Spanish bond slump sends sharemarkets tumbling

Spanish bonds tanked, hitting record interest rate levels and sending world sharemarkets tumbling.

Investors fear Spain is at grave risk of needing a bailout to shore up its troubled banking sector and government finances.

The 10-year bond yield shot up a fifth of a percentage point to 7.49% after a similar rise on Friday,

The benchmark share index tumbled more than 5% before a ban was imposed on short-selling of all stocks for three months. The index ended 1.1% down.

All European markets also fell. Greece slumped the worst at 7.1%.

The Stoxx Europe 600 index tumbled 2.5% to close at 251.75, compounding a 1.4% loss on Friday.

The UK's FTSE 100 fell 2.1% to 5533.87, Germany's DAX dropped 3.2% to 6419.33, and France's CAC-40 closed 2.9% lower at 3101.53.

On Wall Street, the Dow Jones Industrial Average was down 101.11 points, or 0.8%, at 12,721.46 at the close (8am NZ time). Earlier, it plunged 239 points.

The S&P 500 index slid 0.9% to 1350.52 and the Nasdaq Composite Index skidded 1.2% to 2890.15.

In China, the Shanghai Composite fell 1.3% to its lowest close since March 2009.

Other Asian markets also plummeted. Hong Kong's Hang Seng Index dropped to 19,053.47, its second-largest drop this year.

Korea's Kospi ended down 1.8% at 1789.44, Japan's Nikkei Composite dropped 1.9% to a six-week low and Australia's S&P ASX 200 closed 1.7% lower at 4128.90, giving up a large chunk of the 2.8% gain that it made last week.

Oil for August delivery settled 4.2% lower at $US88.14 a barrel in New York. Brent crude traded down $US3.54 at $US103.29.

Gold was down $US6.40 at $US1576.40.

Currencies: Euro at two-year low
The euro slipped below $US1.21 to a two-year low against the US dollar before recovering somewhat.

It is now trading at $US1.2136 from $US1.2158 late on Friday. The euro has depreciated nearly 2% against the dollar from late Thursday.

The euro also hit multiyear lows against the yen, the Australian and Canadian dollars, the UK pound and the Norwegian krone.

Against the yen, the euro was at ¥95.172 from ¥95.42 late on Friday, after falling as low as ¥94.24 earlier, its lowest since November 2000.

The UK pound bought $US1.5517 from $US1.5621, while the dollar fetched 0.9889 Swiss franc from 0.9879 franc.