LONDON (Reuters) – European shares hit a 15-week high and the euro rose against the dollar on Thursday as strong U.S. corporate profits boosted sentiment, but a rise in Spanish borrowing costs rekindled fears that a full sovereign bailout was becoming inevitable.
U.S. stock index futures pointed to the gains in equities continuing on Wall Street , where the earnings season is in full flow.
On the oil markets, Brent crude rose above $106 a barrel to a seven-week high as violence in Syria and an attack on Israeli tourists increased tension in the Middle East, bringing supply concerns back into focus.
The biggest threat to a resumption in demand for riskier assets was the rise in Spain’s borrowing costs, which hit new euro-era highs for five-year debt at a 3 billion euro ($3.7 billion) auction of new bonds.
“The risk is that yields could start rising also in shorter maturities, where Spain is doing most of the funding, and that will basically be game over for Spain,” said Gianluca Ziglio, a strategist at UBS.
The sharp fall in demand for Spain’s bonds and the big rise in costs the government has to pay to fund itself comes despite Madrid’s efforts to cut the budget deficit and tackle the problems in its banking system.
Ten-year Spanish government bond yields in the
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