September 27, 2012 / 9:00 AM / 5 years ago

GLOBAL MARKETS-Shares edge higher, euro flat

* FTSEeurofirst 300 up 0.6 percent as Spain budget looms

* Euro off 2-week low vs dollar, yen near 1-week high vs dollar

* Commodities, gold recover as dollar index inches lower

By Marc Jones

LONDON, Sept 27 (Reuters) - Global shares reclaimed some of the previous day’s sharp losses and the euro steadied on Thursday, boosted by hopes Spain’s budget could nudge Madrid towards a rescue programme and allow the ECB to launch its eagerly awaited new bond-buying bazooka.

Euro zone worries have roared back into focus over the last week as the feel-good factor of recent central bank stimulus has given way to renewed uncertainty over euro zone debt and Spain’s willingness to submit to a politically painful rescue programme.

Violent anti-austerity clashes and signs of political back peddling on burden sharing promises saw European shares suffer their biggest one-day falls since late July on Wednesday.

By 1300 GMT as markets waited on news of new spending plans from Spain, the FTSEurofirst 300 had recovered around a third of the lost ground to stand 0.6 percent higher at 1105.48 points and the MSCI global index of shares was up 0.4 percent.

U.S. stock index futures pointed to a positive open on Wall Street following five straight days of losses after Asian equities had gained on growing hopes China’s government will step in to bolster slowing economic growth.

“I think ... a few opportunistic buyers have been creeping in, on the hope that Spain might just push the bailout button,” said Angus Campbell, head of market analysis at Capital Spreads.

“If that happens, I can only imagine you’ll see risk assets rise.”

The gains came despite weaker than expected euro zone economic confidence and lending data which underscored the heavy toll the bloc’s debt troubles are taking on the economy.

Nervous eyes were focused firmly on Spain’s spending cut plans due shortly. Spanish Prime Minister Mariano Rajoy’s government will lay out budget figures and new spending cuts in what will be a busy two days in Madrid. It was not clear when the announcement might come, as a cabinet meeting continued.

New stress tests on Friday will also spell out how much more money will be needed to strengthen Spain’s shaky banking sector and it also faces the prospect of possible sovereign downgrade by ratings firm Moody‘s.

“The Spanish budget and whether that is linked to a request for aid is what everybody will be looking at today,” said Aline Schuiling at ABN Amro.

“Mr Rajoy appears to be trying to resist making the request but, as we have seen, the yields are back above 6 percent and I think the markets certainly have the power to force his hand.”


Protests in Spain and Greece against austerity measures had roiled markets on Wednesday, sending 10-year Spanish bond yields back above the 6 percent threshold.

Bond markets were largely steady ahead of Rajoy’s budget. Spanish yields were slightly lower at 6.08 percent while German Bund futures were flat at 141.48 following solid gains in previous sessions.

“Nothing that I read on Spain says to me that they’re going to do the budget and then they’re going to apply for aid straight away,” one trader said.

“And whatever numbers they put up, I would be sceptical about them. The whole of Europe seems to think that we’re going to return to growth next year, which I think is questionable.”

Conscious that seeking help from EU partners would carry conditions for budget savings that would be unpopular at home, Rajoy has said he is not sure if a bailout is needed and has made clear he is in no hurry to ask for one.


Ahead of the open on Wall Street, S&P 500 futures rose 6.8 points, Dow Jones industrial average futures added 65 points and Nasdaq 100 futures rose 13.5 points.

Moves in currency markets were also limited ahead of Spain’s budget enouncement. The euro, which has lost more than 1.6 percent over the last two weeks, was broadly flat on the day at $1.2800.

The dollar was a touch lower at 77.70 yen, inching back towards a seven-month low of 77.13 yen hit on Sept. 13, the day the Federal Reserve announced a new round of monetary stimulus.

“All eyes have been on Spain for the last week or so. We have had a big shift in euro positioning recently, so going into the budget investors are probably positioned fairly neutral,” said Michel Sneyd, FX strategist at BNP Paribas.

Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole struck a similar tone: “I think eventually we’ll crack through the 200-day moving average and move lower, with the euro/dollar likely to test below the $1.28 level,” he said.

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