LONDON -- The big news over the weekend was that the EU has agreed on a 100 billion euro bailout of Spain's banks. This is likely to give the Dow Jones Industrial Average
The relief could be short-lived, however, if trading on European markets is anything to go by. Major European markets opened up strongly this morning, with the FTSE 100
Bond markets saw a similar lift, with the yield on 10-year Spanish government bonds falling rapidly in early trading before settling back up at 6.129%. Yields on German 10-year bonds, on the other hand, rose to 1.399% as the demand for safe-haven debt dropped.
One factor that has limited the bond market's reaction this morning is traders' concerns over the source of the money for the Spanish banking bailout. If it comes from the new European Stability Mechanism fund, which is due to come into action next month, then the loans will have preferred creditor status and be senior to outstanding Spanish government debt. This could upset the bond markets and push Spanish yields still higher. If the money comes from the current European Financial Stability Facility, then this won't apply.
Also in the news this morning was new data from China showing that its exports grew by 15% in May from a year earlier. However, industrial output was up by only 9.6%, and retail sales showed their smallest gain in six years, suggesting that the Chinese domestic economy is slowing down.
In company news, British engineer GKN
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No major domestic economic data or earnings reports are due today.
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