Stock markets rid higher borrowing costs

Published:  25 Apr at 6 PM

As reported by the BBC, EU shares have slightly improved from Monday's abrupt falls as investors recuperate from worsening projections of Greek economic contractions and rising Spanish bond yields.

Meanwhile, Holland and Italy were forced to pay higher rates to borrow money. France's Cac40 went up by 2.3%, the UK's FTSE 100 rose 0.8%, and Germany's Dax gained 1.0%. Wall Street finished up 0.6%.

Shares dropped last Monday due to weak manufacturing figures and political worries in France and Holland. Madrid raised nearly 2 billion euros in its most recent auction of short-dated bonds. However, the interest rate (yield) it was asked to pay to attract lenders went up sharply.

Spain’s yield for six-month bonds reached 1.58%, a rise from 0.84% for a similar sale in March. The yield for three-month bonds went up to 0.63% from 0.38%. These rising rates suggest that investors are becoming even more cautious about lending to Spain as uncertainties about the country's power to repay its debts are still strong.

Jo Tomkins, who is analyst at consultancy firm 4Cast, said the rise in rates is an obvious negative headline for Spain, which is experiencing a “double-whammy” of low growth and severe austerity measures.