Stock markets have rebounded on the news that the European Union will fork out billions to help Spain's weakest banks. But the bullish mood may not last long with a crucial election in Greece just around the corner.
Stocks jumped in Asian trading on Monday after eurozone finance ministers threw their weight behind ailing Spanish banks, offering loans of up to 100 billion euros ($125 billion). The announcement relieved markets that had feared a fiscal collapse in Spain.
The euro was on course for its biggest daily rally against the dollar in almost eight months for most of the trading day, but eventually retreated to $1.2639 in Tokyo.
"It was macroeconomics that lifted the markets this morning, as the EU stepped in to help Spain's banks," said Andy Du, the director of the Derivatives Department at Orient Futures.
The 17-nation euro area had agreed to lend Madrid resources for the government's bank rescue fund. No precise amount was set, because Spain said it needed some more time for an independent assessment of the banking sector's capital needs.
Flash in the pan?
Shares also soared in early trading in Europe. Futures for the EuroSTOXX-50, Germany's blue-chip DAX and France's CAC were up between 2.5 and 2.9 percent some three hours before the start of trading. Stocks in Madrid went up by more than 4.0 percent in the morning.
Despite stock markets looking bullish, analysts say the rebound may only be temporary, with uncertainties about the outcome of a crucial election in Greece weighing on sentiments.
Others doubt the thrust of the EU's aid for Spain. "The next phase of the Spain problem will come in six to nine months when it may become clear that the economy there has not improved, thus pointing to a wider realm of distress," Richard Hastings of Global Hunter Securities told Reuters news agency.
"That's indeed the primary concern for the entire European situation that the relationship between banking, credit and growth remains fragmented and impaired," Hastings concluded.
hg/mll (Reuters, AFP)