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May 9, 2012 1:03 pm
Investors shifted their anxiety from Greece to Spain on Wednesday, with Spanish banks suffering heavy selling amid concerns about the sector.
Bankia , Spain’s third-largest bank by assets, extended Tuesday’s losses, sliding 5.8 per cent to €2.13. Shares fell nearly 5 per cent on Tuesday after news that the government could inject up to €10bn into the bank.
The capital injection is expected to be part of a larger bank recapitalisation programme to be announced on Friday.
Reports that this programme could require lenders to shore up more than €30bn to insulate against bad property loans sent bank shares plunging.
Domestic retail lenders suffered the biggest losses, as investors fretted over the sector’s combined €340bn exposure to the property market.
Banc o Popular fell 4.7 per cent to €2.15.
Analysts at Royal Bank of Scotland said Spain’s recapitalisation program would not solve its banking problems and estimated Spain’s seven biggest banks would need an additional €68bn of capital to cushion against bad loans.
The wider Ibex 35 dropped 2.8 per cent to 6,812.7, the lowest closing point in nearly 9 years.
Meanwhile, Spanish bond yields climbed 23 basis points to 6.07 per cent. Borrowing costs above 6 per cent are considered by traders to be unsustainable for Madrid.
In Athens, where stocks hit 20-year lows on Tuesday, the Athens General index fell 0.9 per cent to 615.12.
The wider FTSE Eurofirst fell 0.3 per cent to 1,014.46.
In Milan, Mediase t helped to drag the FTSE MIB index down 1.2 per cent to 13,771.82. Shares in the broadcaster owned by Silvio Berlusconi, the former Italian prime minister, fell to an all-time low after it announced on Tuesday that a slump in advertising sales had dragged first-quarter net profit down by 85 per cent year-on-year.
France’s CAC 40 fell 0.2 per cent to 3,118.65.
In Frankfurt, positive trade data lifted stocks slightly, with the Xetra Dax rising 0.5 per cent to 6,475.31.
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