Following on from the Greek inspired rally which caused a bounce across the markets, concerns over the global economic recovery quickly tempered the return of risk appetite in Asian trading this morning.

Rising borrowing costs in Spanish debt auctions yesterday indicated a possible bailout for one of the largest economies in the Eurozone with the yield on their 10 year bonds rising above 7%, the highest it has been since the launch of the euro more than a decade ago. Previously, yields going above 7% have led to countries needing a bailout, as seen in Greece, Ireland and Portugal. With Italy’s 10 year bonds reaching 6.10% the high borrowing costs from two of the Eurozone’s largest economies offset the bounce inspired by market-friendly Greek elections.

Fuelling concerns over the state of global economies was the news that the Brics economies, Brazil, Russia, India, China and South Africa, five of the fastest growing emerging economies in the world, have increased their contributions to the International Monetary Fund (IMF). China, the biggest Brics economy and the world’s second-largest, confirmed it will contribute $43bn (27.4bn) and two other Brics members, India and Russia, said they will enhance their contribution by $10bn each. The move comes as the IMF has been looking to boost its finances to help prevent any future financial crisis and will mean a greater say in the IMF by the Brics economies ahead of potential bailouts in Europe.

Adding to the worries was the news that India is to be downgraded by Fitch, the credit ratings agency cutting its outlook for the Indian economy to negative, saying the country’s growth faces “heightened risks”. Fitch warned India’s growth potential “will gradually deteriorate if further structural reforms are not hastened”.

As a result of the increased negativity in the markets, stocks were down with Hong Kong’s Hang Seng Index down 0.35%, Australia’s S&P/ASX200 down 0.38%, whilst Japan’s Nikkei 225 Index fell by 0.37%, with European stocks indicating a lower opening.

Today, the focus will be mainly on the US with the first of a two day monetary policy meeting held by the Fed Reserve.  However, with a raft of data coming from Europe and the Eurozone including the release of Spanish Industrial New Orders in the morning and both European and German economic sentiment at around 10am GMT,  one can expect another volatile and potentially rewarding day of trading.

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