Markets welcome Spanish banks rescue deal

Markets in Europe and Asia have risen in response to the bailout of Spain's banks that was agreed over the weekend.

On Saturday, eurozone ministers agreed to lend Spain's banks up to 100bn euros ($125bn; £80bn).

The FTSE 100 in London rose 1.0%, the Dax in Frankfurt was up 1.9% and the Cac 40 in Paris was up 1.6%. Spain's benchmark index, the Ibex, rose 2.6%. All had earlier made bigger gains.

The euro gained half a cent against the US dollar.

Spain's weakest banks were left with billions of euros of bad loans following the collapse of a property boom and the subsequent recession.

Earlier, the Nikkei in Tokyo closed up 2.0%. The Hang Seng in Hong Kong closed up 2.4%.

On the bond markets, the yield on Spanish 10-year bonds briefly dropped below 6%. Bond yields are taken as an indication of the interest rates that governments would need to pay to borrow money.

European banks led the stock market gains, with Lloyds up 4.9%, Barclays up 3.1%, RBS up 3.2%, Credit Agricole up 4.4%, Societe Generale up 3.3%, Commerzbank up 2.5% and Deutsche Bank up 3.1%.

The exact amount of emergency funding that Spain will receive will be decided after two audits of its banks are completed within the next few days.

Spain is in its second recession in three years and the economy is expected to shrink by 1.7% this year.

"The Spanish announcement is not a solution to the eurozone's ongoing woes, but it is a statement of intent," said Richard Hunter from Hargreaves Lansdown stockbrokers.

"Some much-needed time has now been bought in Spain, which will allow the market an at least temporary sigh of relief."

Spanish journalist Miguel-Anxo Murado told BBC News that many Spanish people were surprised there had been a bailout at all.

"The government has been very successful at denying the need for this bailout," he said.

"Now the controversy is actually whether we should be happy or humiliated about this."

There were demonstrations against the bailout in Spain on Sunday.

The Spanish government said in a statement late on Sunday that it was committed to its programme of economic reforms.

In a statement on the economics ministry's website, it said the Spanish Treasury would continue to borrow money commercially and would continue with its planned programme of bond auctions.

The next bond auctions scheduled are short-term sales on 19 and 21 June, after the Greek elections on 17 June, which will be the next key test for the eurozone.

The government has been keen to stress that it is the banks that have been bailed out, not the country.

But in an interview on Monday morning, EU competition commissioner Joaquin Almunia said there would be a troika of authorities to oversee the financial assistance, just as happened with Greece, Portugal and the Republic of Ireland.

The troika will be made up of the International Monetary Fund, the European Central Bank and the Eurogroup of eurozone finance ministers.