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By Bhaskar Prasad: Subscribe to Bhaskar's RSS feed | September 18, 2012 9:07 AM GMT
European markets fell Tuesday as investor confidence was weighed down as fears of the debt crisis affecting the euro zone was revived by the rising borrowing cost faced by Spain.
The French CAC 40 index was down 0.82 percent or 29.21 points to 3524.48. Shares of ArcelorMittal dropped 1.24 percent and those of Renault SA fell 2.24 percent.
London's FTSE 100 index dropped 0.62 percent or 36.30 points to 5857.22. Shares of Rio Tinto Plc declined 1.90 percent and shares of Aviva PLC fell 4.06 percent.
The German DAX 30 index fell 0.63 percent or 46.61 points to 7357.08. Shares of Allianz SE dropped 1.57 percent and those of Volkswagen AG declined 1.52 percent.
Spain's IBEX 35 was down 0.69 percent or 55.90 points to 8092.10. Shares of Bankinter SA fell 1.14 percent and those of Bankia SA dropped 2.24 percent.
The lack of announcement on Spain's decision on whether to seek help from the newly declared bond-buying program by the European Central Bank is affecting the investor sentiment. On Monday, the 10-year Spanish bond yields crossed 6 percent raising the debt pressure faced by the country. Market participants expect Spain to ask for a bailout under the enhanced conditions credit line (ECCL), which will trigger the bond purchasing operation by the ECB.
"It may need transparency on whether or not Spain will ask for ECCL liquidity support in order for another substantial risk appetite move," Credit Agricole said in a note.
The ECB's recent promise to buy peripheral government bonds without limit has certainly helped boost financial market sentiment. But investors worry that with Spain and Italy apparently no closer to asking for support and the German Constitutional Court reviewing the legality of the central bank's plans, there are doubts over when and perhaps even whether the ECB will be able to fulfill its promise.
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