* Spanish stocks, bonds fall after inconclusive vote
* Euro stocks rise on Asia, Wall Street to open higher
By Jamie McGeever
LONDON, Dec 21 (Reuters) - Brent crude oil extended a slide
on Monday to its lowest level in more than 11 years while
investors dumped Spanish bonds and stocks after an inconclusive
general election set the scene for potentially weeks of
political stalemate.
Spain's Ibex share index slid to a near three-month low but
European stocks overall moved higher in early trade, taking
their cue instead from equity gains in Asia.
Brent fell 2 percent to a low of $36.06 a barrel LCOc1 ,
its lowest since July 2004. It has lost a fifth of its value in
the last month and a third since early October.
"What is pushing the price lower is nothing new. It's all
about the same ingredients: oversupply and weak consumption,"
said Naeem Islam, chief market analyst at AvaTrade.
Crude's persistent weakness has exerted heavy downward
pressure on oil exporting countries' currencies, foreign
exchange reserves and government budgets.
The latest to feel the heat was Azerbaijan, which on Monday
floated its currency, the manat AZN= . The currency plunged 48
percent to 1.55 per dollar. ID:nL8N14A0BU
Europe's FTSEuroFirst index of leading 300 shares was up 0.7
percent at 1,429 points .FTEU3 , with Germany's DAX .GDAXI up
1.6 percent and Britain's FTSE 100 .FTSE and France's CAC40
.FCHI both up 0.8 percent.
Earlier in Asia, MSCI's broadest index of Asia-Pacific
shares outside Japan .MIAPJ0000PUS rose 0.3 percent, as
investors bid up modestly priced Chinese blue-chips. China's
CSI300 index .CSI300 surged 2.6 percent, but Japan's Nikkei
225 fell 0.4 percent .N225 .
SPAIN LAGS
Spain's IBEX, however, was down 2.2 percent, hitting its
lowest since Sept. 29 after the fragmented nature of Sunday's
election vote cast uncertainty over the country's reform
programme and broader economy.
Prime Minister Mariano Rajoy's conservative Popular Party
won more seats than any other party but fell well short of a
majority. Left-wing parties failed to win a clear mandate to
govern either, and talks to form a coalition government could
drag on for weeks. ID:nL8N14906K
"A centre-right coalition cannot reach a majority... (and
this) injects even greater political uncertainty. This is
unlikely to be a positive development for markets," Marco
Stringa, senior economist at Deutsche Bank (DE:DBKGn), said in a note.
"Overall the main risk remains political impasse due to the
unprecedentedly fragmented parliament."
Spain's 10-year government bond yield rose almost 20 basis
points to 1.89 percent ES10YT=RR , its highest in over a month.
The spread over the benchmark German 10-year Bund yield widened
to 130 basis points, also the highest in over a month.
In currency markets, the dollar inched higher in light trade
to 98.775 against a basket of currencies .DXY , and the euro
slipped 0.1 percent to $1.0850 EUR= . The dollar rose 0.2
percent against the yen to 121.42 yen JPY= .
U.S. stock futures pointed to a rise of around 1 percent
ESc1 at the open on Wall Street, rebounding from a volatile
end to last week with the expiration of stock and index options
contracts generating heavy trading volume.
The Dow .DJI ended Friday down 2.1 percent, while the S&P
500 .SPX lost 1.78 percent and the Nasdaq .IXIC 1.59
percent. All three fell on the week.
Monday's expected recovery on Wall Street put Treasuries
under pressure.
Longer-dated Treasuries have been particularly popular as
investors wager the Federal Reserve is well ahead of the curve
on inflation after last week's rate hike. But on Monday the
10-year yield was up 2 basis points US10YT=RR .
That steepened the yield curve. The gap between two-year
US2YT=RR and 10-year paper had shrunk to 122 basis points last
week, the smallest since early February, but on Monday was back
out to around 125 bps.
A flatter curve is often an indication that economic growth
is slowing, as investors price in the tightening effects of
higher short-term rates on longer-term activity and inflation.
Gold continued to recoup some of last week's initial slide
following the first U.S. interest rate hike since 2006. It was
up 0.6 percent at $1,072 an ounce XAU= , building on the 1.4
percent gain of the previous session.