Morning papers: Investor fears rise over Spain

Spain’s borrowing costs rose dramatically on Monday as the prospect of the country’s regional governments asking for financial rescues amplified fears that Madrid may be forced to request an international sovereign bailout, reports the Financial Times.

The country’s two-year bond yield saw its biggest one-day move since the eurozone debt crisis broke out in early 2010, jumping almost a percentage point at one stage to 6.74 per cent, the highest level since November 1996, before closing at 6.53 per cent.

“Spain is close to losing access to markets entirely,” said John Stopford, a senior fund manager at Investec Asset Management. “It’s not sustainable to borrow at these levels for very long.”

Fears of a default by Sicily played down as focus turns to Italy’s struggling south

The struggles of Italy’s poorer southern cities came under the spotlight yesterday as the government moved to play down fears of a default by Sicily, reports the Independent.

Reports suggested as many as 10 Italian cities, including Naples and the Sicilian capital Palermo, face difficulties managing their finances as bloated public administrations struggle in the face of falling tax revenues.

Number of companies at risk of downgrade doubled in first half of 2012

The number of companies, governments and other institutions at risk of a downgrade doubled in the first half of the year, according to the ratings agency Fitch, reports the Daily Telegraph.

The number of countries hit with a negative outlook from the agency almost doubled to 19.8 per cent in the first half of the year, with the struggling eurozone countries bearing the brunt.

China manufacturing nears growth level

China’s manufacturing sector is clawing its way back towards growth in July, according to a survey that suggests government policies to support the economy are starting to work, reports the Financial Times.

HSBC said its purchasing mangers’ index for July was on track to rise from 48.2 last month to 49.5, which would mark a five-month high - but this still indicates that factory activity is still contracting at a mild pace.

Libor arrests expected in US as SFO has yet to decide what laws have been broken

Prosecutors in the US are poised to make arrests in the Libor-fixing scandal, but the UK’s SFO has not yet decided what offence to press charges under, reports the Daily Mail.

Lawyers for some of the suspects in the US have been told that arrests and criminal charges are imminent, as the investigation into Libor-rigging gathers pace. European regulators are also thought to have identified a ring of traders from at least four banks who conspired to make money by manipulating Libor.

Six convicted of insider trading in City

Six men have been convicted of participating in an insider trading ring that profited from confidential information stolen from the print rooms for two of the City’s biggest investment banks, reports the Financial Times.