MARKET REPORT: Bears battered by euro rescue

By Geoff Foster

PUBLISHED: 16:47 EST, 11 June 2012 | UPDATED: 16:47 EST, 11 June 2012

Overweight bears had the life squeezed out of them after the Spanish government secured 80billion of funding for its ailing banking sector over the weekend.

Share prices soared first thing on sheer relief but the euphoria did not last for long. Dealers soon questioned whether the bailout would be enough, while sceptics suggested it addresses the symptoms rather than the disease and only keeps the banking sector alive rather than supporting growth.

Up 100 points before dealers had a chance to digest their cornflakes, the Footsie drifted steadily lower as shrewd fund managers trousered profits and the close was 2.71 points easier at 5,432.37.

Share prices soared first thing on sheer relief but the euphoria did not last for long as dealers questioned whether the bailout would be enough

The FTSE 250 traded 187 points up at best before ending 40.71 points down at 10,658.24. Wall Street opened almost 10 points lower.

Neil Mackinnon, chief economist at VTB Capital, still advises extreme caution. He said: The eurozone debt and banking crisis remains unresolved and there is every chance that more bailouts will be needed thus stretching the existing EU rescue funds beyond the 750billion available.

Kathleen Brooks at Forex.com also remains nervous. She added: Now the attention turns to the next domino. Unfortunately for the EU authorities, far from ease up pressure on Italian bond yields, Spains bailout may have made Italian debt less attractive.

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MARKET REPORT: Bears battered by euro rescue