Spanish bank concerns keep euro near two-year low

29/05/2012 - 8:43

LONDON (Reuters) - The euro hovered near a two-year low on Tuesday with investors worrying about Spain's banking problems, the outcome of the Greek elections and the health of the global economy.

Speculation that China may soon launch a stimulus programme to boost flagging growth and a view that U.S. data later in the week will show the recovery in the world's top economy remains on track helped support equities and commodities.

"Equities are likely to be stuck on the ?risk on/risk off' merry-go-round until we get some more stability and clarity around the goings-on in Europe," Cameron Peacock, analyst at IG Markets, said.

The euro stood at $1.2555, near last week's two-year low of $1.2495.

The FTSEurofirst 300 index , which has fallen 5.6 percent so far in May, opened 0.5 percent higher at 988.79 points led by a solid gain in Germany's DAX index .

Mining stocks also rose 2 percent on optimism about a potential uptick in demand from any Chinese stimulus programme while global shares, as measured by the MSCI world equity index extended their recovery from last week's sharp selloff rising 0.25 percent.

In the debt markets, safe-haven German Bund futures were within sight of record highs a day after Spain's 10-year bond yields rose to 6.53 percent, their highest since November 2011.

(Reporting by Richard Hubbard; editing by Anna Willard)