LONDON, May 30 (Reuters) - European shares traded lower on Wednesday afternoon as renewed concerns Greece may leave the euro zone overshadowed relief at a European Commission appeal for a banking union in the region.
Greece’s radical leftist SYRIZA party has taken the lead over the pro-bailout conservatives ahead of elections next month that may determine whether the debt-laden country stays in the euro, a poll showed on Wednesday.
The news sent shares in European banks back into the red after a short-lived rebound, which had been fuelled by a European Commission report saying the euro zone should move towards a banking union and consider euro bonds.
At 1305 GMT, the FTSEurofirst 300 index of top European shares was down 1.1 percent at 980.39 points.
It mirrored moves on the debt market, where the yield premium investors demand to hold 10-year Spanish bonds rather than German benchmarks rose to 531 basis points, while Spanish yields rose to 6.6 percent. Funding costs are seen as unsustainable beyond 7 percent.
“These are dangerous signs as, in the past, crossing such levels led Portugal, Greece and Ireland to seek international bailout,” Koen De Leus, strategist at KBC Securities, said.
“If things don’t improve and the European Central Bank doesn’t intervene in the bond market, the fear of a collapse of the euro zone will rise and stocks could easily fall 10 percent in a couple of weeks.”
European basic resources index, down 2.6 percent, was the top faller, mirroring a sharp decline in key base metals prices, on indications that China may take a cautious approach in stimulating its economy.