GLOBAL MARKETS-Spanish borrowing costs jump despite c.bank action

LONDON: Policy loosening by a trio of major central banks failed to
impress investors on Friday, pushing Spanish borrowing costs back up to
unsustainable levels reached before last week's EU summit took measures
designed to ease pressure on them.
China, the euro zone and
Britain all loosened monetary policy on Thursday, signalling growing
alarm about the world economy. But to little avail.
The euro stayed close to a five-week low against the dollar after an interest rate cut by the European Central Bank further dampened the common currency's appeal, while Brent crude oil shed more than a dollar to drop below $100 a barrel.
A
U.S. jobs report, due at 1230 GMT, is the day's big number and will
gauge the extent of damage the euro zone's debt crisis is inflicting on
the U.S. economy and whether the Federal Reserve may consider more
action when it meets next at the end of the month.
"If non-farm
payrolls are strong enough to suggest there will be no QE from the Fed,
the dollar will strengthen. If they are weaker then the dollar will
fall as the Fed will just be playing catch-up with the rest of the
world," said ING head of currency strategy Chris Turner.
Thursday's
robust U.S. private employment data came in strong but a Reuters poll
showed expectations were for non-farm payrolls to expand by just 90,000
jobs in June.
Spanish 10-year government bond yields extended
their rise past 7 percent, a level which is not a sustainable borrowing
rate indefinitely.
If Madrid requires a full sovereign bailout
on top of the up to 100 billion euros already earmarked for its banks,
it would stretch euro zone rescue funds to the very limit.
Italian yields climbed above 6 percent.
The pan-European FTSEurofirst 300 index was down 0.2 percent at 1,042.04, but was still up more than two percent for the week.
Reflecting
the impact of the European Central Bank's decision to cut lending rates
to 0.75 percent and deposit rates to zero, German government bond
yields were weaker with the yield on two-year debt briefly turning
negative.
U.S. stock index futures pointed to a slightly lower
open on Wall Street, with futures for the S&P 500, the Dow Jones
and the Nasdaq 100 down 0.1 to 0.2 percent.
A weaker session in
Asia, where Chinese growth worries are on the rise ahead of Q2 GDP data
next week, pushed the MSCI world equity index down 0.15 percent to
313.85, though it is on track for a gain of 0.6 percent this week.
SLOWDOWN ALL ROUND
Japan's
Nikkei share average also fell with investors unconvinced Thursday's
tripartite monetary easing will jump start slowing global growth.
International
Monetary Fund chief Christine Lagarde said the world economic outlook
had deteriorated as both developed and big emerging nations show signs
of slowing down.
China surprised markets with its rate cut,
coming just four weeks after a previous reduction and ahead of economic
data next week that includes second-quarter gross domestic product. It
fed expectations that those figures will be weak.
Vice Premier
Wang Qishan said in comments published late on Thursday that China
would have difficulty meeting its 10 percent trade growth target this
year.
Crude oil fell below $100 a barrel on expectations the
Norwegian government would end an oil workers' strike and as enthusiasm
over central bank rate cuts waned.
"The focus continues to be on
the global economy and oil demand," said Victor Shum, a senior partner
at oil consultancy Purvin and Gertz. "China's rate cut was a surprise
and although it was meant to stimulate, it was interpreted as a sign of
more trouble in the economy and it didn't really inspire."
Gold
edged down as a stronger dollar hurt European appetite for the metal
but remained on track for a second week of gains and as investors
waited for U.S. jobs data. - Reuters