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Share markets fall on latest euro zone jitters

World stocks and oil prices have fallen as economic news out of Europe continues to worsen.

Radio New Zealand'

18 May, 2012

The euro zone's fourth largest economy Spain has tumbled into recession and concerns intensified about the health of the country's banks.

Figures from Spain's national statistics institute showed the economy contracted by 0.3% in the first quarter of 2012, confirming it was officially in recession.

The country's borrowing costs shot up at a bond auction on Thursday, also affected by reports of an outflow of deposits from state-controlled bank, Bankia.

Shares of the partly nationalized Bankia fell 13.5% but recovered some of the losses after the government denied there had been a large amount of withdrawals.

Fears that Greece will exit the euro zone have been growing since an inconclusive poll in May, in which parties opposed to austerity measures linked to a financial rescue package gained strong support. A caretaker government is in place until new elections on 17 June.

Debt crisis warning

British Prime Minister David Cameron has renewed his call for euro zone leaders to take decisive action or face the break up of the single currency over the Greek debt crisis.

Britain is not a euro zone member but the bloc is a key trading partner and fallout from the debt crisis is having a serious effect on the entire 27-member European Union.

European heads of government have discussed the crisis in a video conference scheduled to talk about the weekend's G8 meeting of industrialised countries.

The conference included the leaders of Britain, Germany, France and Italy, as well as European Union officials.

Euro, stocks slip

European shares extended their losing streak because of the crises in Greece and Spain.

The pan-European FTSE 300 index dropped 1.2%, a fourth straight day of declines.

London's FTSE 100 index fell 1.3%, Frankfurt's DAX was down 1.2% and Paris' CAC 40 index was 1.2% lower.

The euro fell more than a cent against the US dollar.

In the United States, Wall Street stocks continued to fall as weak economic data worried investors already concerned about the ongoing debt crisis in Europe.

Brent crude futures extended losses to more than $US2 a barrel on concerns about Greece and the wider euro zone. Brent July crude fell to a low for the year before recovering slightly to $US107.42 a barrel,

Euro zone volatility 'could lower NZ interest rates'

A bank economist says says the Europe debt crisis could see interest rates in New Zealand dropping further..

Radio New Zealand

18 May, 2012

At least two banks, Kiwibank and ASB, have begun to cut their fixed home loan rates in response to the uncertainty on world financial markets.

ASB is on Friday reducing its four-year fixed home loans to 6.1% and the five year rate to 6.5% - in both cases a cut of 0.4 percentage points.

This follows reductions to its one-, two- and three-year fixed home loan rates earlier in the week.

On Thursday, Kiwibank also reduced its fixed rates and extended its 4.99% one-year fixed rate special.

BNZ chief economist Tony Alexander told Morning Report that commodity prices could drop if China's exports to Europe fall, leading to less inflation and prompting a further fall in interest rates.

But he says situation is extremely difficult to predict, and it is also possible that things will settle down in Europe and rates will rise again.

Mr Alexander says the financial markets are terrified of the fallout from what's expected to be a very messy situation if Greece exits the euro zone.

Financial commentator Bernard Hickey says New Zealand banks are insulated from what is happening in Europe because the country was more protected from the global financial crisis

He says New Zealand has not had a housing slump, did not expose itself to toxic mortgages like Britain and America and its strongest trading partner, China, was booming.

Coverage from Radio New Zealand on the effect on New Zealand