Spain

Global markets were spooked by Spanish bond yields spiking to near-critical levels, with many indices posting losses of more than 1% overnight, and the FTSE 100 opening 1% lower this morning.

Spain became the new Italy this morning after the yield on bonds it sold at auction reached a 14-year-high of just under 7%.

The euro weakened this morning as the cost of insuring French bonds climbed to a record, Spanish yields rose and european equities retreated for a second day.

Fears of France and Spain being the next to suffer in the eurozone debt crisis intensified as 10-year bond spreads reached euro-era highs above German yields yesterday.

The Spanish regulator has provisionally suspended trading in the shares of Banco de Valencia after reports the troubled regional bank faces a funding shortfall of €600m.

Credit agency Moody's has cut the rating of Spanish government bonds by two notches, echoing Standard & Poor's decision two days ago.

Standard & Poor's has delivered another blow to sentiment across Europe after cutting Spain's long-term credit rating by one notch, from AA to AA-.

S&P and Fitch have downgraded some of Spain's largest financial institutions including bank Santander, citing a deteriorating outlook for the Spanish economy.

EAST OR WEST...

Italian and Spanish government debt have both been downgraded by the Fitch credit rating agency.