News - 2012 06

EU leaders have agreed to ease repayment rules for emergency loans to Spanish banks and potential help for Italy, with concessions from Merkel and Germany.

Market volumes remain somewhat lighter than average but there are a few fundamental and technical concerns which have come to light today.

German finance minister urges Eurozone members to use the EFSF to buy bonds and use all tools to facilitate such, Euro reclaims 1.245 level and Equities rally off lows

Italian debt auction update, 2.5bn Euros of 5 year debt sold at 5.84% and 2.923bn Euros of 10 year at 6.19%, highest such yields in 6 months. Risk off remains in play with Euro breaking the 1.245 level, trading towards 1.24 and European Equities trading lower again. Next key datapoint being US Q1 GDP at 1.30pm BST (consensus 1.9%).

In bonds, Spanish debt continues to be sold with the 10 year yield trading above 7%. US and German bonds are well bid. Watch out for the results of 2 reasonable sized auctions out of Italy for 5 and 10 year debt.

US futures were marginally higher first thing, and coupled with the broad strength out of Asia marked the European Bourses higher on the open, mainly on optimism that the EU summit over the next couple of days would bring some credible plan to solve the Eurozone crisis.

Earlier this morning in Asian trade the Euro firmed up against the Dollar to trade above 1.25, and with it Asian equity markets were broadly firmer. One exception to that was the Shanghai composite which closed down almost 1%, and more importantly is now down for the year.

Not a great deal of excitement to report from Tuesday, another marginal recent low for EUR/USD noted, while USD/JPY continued to slip back from its recent highs.

Risk aversion seeping back in Asia afternoon, after more stable morning markets despite the lower US stocks, as Spain downgraded 28 banks, Cyprus bailout request.

US indices fell sharply on Monday ahead of the European Summit. The decline was led by the Semiconductors & Semiconductor Equipment, Diversified Financials and Technology Hardware & Equipment sectors.

US indices bounced Friday driven by gains in the banks, software & services and semiconductors sectors. The S&P 500 (1335.02) closed above its 20d moving average (1320.5 - flat slope) and below its 50d moving average (1344.9 - flat slope).

Both Greek PM, Finmin will be absent due to health problems. EUR at 1.2536, eye break of key 1.2500 - speculation of options interest, and Asian, sovereign interest there. Stop-loss on break. Eye Swiss supranational, sovereign, Asian, Dutch, European selling interest to 1.2600. More stops below 1.2450.

Spain on Monday will formally ask its Eurozone partners for up to €100bn to recapitalise its banks, opening a week of diplomatic activity that will culminate in a EU summit on Thursday night to address the region's damaging sovereign debt crisis.

Economic data continue to disappoint with the European markets waking up to falling Asian session with the commodities entering a bear market due to a stronger US dollar and continued weak economic news.