STOCK MARKET WATCH - Wednesday, 1 February 2012

[Demeter]

17. Portuguese storm gathers as EU leaders fight over Greece By Ambrose Evans-Pritchard

http://www.telegraph.co.uk/finance/financialcrisis/9050601/Portuguese-storm-gathers-as-EU-leaders-fight-over-Greece.html

Surging borrowing costs in Portugal have raised the spectre of a second full-fledged contagion crisis in the eurozone, eclipsing the latest efforts by European Union leaders in Brussels to agree on Europe's bail-out machinery and a strategy for Greece...Yields on Portuguese 10-year bonds hit a fresh record of 17.38pc on Monday even though the country is already shielded by a €78bn (£65.2bn) package from the EU, European Central Bank (ECB) and International Monetary Fund "troika" and does not have to tap the markets this year.

Reports also emerged on Monday night that European banks were gearing up to ask the ECB's emergency funding scheme for up to twice as much in funds as the central bank supplied in its debut €489bn auction last month.

The news reveals the extent of the liquidity squeeze on banks – with some chief executives looking to tap the ECB for up to triple the amount they originally borrowed, when the three-year money auction takes place on February 29...