Cynicism towards crisis meeting takes toll on yields and currency

 
City A.M. Reporter
THE EURO fell against the dollar and Spanish borrowing costs jumped yesterday, on doubts about the outcome of the European summit starting tomorrow in a bid to mitigate the debt crisis.

Yields on Spanish three-month securities hit 2.36 per cent, soaring from 0.85 per cent at the last such auction. Spain auctioned off €3.08bn worth of the bills, but the yield reflected fears over the struggling country’s prospects.

And nearby Italy also saw yields rise at a bond auction, but to a less severe extent. The yield on Italian two year notes came in at 4.71 per cent, up from the 4.04 per cent paid last time around.

In the currency market, the euro fell 0.3 per cent against the dollar at $1.2463 after touching $1.2440, its lowest level in more than two weeks – although the greenback also strengthened against other currencies.

The FTSEurofirst 300 index of Europe’s top shares was essentially unchanged at 986.34 points, wiping out an earlier 0.4 per cent rise. MSCI’s world equity index dipped 0.12 per cent to 1,186.81, adding to three straight days of losses. Investors pared their safe-haven holdings in gold as well as US and German government debt.