US stock markets and bank shares have dropped amid concerns about the eurozone debt crisis and renewed fears that Spain may be unable to avoid a costly bailout.
On Friday, the Dow Jones Industrial Average dipped 120.79 points (0.93 percent) to 12,822.57, while the Nasdaq Composite Index shed 40.60 points (1.37 percent) to 2,925.30.
The Standard & Poor’s 500 Index fell 13.85 points (1.01 percent) to 1,362.66.
US bank shares also suffered on the news from Spain, that the heavily indebted region of Valencia requested Madrid for financial aid, raising fears that the eurozone’s fourth-largest economy may itself need to be rescued.
The KBW bank index fell 1.9 percent, taking its weekly decline to 2.3 percent. Shares in Morgan Stanley dropped 3.5 percent to $12.78.
Valencia has used several government credit lines in the first six months of the year to pay off its debt. Now it needs to repay 2.85 billion euros by the end of 2012.
The Spanish economy is suffering from the aftershocks of a real estate bust that has devastated not just the banks, but families as well.
Battered by the global financial downturn, the Spanish economy collapsed into recession in the second half of 2008, taking with it millions of jobs.
The worsening eurozone debt crisis has increased Spain’s financing costs and the country is seeking a European Union bailout similar to the one Greece received.
On June 9, eurozone finance ministers agreed to lend 100 billion euros to Spain to save its teetering banks, which means more debt would be added to Madrid’s already huge official borrowings.
Many economists believe Spain will soon enter into a new recession.