticipated in a pair of short-term bond auctions and after a solid round of U.S. corporate earnings reports.

While worries over Spain remain, evidenced by a big increase in the interest rate the country had to pay investors to take €3.2 billion ($4.2 billion) of its debt, markets were cheered by the news that it found plenty of interested buyers.

The amount raised was more than the €3 billion top target initially planned, and that helped lower the yield on Spain's ten-year bonds in the markets by 0.16 of a percentage point to 5.86 percent.

Spain has become the main source of concern in Europe's debt crisis over recent weeks as investors worry over the government's ability to push through a raft of austerity measures at a time when the economy is in recession and unemployment stands at a startling 23 percent.

The yield on the country's ten-year bond has spiked above 6 percent in recent days, not far off the 7 percent rate that eventually forced Greece, Ireland and Portugal into seeking financial help from their partners in the eurozone.

Though Tuesday's auction results proved encouraging, investors will be more interested in a ten-year bond offering later this week.

"It'll be Thursday's bond auctions that will truly set the tone for investor interest in Spain," said Lauren Rosborough, an analyst at Societe Generale.

A surprisingly upbeat German investor survey from the ZEW institute also helped shore up markets in Europe. Even though fears over Europe's debt crisis have resurfaced over the past couple of weeks, German investors have grown more confident about the future, according to the survey.

In Europe, shares rallied alongside Spain's IBEX. The FTSE 100 index of leading British shares was up 0.7 percent at 5,708 while Germany's DAX rose 1 percent at 6,690. The CAC-40 in France was 1.4 percent higher at 3,248.

The euro was trading flat around $1.3125. It had earlier risen to $1.3170 on a surprise increase in inflation in the 17-country eurozone to 2.7 percent in the year to March that reined in expectations that the European Central Bank will cut interest rates again anytime soon.

U.S. stocks got a further lift at the open after a solid round of corporate earnings from the likes of Goldman Sachs Group Inc. and Coca Cola Co. — the Dow Jones industrial average was up 0.8 percent at 13,024 while the broader S&P 500 index rose 0.7 percent to 1,379.

Earlier in Asia, Japan's Nikkei 225 index fell less than 0.1 percent to close at 9,464.71 while South Korea's Kospi index slipped 0.4 percent to 1,985.30 and Hong Kong's Hang Seng lost 0.2 percent to 20,562.31. Mainland Chinese shares lost ground, with the benchmark Shanghai Composite Index falling 0.9 percent to 2,334.99. The Shenzhen Composite Index lost 1.3 percent to 936.74.

Oil prices tracked equities higher — benchmark oil for May delivery was up $2 at $104.93 per barrel in electronic trading on the New York Mercantile exchange.

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Pamela Sampson in Bangkok contributed to this report.

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