Spanish stocks dropped after elections on Sunday left no clear winner, signalling weeks of political instability ahead.

Barclays is to sell the bulk of its operations in Spain after agreeing a deal worth £630m with one of the country’s biggest banks.

Bad loans as a proportion of total lending in Spain rose to a record in June as the country’s weak economy spurred a jump in missed payments.

Santander plans to invest in Spain’s so-called “bad bank” in a sign that healthy domestic lenders are willing to support the entity created to clean up the aftermath of a 2008 property crash.

Spain will force banks to increase provisions against real estate loans by about €30bn and will hire two auditors to value lenders’ assets in a fourth attempt to clean up the industry.