May 30, 2012

Spain Takes Center Stage in Euro Crisis

By DAVID JOLLY

PARIS — All eyes in the euro crisis fixed Wednesday on Spain, which is struggling to cut its budget even as its economy shrinks and borrowing costs rise.

With Washington increasingly concerned that the euro crisis will spill over into the United States, and into election-year politics, Treasury Secretary Timothy F. Geithner has dispatched Lael Brainard, a Treasury undersecretary for international affairs, to Europe for meetings with senior officials “to discuss their plans for achieving economic stability and growth in Europe,” according to a Treasury statement.

Ms. Brainard arrived Tuesday in Greece, and will be also be in Germany, Spain, and France this week.

On Tuesday, the governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, added to the sense of crisis, announcing that he would step down early, on June 10.

Mr. Fernández Ordóñez has taken some heat over a new bailout request from Bankia, the country’s biggest mortgage lender, which said Friday that it would need another 19 billion euros, or $24 billion.

Investors sold Spanish debt, seeking the safety of German bonds, driving the spread, or gap, between them to a euro-era record, Bloomberg News reported. The yield on Spanish 10-year bonds, which moves in the opposite direction of the price, rose 8 basis points to 6.48 percent in early trading on Wednesday.

The Euro Stoxx 50 index, a barometer of euro zone blue chips, fell 1.0 percent, while the FTSE 100 index in London fell 0.9 percent.

Shares of Bankia which are down 71 percent this year, fell 11 percent Wednesday as the Madrid benchmark Ibex 35 stock fell 1.8 percent.

Standard & Poor’s 500 index futures fell, suggesting Wall Street stocks would open lower. The S&P 500 rose 1.1 percent on Tuesday.

The dollar rose against major European currencies. The euro fell to $1.2465 from $1.2503 late Tuesday in New York, while the British pound fell to $1.5587 from $1.5641. The dollar rose to 0.9634 Swiss francs from 0.9606 francs. But the U.S. currency fell to 79.32 yen from 79.49 yen.

Comex gold futures fell 0.1 percent to $1,547.40 an ounce. Gold is now down about 3.2 percent in 2012.

Asian shares declined. The Tokyo benchmark Nikkei 225 stock average slipped 0.3 percent. The Sydney market index S.&P./ASX 200 index fel 0.5 percent, and in Hong Kong, the Hang Seng index fell 1.7 percent in late trading.

Most trading is carried out by the computer programs of big banks and investment funds over high-speed networks and does not necessarily offer a complete picture of market sentiment.