by Calculated Risk on 5/25/2010 08:12:00 AM

From the NY Times: Concerns Over North Korea Shake Markets and Euro

From the WSJ: Europe's Banks Hit by Rising Loan Costs

On Monday, the London interbank offered rate, or Libor—the rate at which banks lend money to each other, and thus a vital sign of their mutual trust—rose to its highest level for the three-month dollar rate since last July. While the current Libor, at just above 0.5%, is far below the sky-high levels of 4.81875% reached at the height of the financial crisis in 2008, it is still a significant jump from 0.25% as recently as March.

But Libor's jump is more pronounced at European banks. On Monday, German state-controlled lender WestLB AG said it cost 0.565% to borrow dollars for three months, up from 0.38% a month earlier. U.S.

The three month Libor has moved even higher, and is now at 0.54.

The TED spread is up to 38.61 (from 34.47). This is the difference between the interbank rate for three month loans and the three month Treasury. The peak was 463 on Oct 10th -the spread is still low, but has been steadily rising.

The European markets are off sharply. The German DAX off 2.76%, the FTSE 100 off 2.5%.

From CNBC: Pre-Market Data shows the S&P 500 off about 25 or over 2.0%. Dow futures are off almost 200 points.

The Euro is down to 1.22 dollars.