Spanish stock market down 1%, risk premium exceeds 400 points

The yield on Spanish 10-year bonds struck a euro-era high of 6.45% Tuesday amid mounting evidence of a sluggish US economy.

Shortly after trading began, the spread, or difference between the yield on the Spanish bonds and the benchmark German equivalent, reached 404 basis points, its highest since the euro was introduced. It closed on Monday at 375 points.

Trading on Madrid''s stock exchange was down 0.4% after losing 3.4% Monday.

Investors on Monday were spooked by a surprise decline in a closely-watched US manufacturing survey, that stoked fears that the economic recovery was coming to a standstill.

In recent months investors have been demanding higher rates to lend money to Spain, raising fears that it could be next in Europe to require a rescue package after Greece, Ireland and Portugal.

Spain is struggling to recover from nearly two years of recession triggered in large part by the collapse of an overheated real estate sector. The jobless rate stands at nearly 21%.

Earlier Tuesday, the Labor Ministry said the number of people filing claims for unemployment benefits fell by 42,059 in July as the summer tourism season provided new jobs.

It was the fourth straight monthly decline and left the number receiving benefits at 4.08 million, down from 4.12 million the previous month.

But the figure was still up by 4.4% when compared to July 2010.

The Labor Ministry said much of last month''s decline in jobless claims came in the services sector.