• President Barak Obama to urge European leaders to form action plan at G-8 Summit
    • Stocks in Spain, Italy advance from lows on talk of "short selling" ban
    • Euro improves at mid-day after slumping to four-month low in Asia trading
    • Global stocks give back $4tn in value as May rout pummels portfolios around the world

1400 BST: FT Alphaville supports the thesis I advanced earlier this morning regarding Spanish banking liquidity
Well, to be honest, it's not an *original* theory, but it is one that I developed independently nonetheless! FT Alphaville notes that while a presumptive ban on short selling has lifted share prices for Spanish banks, it has yet to impact prices on Credit Default Swaps.
IBEX is up around 0.4 percent on the day to 6,580 led by a 26 percent surge for newly-nationalised lender Bankia.
1355 BST: Italy update
Some interesting moves in the Italian debt market after an interview with the country's top debt market official, Maria Cannata, appeared on the Reuters newswire. She says Italy is reducing the average term of its overall debt market to 6.8 years from 7.0 years at the end of 2011 and expects to issue around half of this year's €450bn gross funding target in the form of shorter-dated Treasury bills.
Investors added around 12 basis points to Italy's 1-year TBill yields (now trading at 2.54 percent) today while taking 6 and 8 basis points respectively from 2-year and 10-year bond yields (the latter falling to 5.89 percent).
1300 BST: Stress Tests in Spain
Spain's Deputy Prime Minister, Maria Sanez de Santamaria, says her nation's banks will undergo a one-month "stress test", followed by a deeper analysis of the sector's assets. She made the announcement after indicating she's appoint an independent auditor to examine the sector as part of the government's plans to overhaul and de-risk its banks and financial institutions.
1220 BST: FTSE drift
Britain's FTSE 100 has slid past a 6-month low and into unofficial "correction" territory after declining more than 10 percent from its mid-March peak of 5,965. Today's 0.9 percent dip takes the benchmark to a November 2011 low of 5,288.62
London's down about 6.3 percent since the 6 May vote in Greece which has unsettled global equity markets to the tune of $4bn in lost valuation.
Here's how Europe's other main indices have fared since:
FTSE MIB (Italy): -7.6 percent
IBEX (Spain): -7 percent
CAC-40 (France): -6.3 percent
DAX (Germany): -4.3 percent
FTSE Eurofirst 300: -5.65 percent
1135 BST: A licence to print money?

Euro
A demonstrator sits in the euro sculpture as the waits for police to clear the camp of occupy protestors in front of the European Central Bank (ECB) in Frankfurt

Reuters reports, citing unnamed sources, that British currency printing expert De La Rue is preparing contingency plans to print Drachma banknotes in the event of a return to the Greek currency following a Eurozone exit. De La Rue produces more than 150 different national currencies but hasn't printed a Drachma for at least 20 years.

Shares in the group were 0.25 percent higher this morning at 994p

1125 BST: Expecting the unexpected

Reuters is reporting comments from a German Finance Ministry spokesperson who was asked about EU Trade Minister Karel De Gucht's assertion the that EU and the ECB were preparing emergency measures in case of Greek departure from the single currency.

"For the last two years we have been doing everything possible to keep Greece in the euro zone... We have a programme and we stand by this. Greece must also stick by this. Everyone is prepared to go forward with it. Brussels has also emphasized this ... the German government naturally has the responsibility to its citizens to be prepared for any eventuality."

Meanwhile, soon-to-be leaving ECB policymaker José Manuel Gonzalez-Paramo says it's high time Europe moved towards closer political, as well as economic and monetary, until. In his words, the solution to Europe's current problems are "more Europe". I'm not sure how many people will agree with that.

1100 BST: Posen the question.

Forgive the dreadful puns, but it's been a long week! Apropos of my suggestion that equity market weakness might be linked to an interview with a senior policy marker, let me immediately contradict my own premise by looking at Gilt markets here in the United Kingdom.

Bank of England rate-setter (inter alia) Adam Posen spoke at length with the UK-based financial newswire MNSI and the interview was published today. He appears to suggest a re-think of his earlier re-assessment of his decision not to re-visit a re-start of the Bank's £325bn asset purchase programme.

  "I had been hopeful in the last few months that after we did an additional 125 billion pounds (quantitative easing) that was getting close to enough. And now I am debating whether ... I was premature to think that ..."

Confused? Me too. And so are bond traders. Normally a policy-maker dropping the flag on QE extensions would be bullish for bond prices (pushing down yields) and traders snap up the Gilts today they hope they can sell back to the Bank of England a few weeks down the road.

Instead, what we're seeing is a 3 or 4 basis point *rise* in 10-year Gilt yields (from an all-time low) to 1.85 percent.

1040 BST: Standaard Stuff?

It's always tricky assigning particular news events to market declines, but it is interesting to see European shares extend losses this morning after an interview with EU Trade Commissioner Karel de Gucht in Belgium's De Standaard.

de Gucht is reported as saying that both the EU and the European Central Bank are working on an emergency case scenario in the event of a Greek departure from the Eurozone, the first public statement to that affect from a named official.

FTSE Eurofirst 300 is down 12.3 points, or 1.24 percent, to 969.10. The Euro is marked at a firmer 1.2691 while the Euro STOXX Banking Sector Index is 1.07 percent to the good at 80.47.

1000 BST: Short-selling ban proposed in Spain?

Just as I finish my thougthts about market liquidity moving into more opaque markets such as credit default swaps, I see reports on social media that could accelerate that significantly.

Spanish business newspaper CincoDias reports regulators are considering reinstating a ban on the short-selling of banking shares. If this turns out to be true, it's just the sort of well-intentioned decision that has dangerous unintended consequences.

Limits on short-selling in public, transparent markets will only drive traders into non-public, opaque markets in order to do the very same thing. (A "long" position in bank credit default swaps is essentially the same as a "short" position in a bank's shares).

Meanwhile, this "Twitpic" is making the rounds, indicating the day's biggest buyer of Bankia shares is ... Bankia Bolsa, it's online brokerage arm!

0945 BST: Spanish market into positive territory

The expected downgrades - and the dismal banking sector data - don't seem to be filtering into share prices. All of Spain's biggest lenders are watching their share prices rise (in the case of Bankia, suspended after rising 26 percent) as investors execute the classic "sell on mystery, buy on history" trade. The surge has taken the IBEX into the green (it's up 0.94 percent) although it still trades in deep nine-year low territory.

What I'm hearing from market professionals, however, is that investors are acting out their concerns in the market for credit defaults swaps on Spanish banks, and not the shares, a development which is both logical and troubling at the same time.

Logical in that balance sheet reparation (shedding assets, pulling back on lending, focus on keeping diluted equity holders happy) is likely to impede any given bank's ability to maintain good ratios of cashflow to debt. This makes bondholders nervous and, as a result, they will pay more for default protection.

It's troubling, however, in terms of transparency. If (and it's a long way from being so) CDS prices become more reflective of day-to-day risk valuations than share prices, ordinary investors (and the rest of the investing world outside of the cadre of banks which control CDS pricing) will find it increasingly difficult to gauge value. Opaque markets aren't the best places to establish value in assets as critical to the global economy as these are becoming.

0925 BST: A natural disaster is not what's needed

Deletion reports of a 4.8 (on the Japanese scale of 7) shaking buildings in Tokyo and parts of Eastern Japan.

0905 BST: Can't seem to escape the Spanish banking news cycle

The Bank of Spain says bad loans have risen to 8.37 percent of the overall sector's portfolio in March, up marginally from February. Key figure reported on the side is that lending collapsed -3.1 percent in the same period. Economic growth without credit is nigh on impossible. Bank lending, especially in an economy mired in recession and desperate for job creation, is utterly crucial for expansion. This is even more so the case when the government has pledged to carve out a further €27bn from its public spending plans.

Spain's banks are now being asked to repair their balance sheets of bad loans, raise capital to protect against the losses those loans might cause *and* increase lending to the overall economy all at the same time - all the while making sure depositors don't decide that the warm space under the mattress is a safe place to stuff their cash. (Deposits are down 4.2 percent from March of last year).

It's not hard to see why investors are so skittish about its prospects for success.

0850 BST: It's not really about Greece anymore, so it seems

We saw this theme play out yesterday, as well, in that investors are far more focused on what's happening in active, liquid markets such as Spain and Italy as opposed to the political developments in illiquid markets such as Greece.

In fact, you could argue that the potential for Greece's political crisis to *further* disrupt markets is actually diminishing. I was struck by this last night was reading various opinions on Twitter, many of which seemed to agree with the sentiment that anti-bailout party leader Alexis Tsipras of Syriza was "the most important politician in the world". Set aside the absurdity (and I'm sure the Tweeter was being dramatic for a reason) the fact is that he's likely not even the most important politician in his own country.

Polls released in Greece last night show the pro-bailout New Democracy party on pace to win 26.1 percent of the vote, a figure which would take them to around 121 seats in the 300-seat parliament, a full three-points ahead of Syriza. PASOK was a close third.

In other words, it's seems as if Greeks are beginning to reconcile their desire to stay within the single currency - and 80 percent wish to do so - with their desire to elect a leader who will keep them there.

If a "Greixt" can be taken off the table, investors can take one giant step towards isolating a least a portion of European risk in their portfolios.

Spanish stocks are now down around 0.3 percent at 6,513.7 while Spanish 10-year bonds are 7 basis points better at 6.30 percent

0820 BST: European markets are trying to hang on

It's weaker, for sure, but the damage is thus far not escalating too quickly. FTSE 100 is down a full 1 percent t0 5,289.33 and there are only four stocks in positive territory, but given the avalanche of news this week and the corresponding downward momentum, it could be worse.

The larger Spanish banking stocks are down, too, but not plunging, and that's keeping the IBEX's losses contained at around 1.83 percent so far (6,418.40). The Euro STOXX Banking Sector Index is down about 1 percent to 78.40.

0815 BST: A quick look at how the bond markets are reacting at the start of equity trading

Spain's benchmark 10-year bonds are marginally weaker at 6.37 percent while Italy's have risen past 6 percent to trade at 6.04 percent.

Safe-haven flows are helping Bunds test a dip below 1.40 percent (currently trading at 1.402 percent) while 10-year UK Gilts are also in uncharted waters at 1.81 percent.

Credit Default Swaps on Spanish banks are active this morning as investors try and re-set risk profiles in the wake of the three-notch downgrades for BBVA and Santander. BBVA's five-year CDS is trading at 515 basis points, meaning investors pay €515,000 each year for five years to protect BBVA bonds from default. Similar costs for Santander are €460,000.

0805 BST: Big slides to downside

European shares open dangerously weaker after that brutal session in Asia. FTSE Eurofirst 300 falls 0.5 percent in the opening seconds to 976.58.

Spain's IBEX is immediately down 2.5 percent, led by big bank declines, while Italy's FTSE MIB is down 1.2 percent after the opening bell. Full one percent declines for markets in Germany and France as well.

The single currency is changing hands at $1.2649 against the US Dollar (a four-month low).

0755 BST: Good Morning ...

It's setting up to be a hectic end to an exhausting week - and we're really only halfway through an utterly savage month that's claimed around $4tn in equity value from global stock markets.

Investor focus will once again centre on developments in Spain, where bank shares are expected to fall swiftly after last night's move by Moody's Investors Service to downgrade 16 financial sector firms. Spain's two largest banks, Banco Santander and Banco Bilbao Vizcaya Argentaria, had their ratings slashed three notches to A3.

Greece's debt rating was also affected in a late Thursday decision by Fitch Ratings, which knocked it down one level to CCC after the inconclusive ballot on 6 May raised legitimate questions about its ability to meet the financial commitments link to its collective €240bn bailout.

Europe's equity markets are poised to open lower while German Bund yields have already started the session testing new all-time lows as investors take flight from risky trades and pile-in to safe haven assets.

Overnight trading in Asia was brutal with the MSCI Asia Pacific Index plunging a full 3 percent at one stage in the session, its biggest single-day dip since November of last year. The Euro declined to a four-month low, and has fallen further since, on speculation that Greece's political turmoil will at best elongate the region's economic stagnation and at worst precipitate the collapse of the Eurozone project.