I hate to rain on President Obama's re-election party, but there is still the little matter of euro debt that could derail his pitiful recovery and send us reeling back into a recession.

On the chopping block is Spain. As Reuters reports, the perception is growing that the right of center Spanish government will be unable to make the cuts necessary to get it's fiscal house back to sane levels. This doubt has caused Spanish bonds that finance its debt to soar above the danger level of 6% and start speculation that they are going to need a bailout before long.

Signs of slowing global growth also undermined sentiment in commodity markets while European equity markets were mostly in positive territory after sharp falls last week.

Spanish stocks were lower, however, reflecting concerns about the country's ability to finance its deficit and debt with borrowing costs on the rise.

"We're back in full crisis mode," Rabobank strategist Lyn Graham-Taylor said.

"It is looking more and more likely that Spain is going to have some form of a bailout."

Mixed signals from the European Central Bank (ECB) over its willingness to help the market by restarting a special bond buying program and news Spanish banks have been heavy borrowers of cheap ECB funds also undermined confidence.

Spain's 10-year bonds were up 16 basis points at 6.15 percent, five-year yields topped 5 percent, while two-year yields spiked to 3.70 percent, all highs for this year.

Six percent was last reached in December and is psychologically important for markets. The rise typically accelerates after that level, putting yields on course for 7 percent beyond which debt costs are seen as unsustainable.

The cost of insuring Spanish debt against default also hit record highs in early trading. Spain will auction 12- and 18-month Treasury bills and two-year and 10-year bonds on Thursday.

Contagion fears also pushed Italian 10-year bonds higher.

The euro fell below a key level at $1.30 on the concerns about Spain to hit $1.2995, its lowest in two months, before recovering to be down 0.4 percent at $1.3010.

The ability of the European Central Bank to bail out nations with big economies like Spain has been increased with several new programs in place that will allow the ECB to fund a bailout up to a trillion dollars.

But if two or three nations go at once or very close together, default for one or two of them is likely.

Italy's bond yields rose as well, putting pressure on the Italian government and banks. The two nations are linked - as are Italy and France, whose banks are heavily exposed to Italian debt.

The dominoes are lining up and it won't take much to set them falling.