June 18 (Bloomberg) -- Spanish 10-year bond yields rose above 7 percent for the first time since the euro’s creation as a jump in bad loans fueled concern the debt crisis is deepening. Stocks and the euro fell, erasing gains triggered when Greek pro-bailout parties won enough seats to form a government.
The 10-year Spanish yield jumped 32 basis points to 7.19 percent at 9:31 a.m. in New York. The Standard & Poor’s 500 Index lost 0.3 percent and the Stoxx Europe 600 Index slipped 0.2 percent after earlier rallying 1.1 percent. The euro depreciated 0.4 percent to $1.2593 after rising as much as 0.9 percent. Egyptian stocks headed for a bear market after the military curtailed powers of the elected president.
“Any relief following the Greek election results should be brief,” Ciaran O’Hagan, head of interest-rate strategy at Societe Generale SA in Paris, wrote today in an e-mailed note. “At best, we are facing a muddle-through scenario in Greece. The focus now returns to Spain, where the latest developments continue to trouble us.”
Bad loans as a proportion of total Spanish lending jumped to 8.72 percent in April, the highest since 1994, from 8.37 percent in March, the Bank of Spain said on its website today. Greece’s New Democracy and Pasok parties won enough seats to form a majority in the 300-member parliament, according to the parliament’s speaker, easing concern that Greece would reject austerity measures needed to qualify for aid.
G-20 Meeting
Group of 20 nations are discussing a mix of measures that will include deficit reduction for some countries and pledges for additional stimulus by others with sounder finances, a Canadian official said as leaders prepare for a two-day summit in Mexico. Federal Reserve policy makers will bring new forecasts to their June 19-20 meeting and probably will mark down their April central-tendency estimate for growth of 2.4 percent to 2.9 percent this year.
The S&P 500 retreated today after last week capping a second straight weekly gain. The index has rebounded more than 5 percent from a five-month low on June 1.
The largest U.S. companies are beating the average stock in the S&P 500 by the most in more than a decade, fueled by rising dividends, valuations 31 percent below the historical average and fear.
Companies in the S&P 100 from Apple Inc. to Bank of America Corp. have gained 7.7 percent in 2012, compared with 5.1 percent for a version of the S&P 500 that strips out weightings for market value, the widest margin since 1999, data compiled by Bloomberg show. With price-earnings ratios down 6.6 percent this quarter to 12.7 and payouts at 2.2 percent of share prices, analysts raised buy recommendations for the group to the highest level since 2007.
Among European stocks, Bankia SA, Spain’s nationalized lender, sank 8.9 percent after earlier surging 5.3 percent. Cable & Wireless Worldwide Plc advanced 7.9 percent as the company’s largest investor, Orbis Holdings Ltd., said it will accept a 1.04 billion-pound ($1.6 billion) takeover offer from Vodafone Group Plc.
The ASE Index of Greek stocks rallied 2.8 percent to the highest level in a month as National Bank of Greece SA and EFG Eurobank Ergasias SA climbed more than 10 percent. The ASE has rebounded 21 percent after reaching the lowest level since 1990 on June 5.
Spain, Italy Bonds
The Dollar Index, which tracks the U.S. currency against those of six trading partners, climbed 0.3 percent, erasing a drop of as much as 0.6 percent. The euro was little changed versus the yen after earlier rallying as much as 1.4 percent.
Italy’s 10-year yield climbed 16 basis points to 6.09 percent. The U.K. two-year gilt yield slid to as low as 0.173 percent, a record.
The MSCI Emerging Markets Index rose 0.6 percent, poised for the highest close since May 15. The Hang Seng China Enterprises Index of mainland companies rose 0.8 percent. India’s Sensex Index dropped 1.4 percent after the central bank unexpectedly kept interest rates unchanged.
Egypt’s EGX 30 Index fell 3.4 percent, extending its decline from this year’s high on March 7 to 22 percent. The country’s ruling military council issued a declaration yesterday after polls closed in the first post-Hosni Mubarak election, giving itself sole authority over its affairs, including the budget and personnel. It also acquired the power to name the 100-member committee that will draft a new constitution.
Oil dropped 1.8 percent to $82.51 a barrel in New York and copper slipped 0.1 percent. Corn jumped 1.6 percent as dry weather may curb production in the U.S.
