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 Spain's Ibex share index slid to a near three-month low but European
stocks overall moved higher, taking their cue instead from equity
gains in Asia and higher U.S. stock futures.
Spanish stocks and bonds recovered some of their earlier losses but
were still down at midsession. Oil too had recovered some ground,
having fallen early by more than 2 percent to a low of $36.05 a
barrel.
That was its lowest since July 2004. It has lost a fifth of its
value in the last month and a third since early October.
"Really, I wouldn't like to be in the shoes of an oil exporter
getting into 2016. It's not exactly looking as if there is light at
the end of the tunnel any time soon," Saxo Bank senior manager Ole
Hansen said.
Crude's persistent weakness has exerted heavy downward pressure on
oil exporting countries' currencies, foreign exchange reserves and
government budgets.
The latest to feel the heat was Azerbaijan, which on Monday floated
its currency, the manat. The currency plunged 32 percent to 1.55 per
dollar.
At 1130 GMT Europe's FTSEuroFirst index of leading 300 shares was up
0.3 percent at 1,424 points, with Germany's DAX up 0.9 percent,
Britain's FTSE 100 up 0.8 percent and France's CAC40 0.5 percent.
Earlier in Asia, MSCI's broadest index of Asia-Pacific shares
outside Japan rose 0.3 percent, as investors bid up modestly priced
Chinese blue-chips. China's CSI300 index surged 2.6 percent, but
Japan's Nikkei 225 fell 0.4 percent.
SPAIN LAGS
Spain's IBEX, however, was down 2 percent. Earlier it hit its lowest
since Sept. 29 after the fragmented nature of Sunday's election vote
cast uncertainty over the country's reform program and broader
economy.
Prime Minister Mariano Rajoy's conservative Popular Party won more
seats than any other party but fell well short of a majority.
Left-wing parties failed to win a clear mandate to govern either,
and talks to form a coalition government could drag on for weeks.
"A center-right coalition cannot reach a majority... (and this)
injects even greater political uncertainty. This is unlikely to be a
positive development for markets," Marco Stringa, senior economist
at Deutsche Bank, said in a note.
"Overall the main risk remains political impasse due to the
unprecedentedly fragmented parliament."
Spain's 10-year government bond yield rose almost 20 basis points to
1.89 percent, its highest in over a month. It was last at 1.80
percent, still well up on the day.
The spread over the benchmark German 10-year Bund yield widened to
130 basis points, also the highest in over a month.
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"The risk of a fresh election being called next spring or one year
after the one just held is high," said Societe Generale.
In currencies the dollar was flat at 98.74 against a basket of
currencies, and the euro was steady at $1.0865. The dollar rose 0.1
percent against the yen to 121.32 yen.
China's yuan was fixed higher for the first time in 11 sessions.
Beijing will keep monetary and fiscal policies accommodative in 2016
to help support the slowing economy, a source with the direct
knowledge of the annual Central Economic Work Conference said on
Monday.
U.S. stock futures pointed to a rise of around 1 percent at the open
on Wall Street, rebounding from a volatile end to last week with the
expiration of stock and index options contracts generating heavy
trading volume.
The Dow ended Friday down 2.1 percent, while the S&P 500 lost 1.78
percent and the Nasdaq 1.59 percent. All three fell on the week.
Monday's expected recovery on Wall Street put Treasuries under
pressure, with the 10-year yield up 2 basis points.
That steepened the yield curve. The gap between two-year and 10-year
paper had shrunk to 122 basis points last week, the smallest since
early February, but on Monday was back out to around 125 bps.
A flatter curve is often an indication that economic growth is
slowing, as investors price in the tightening effects of higher
short-term rates on longer-term activity and inflation.
Gold continued to recoup some of last week's initial slide following
the first U.S. interest rate hike since 2006. It was up 0.6 percent
at $1,072 an ounce, building on the 1.4 percent gain of the previous
session.
(Reporting by Jamie McGeever; Additional reporting by Amanda Cooper;
Editing by Hugh Lawson; To read Reuters Global Investing Blog click
on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog
click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog
Hub click on http://blogs.reuters.com/hedgehub)
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