2012.05.24 10:25:40 MARKET TALK: EUR/USD Has Key Support At 1.2530 -Commerzbank

LONDON (Dow Jones)--The cost of protecting Italian government debt against default rose Wednesday, alongside most other European countries, after an inconclusive European Union summit. At around 0940 GMT, Italy's five-year CDS spread was at 516 basis points, according to data-provider Markit. This was just 11 basis points wider from the close Wednesday and far off from record levels of 550-560 basis points reached earlier in the week. CDS are derivatives that function like a default insurance contract for debt. If a borrower defaults, sellers compensate buyers. Spain's five-year CDS spread was also off the record highs the sovereign has been hitting this month, with the spread on Spain's CDS four basis points wider at 544 basis points. Other European countries also widened. Germany once again rose to 101 basis points, widening by two basis points. France widened by five basis points to 223 basis points. Dampening market tone were data that show that the German economy may face a slow down in the future, limiting its ability to prop up the rest of the Europe, despite German data showing Thursday that the economy grew 0.5% in the first quarter of this year. While inconclusive and vague, European leaders at Wednesday's summit said they were committed to promote growth in the region through increasing spending and a strengthening of job creation. However, policy makers highlighted the importance of being ready for the worst-case scenario in the case of a Greek exit and the effects of contagion, but no concrete answers were given. Also up for discussion was a cross-border bank deposit insurance scheme and euro-zone bonds. No agreement was reached on the latter, with some leaders calling the proposed bond scheme counter-productive. -By Sarka Halas, Dow Jones Newswires; +44 (0) 207 842 9236; Sarka.Halasova@dowjones.com (END) Dow Jones Newswires May 24, 2012 04:27 ET (08:27 GMT)