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Euro slides on Spain fears

Euro slides on Spain fears

European shares fell and the euro hovered near multi-year lows after two Spanish regions said they would need aid, reigniting fears the country will become the fourth euro zone member to need a full international bailout. Ten-year Spanish government bond yields rose to a fresh euro-era high of 7.55 percent after a second region said over the weekend it would ask for central government help to keep it afloat.

The UK government finances took a set back as the public sector borrowing requirement in June was higher than expected at £14.4bn, up 3.8% on a year ago. There were revisions to the figures in the previous two months resulting in the debt to GDP ratio increasing to a record high of 66.1%. With the economic outlook remaining weak, the government looks unlikely to achieve its OBR (Office of Budget Responsibility) forecasts.

Sterling proved particularly resilient most of last week against its main trading partners despite some downbeat economic news. During the week retail sales disappointed, the BoE advised there would be no further policy stimulus in the short term and public finances exceeded forecasts. Nonetheless, Sterling gained against both the euro and the US dollar.

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