Greek Stocks Leap 10%

Greek stocks rallied sharply ahead of Parliamentary elections scheduled for the weekend, while most European markets were weighed down by slumping technology shares and worries over a fresh downgrade for Spain.

The benchmark Stoxx 600 index closed down 0.3% to 241.84. Greece's ASE index had its biggest percentage gain this year, climbing 10% at 550.10. Spain's IBEX 35 increased 1.2% to 6696.00 and Italy's FTSE MIB gained 1.5% to 13084.62.

Elsewhere, the U.K.'s FTSE 100 index dropped 0.3% to 5467.05, led lower by the heavily weighted miners, France's CAC-40 ticked up 0.1% to 3032.45 and Germany's DAX closed 0.2% lower at 6138.61.

Pressure remained on European bond yields after Moody's Investors Service's downgraded Spain's credit rating late Wednesday by three notches to just one notch above junk status. Spain's 10-year bonds rose to a euro-area record high of 6.96%, according to Tradeweb. Greece, Ireland and Portugal were previously forced to request bailouts when their bond yields rose above 7%.

The Italian government's borrowing costs soared at a bond auction over previous sales, although the government sold the maximum targeted €4.5 billion ($5.65 billion) amid decent demand. In the secondary market, yields on 10-year Italian government bonds rose to 6.11%, according to Tradeweb.

Yields on Spain's 10-year bonds were at 6.93% in late trading in New York from 6.76% Wednesday. Italy's 10-year bonds yielded 6.13% from 6.23% Wednesday.

"The proposed bailout of Spain's banks not only failed to provide a firewall for Spain against further contagion but rather made matters far worse," Rabobank said in a report.

Despite the investor concerns over the euro zone, Greek stocks saw sharp gains following unofficial polling data that reportedly pointed to a victory for the pro-austerity party New Democracy. Sunday's election is seen as a close race between the antiausterity party Syriza and the New Democracy party, which wants to largely adhere to bailout pledges. Public opinion polls can't be openly released as Greek law forbids their publication in the last two weeks of campaigning.

The gains were led by the country's banks. Alpha Bank shares soared 29.8%, EFG Eurobank Ergasias increased 24.6% and National Bank of Greece shot up 26%.

Investors were squaring positions ahead of the Greek election to avoid being caught on the wrong side, said John Ventre, fund manager at Skandia Investment Group.

The chief economist at Saxo Bank, Steen Jakobsen, said that the poll excitement further spilled over into Spanish and Italian stock markets, where indexes erased earlier losses.

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