Shares plummet as Spanish spreads hit record high

European equity markets have slumped in afternoon trading as Spanish 10-year bond yields approach record highs once again.

Yields on Spanish 10-year debt rose to 7.25%, close to the euro-era record of 7.3%, as thin trading weighed heavily on risk assets. The spread between Spanish and German 10-year debt passed 600bps for the first time to reach 607bps.

Those moves came after yesterday's Spanish debt auction saw borrowing costs soar for two, five and seven-year debt.

Today's bond market action has seen so-called safe haven bonds including US treasuries, German bunds and UK gilts resume their upwards momentum.

Equities, by contrast, were under severe pressure across the continent, erasing the mildly positive moves seen in recent days.

Spain's Ibex index dropped some 5.1% or 342 points, to stand at 6,200, with Italy's MIB index falling 4% to 13,125.

As European equities sold-off the FTSE 100 extended losses to stand down 1% at 5,659 shortly before the open of US markets.

Futures suggested US stocks would also pare some of this week's gains, having touched a two-month high yesterday, with the S&P 500 set to open down 0.6%.