Markets fall as Spain plunges into recession

European markets soured on Monday as Spain, which is battling a rising budget deficit with punishing austerity measures, officially entered a double-dip recession.

The FTSE 100 lost 0.68%, or 43 points, to hit 5,734 and the Mid-250 index shed 0.54%, or 62 points, to 11,418. See the FTSE’s performance and the index’s top risers and fallers.

Hedge fund Man Group (EMG.L) slipped 3.5p, or 3.3%, to 103.5p as investors worried that it could be hit by the renewed economic uncertainty, after adding 10% in the past week on bid speculation.

Spain announced that it had entered a recession as the National Statistics Institute revealed that the economy contracted 0.3% in the first quarter of this year.

The news comes after Spain’s debt rating was downgraded two notches by Standard & Poor’s from A to BBB+ over concerns about the country’s growing budget deficit and weak banking system.

Michael Hewson, senior market analyst at CMC Markets, commented: ‘Recent speculation that EU ministers were looking at steps to refocus a policy response more towards growth was shot down by the EU commission who stated that recent press speculation about alternatives to austerity were wide of the mark, and that there was no substitute to fiscal consolidation.’

Other stock markets in Europe also fell back: Germany’s DAX index gave up 0.59% to 6,761, France's CAC 40 index fell 1.64% to 3,212, and the FTSEurofirst 300 index of top European shares dropped 0.63% to 1,045.

In the US personal spending growth slowed from 0.9% in February to 0.3% in March, despite an increase in personal income growth from 0.3% to 0.4% over the same period as consumers reigned in expenditure amid an uncertain economic outlook.

Figures from the Chicago purchasing managers index (PMI) also suggested a weaker growth story, with the reading falling from 62.2 in February to 56.2 in March.

Stateside markets dipped, breaking a four-day high. The Dow Jones Industrial Average declined 0.28% to 13,191, the Standard & Poor's 500 index dropped 0.48% to 1,397, and the Nasdaq Composite index gave up 0.61% to 3,051.

The dollar index, which tracks the greenback’s performance against a basket of major currencies, rose 0.17%.