The Eurozone crisis never really abated, and it looks like Spain and Italy are in trouble, again. Exchange traded funds following the two countries’ markets have been depressed as poor economic data and the higher cost of issuing sovereign debts weigh on the economies.
The iShares MSCI Italy Index Fund (NYSEArca: EWI) and iShares MSCI Spain Index Fund (NYSEArca: EWP) are down 5% over the past five trading sessions.
Spain’s benchmark 10-year bond yields rose 62 basis points this week to 5.71% earlier Friday, its biggest weekly gain in almost 17 years after the finance minister announced a higher-than-expected deficit-to-GDP for 2011, report Lukanyo Mnyanda and David Goodman for Bloomberg. Meanwhile, Italy’s 10-year bond yields rose to 7.13%, even as the European Central Bank promised to buy Italian debt.
“Even though the refinancing needs for Italy are actually more pronounced, we see Spain to be under more pressure given the persistent negative news flow and two auctions over the next two weeks,” Norbert Aul, strategist at RBC Capital Markets, said in a Reuters report.
The index for executive and consumer sentiment on the Eurozone’s economic outlook fell to 93.3 in December from 93.8 in November.
The region’s unemployment rate was 10.3% in November. In comparison, Spain’s unemployment rate was 22.9% in November, a record high and the highest among E.U. members.
“There is obviously some concern lurking around, with sovereign debt downgrades hanging over a lot of countries,” Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets, said in the Bloomberg article. “The market is continuing to punish peripherals.”