LONDON: European equities sank Thursday and the euro hit a new two-year dollar low, as sentiment was jarred by spiking Spanish bond yields, eurozone debt fears and receding hopes of fresh Fed stimulus measures. Madrid stocks slumped and Spanish 10-year bond yields surged back towards the danger level of 7.0-percent, as investor enthusiasim evaporated over the government's vast 65-billion-euro austerity package. The nation's IBEX 35 index of top companies tumbled 2.14 percent to 6,659.7 points in early afternoon deals. Elsewhere in Europe, London's FTSE 100 slid 1.04 percent to 5,606.01 points, Frankfurt's DAX 30 index dropped 1.01 percent to 6,388.48 points and in Paris the CAC 40 fell 0.49 percent to 3,141.73. Rome's FTSE Mib index dipped 1.53 percent at 13,649.62 points, despite news of a successful 7.5-billion-euro ($9.2-billion) Italian government bond sale. And the European single currency slumped to $1.2170 -- which was the lowest level since June 30, 2010. Traders said that Wednesday's Spanish austerity measures had failed to alleviate eurozone debt crisis fears, while the US Federal Reserve appeared unlikely to deliver any further stimulus measures any time soon. "Spanish bonds are under renewed ... pressure as investors doubt the wisdom of the latest fiscal consolidation measures announced by the government," RIA Capital Markets analyst Nick Stamenkovic told AFP. "Indeed, the risk is that the latest budget deficit reduction measures compound the worsening growth outlook and deteriorating fiscal dynamics. Hence the euro is moving to new lows as confidence in the single currency continues to ebb away." Traders were also on the back foot after minutes from the most recent US Federal Reserve June meeting suggested that officials were split on further stimulus measures to aid the American economy. "There was no smoking gun from the latest Fed minutes for an imminent easing. Hence fears of (more stimulus) have eased, supporting the dollar," added Stamenkovic. Wall Street also fell Wednesday after publication of the Fed minutes, with the Dow Jones Industrial Average finishing down 0.38 percent. Several top policymakers urged the central bank to look at new tools to bolster the financial system amid a weak recovery, but the minutes also showed the Fed split on how, when and if to provide more stimulus. Across in Asia, stock markets mostly plunged Thursday on growing fears of a regional slowdown after South Korea unexpectedly cut interest rates and Japan's central bank also failed to announce major new stimulus measures. The news spooked investors who were already nervous a day before China releases key data expected to confirm slowing growth in the world's second-biggest economy. Hong Kong dropped 2.03 percent, Seoul closed down 2.24 percent, Sydney fell 0.70 percent and Tokyo fell 1.48 percent, but Shanghai eked out a gain of 0.46 percent. By cutting its key interest rate 25 basis points to 3.00 percent, South Korea's central bank joined an international drive to ease the impact of the eurozone debt crisis that threatens export-dependent Asian economies. The bank said in a statement the domestic economy was under pressure "due mostly to the increase in euro area risks and the sluggish economies of its major trading partners". The reduction was the first since February 2009, when the key rate hit a record low of 2.00 percent. The European Central Bank and China's central bank cut their rates last week, while Brazil on Wednesday slashed its rate to a record low. But the Bank of Japan took no major new action despite lowering its growth forecast for the fiscal year, to 2.2 from 2.3 percent, surprising some analysts. Following a two-day policy meeting, the bank said it would keep rates steady at zero to 0.1 percent and fine-tuned a 70 trillion yen ($880 billion) asset-purchase programme but the size of the policy tool remained steady.

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