European stocks are expected to open lower on Wednesday amid concerns over Spain and Greece’s finances and following a rare earnings miss by Apple. With Spain’s borrowing costs soaring after an auction of short term debt on Tuesday an alarm signal was sounded when the cost of borrowing over 5 years rose above the cost of 10 year borrowing.
The FTSE 100 is expected to open 24 points lower with the DAX called down by 58 points and the CAC 40 is seen down by 17 points.
Spain’s finance minister Luis de Guindos met with his German counterpart in Berlin late Tuesday with both ministers warning Spain’s borrowing costs were too high and calling for swift EU action on a banking union they hope will help stabilize the euro zone debt crisis.
Adding to the negative sentiment was news that the region of Catalonia, which includes Barcelona and accounts for one fifth of Spain’s economic output, said it was considering whether to take state aid to meet its financing needs. CNBC’s Carolin Schober will report live from Barcelona on Wednesday with Stephane Pedrazzi bringing you the latest market moves from the Spanish stock exchange in Madrid.
Greece remains the key problem for the euro zone with investors wearily hoping for an end to the debt crisis. An EU official told the Reuters news agency that Greece is “hugely off track” in its attempts to bring its budget in-line with EU and IMF targets as inspectors arrived in Athens for make or break talks. "The debt-sustainability analysis will be "pretty terrible” the unnamed official told Reuters.
Greece’s Prime Minister Antonis Samaras put the scale of the problem in perspective when he said Greece's economy could contract by more than 7 percent this year, further adding to its debt problems. “There are certainly delays in this year's agreed program, and we must quickly catch up," Samaras told party colleagues.
"Let's not kid ourselves, there is still big waste in the public sector, and it must stop." Julia Chatterley will be live from Athens reporting on developments.
Minutes before the market closed in Frankfurt on Tuesday Deutsche Bank pre-announced its second quarter earnings blaming the weak euro and poor trading activity for far worse than expected earnings. The banking giant said second quarter net profit would be around 700 million euros ($845 million)versus an expectation of 1 billion euros.
After the close in the United States Apple earnings missed sky high Wall Street expectations sending its stock lower. A weak European economy and weaker iPhone sales ahead of the release of a new version sent Apple’s stock 5 percent lower in after-hours trade.
With the Olympics in London now just hours away we also get second quarter GDP figures from the UK at 09:30 BST/10:30 CET today. Analysts polled by Reuters expect the data to confirm the UK is stuck in recession and predict GDP will be 0.2 percent lower versus the 0.3 percent contraction in the first quarter.