- German business confidence slumps
- Spanish banks soar on improved bond yields
- ECB relaxes collateral rules

FTSE 100: -0.95%
Dax 30: -1.26%
Stoxx 600: -0.73%
Cac 40: -0.75%
Ibex 35: +1.52%
FTSE MIB: -0.65%

Most major European markets fell on declining German business confidence but under-pressure Spanish bonds had a good day as investors hoped European leaders would present a convincing solution to the ongoing sovereign debt saga.

The closely watched IFO Institute’s business climate index in Germany fell from 106.9 in May to 105.3 in June. It was the lowest reading of the survey in over two years. The results are based on responses from 7000 executives.

Spain was again under the spotlight. An independent assessment of the amount of capital its banks would need to withstand the worst case economic scenario suggested the figure could be as high as EUR62bn.

Meanwhile, the European Central Bank relaxed some of the rules governing the type of collateral it requires from banks in exchange for loans. This made life easier for Spanish financial institutions.

The yield on 10-year Spanish bonds dropped 27 basis points or 0.27% to 6.34% by the close.

Elsewhere, the German Chancellor, Angela Merkel, has held meetings in Rome with the leaders of France, Italy and Spain as speculation mounted Germany would allow more direct intervention in bond markets to support the under pressure euro nations.

A summit of euro-area politicians on June 28th and 29th in Brussels is the focus for investors now. Some hope the meeting will deliver more detail on the bailout being offered to Spain’s banks, and an easing of Germany’s policy stance towards greater stimulus.

COMPANIES

Spanish banks rose through the day, with Bankia and Banco de Sabadell both posting significant gains.

German carmakers had a very tough time after a news report suggested rebates on new cars rose to the highest level in seven years. Volkswagen, BMW and Porsche were all victims.

On the benchmark Stoxx Europe 600 the strongest sector was telecommunications which rose 0.68%, the chemicals sector saw the biggest fall, down 2.5%.

OTHER MARKETS

By 16:59 in London the euro was up 0.04% against the dollar at $1.2545.

Futures contracts for front month delivery of Brent crude had gained 1.5% by 16:48 to hit $90.57 per barrel.

BS