Shares, oil gain after Spanish debt sale, euro weak

Thu Apr 19, 2012 8:00am EDT
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By Richard Hubbard

LONDON (Reuters) - Solid demand at Spain's bond sale gave a slight boost to European share and oil prices on Thursday, but the euro eased against the dollar due to wider concerns over the government's ability to tackle a ballooning deficit as its economy shrinks.

Stocks were set to open higher on Wall Street on the auction result though attention was expected to switch to the release of a slew of corporate earnings and economic data.

Spain's Treasury issued the full 2.5 billion euros ($3.3 billion) of two- and 10-year bonds it planned at the auction but was forced to pay more for the longer-dated paper than at a previous sale in January, suggesting that investors were not convinced by the government's spending cuts and reforms.

"The bigger story for Spain remains one of fiscal position and growth," said Nick Stamenkovic, bond strategist at RIA Capital Markets.

"Until we see signs that the government is implementing the medium-term fiscal consolidation program and signs of life in the Spanish economy, investors are going to worry."

Many investors are also concerned about the euro zone's ability to prevent Spain's fiscal woes from spreading to other vulnerable economies in the 17-member bloc.

They are increasingly looking to the meetings of the G20 economies and the International Monetary Fund for signs of progress on a deal to increase the amount of money available to fight the euro zone crisis.

After the auction, yields on existing Spanish and Italian government debt rose slightly. Spain's 10-year bonds were up 2 basis points at 5.87 percent, compared with the average yield achieved at the auction of 5.743 percent.   Continued...

A man takes a photo of displays showing market prices at the Tokyo Stock Exchange in Tokyo April 11, 2012. REUTERS/Toru Hanai