Spanish debt concerns affect global risk appetite

  Euro reaches fresh session peak to the Dollar although  Spanish debt costs remain firmly in focus, while the  German ZEW survey is set to test sentiment.

 The Euro cut earlier losses today, to rise to a  session high above $1.3100 against the Dollar.

  Investors had reversed earlier bearish bets on the  Euro, following more talk of steady demand for the  Euro to meet IMF related payments and assisted also  at the margins, by higher European stock markets.

  Prior to that, the Euro had lost ground slightly and  German government bond prices edged away from record  highs, as investors were waiting to see if concerns  over Spain's budget deficit and banking sector would  push up borrowing costs at a debt sale.

  The Spanish 10-year bond yields had traded above the  key 6% level, with investors increasingly concerned  that Spain's economic woes will reignite the Euro zone  debt crisis.

  It was at the 7% level that Greece, Ireland and  Portugal were pushed into international rescues.

  Spanish Prime Minister, Mariano Rajoy, has said that  should Spain fail to reduce its deficit, the nation  won't be able to fund its debt and meet its commitments.  They have to slash the Spanish budget deficit in order  to maintain access to financing.

  Spain has the Euro area's fourth largest economy and  the Spanish government forecasts that the economy will  contract by 1.7% in 2012, this as the deepest budget  cuts in more than 30 years are to be implemented. They  plan to shrink the deficit to 5.3% of GDP in 2012 from  8.5% in 2011.

  Today, Madrid will auction 12 and 18 month Treasury  bills. The auction is seen as a key test of investor  sentiment, before the more challenging sale on Thursday,  of 2 year and 10 year bonds due in 2014 and 2022.

  Risk appetite around the globe has been affected by  concerns over Spain. In fact major markets have seen  shares weaker, the gold price lower and oil prices  slipping.

  The situation in Spain, today's bill auction and  concerns over the economy and debt, will likely be  the main focus in the markets today, and as a result  the Euro is expected to still remain under pressure.