Daily Market Commentaries - IMF Chief Predicts Euro Will Survive

IMF Chief Predicts Euro To Survive

Jan 6 • Market Commentaries • 1916 Views • No Comments

International Monetary Fund Managing Director Christine Lagarde said on Friday at a gathering in Pretoria South Africa that she didn’t think 2012 would be “the end of the euro currency” despite the debt crisis in the euro zone.


Will 2012 be the end of the euro? My answer is, I don’t think so. The currency itself is not likely to vanish or disappear in 2012.

However, Ms. Lagarde did suggest that South Africa and other advanced African economies could suffer the effects of the Eurozone debt crisis unless a solution to the crisis is found soon. “These countries will suffer setbacks if the European crisis is not addressed”, she said after a meeting with S.African Finance Minister Paravin Gordhan.

Fresh data from the ECB shows that overnight deposits at the central bank last night are up to €455.3bn – another new high. They hit a previous record of €453bn on Tuesday night.

European Central Bank Governing Council member Klaas Knot said Germany should support raising the European emergency fund to help end the region’s debt crisis. Separately, Knot said he isn’t worried about the depreciation of the euro against the U.S. dollar;

It’s part of the normal exchange rate fluctuation, even in historic perspective the euro is remarkably stable even compared to other currencies. The most important obstacle lies in Germany, not in the Netherlands. I think that more money is needed and we will use the time to convince our German colleagues. We haven’t moved in the right direction and it’s also clear that measures needed are happening too slowly and too limited in size. A significant acceleration in decision-making is needed.

European stocks rose for the first time in three days and copper before a U.S. jobs report that may show hiring increased by the most since September. The euro traded near a 15-month low versus the dollar.

The euro headed for a fifth weekly loss versus the dollar before a report that economists said will show consumer confidence declined in the region, making it harder for European leaders to contain their debt crisis.

The 17-nation currency was about 0.1 percent from the weakest in 11 years versus the yen as Spain and Italy prepare to sell debt next week after France’s borrowing costs rose at an auction yesterday. The dollar headed for weekly gains versus the yen and euro before a U.S. report forecast to show employers added the most jobs in three months in December. The Dollar Index reached a one-year high.

Payrolls probably climbed by 155,000 workers after rising 120,000 the previous month, according to the median forecast of 84 economists surveyed by Bloomberg News. The unemployment rate rose after dropping in November to the lowest level in more than two years, the report may also show. The Labor Department’s report is due at 8:30 a.m. in Washington, 13:30 GMT. Bloomberg survey estimates ranged from increases of 80,000 to 220,000. The jobless rate may have climbed to 8.7 percent in December from 8.6 percent the prior month, which was the lowest since March 2009, according to the survey median. Employers may have added 1.45 million workers last year through November. The increase shows the economy has made little headway in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009.

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, rose 0.1 percent to 80.970 after reaching 81.062, the highest since Jan. 11, 2011.

 

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Market Overview
The euro was little changed at $1.2787 at 8:24 a.m. in London having lost 1.5 percent this week, the longest stretch of declines since February 2010. It earlier fell to $1.2764, the lowest since September 2010. The euro was also little changed at 98.53 yen after falling to 98.48 yen yesterday, its weakest since December 2000. The dollar gained 0.1 percent to 77.16 yen, having risen 0.3 percent this week.

The Stoxx Europe 600 Index climbed 0.3 percent as of 8:00 a.m. in London. Standard & Poor’s 500 Index futures lost 0.1 percent. The Shanghai Composite Index gained 0.7 percent, paring a ninth weekly decline and the euro bought $1.2777.

Oil had initially declined for a second day in New York, trimming a weekly gain, as increasing U.S. crude inventories and signs that Europe’s sovereign debt crisis is worsening pointed to faltering demand for fuel. Futures slid as much as 0.5 percent after dropping 1.4 percent yesterday. U.S. crude supplies climbed 2.2 million barrels last week, the Energy Department said. Crude for February delivery slid as much as 51 cents to $101.30 a barrel in electronic trading on the New York Mercantile Exchange. It was at $101.54 at 5:11 p.m. Sydney time. The contract yesterday fell 1.4 percent to $101.81, the lowest close since Dec. 30. Prices gained 8.2 percent in 2011.

Brent oil for February settlement initially fell by 0.2 percent to $112.49 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $10.95, compared with $10.93 yesterday and a record of $27.88 on Oct. 14.

Market snapshot at 9:30 am GMT (UK) time

In the Asian session both the Nikkei and Hang Seng suffered falls whilst the CSI closed up. The Nikkei closed down 1.16%, the Hang Seng closed down 1.17% and the CSI closed up 0.62%. the ASX 200 closed down 0.83%. European bourses are up in the morning session, the STOXX 50 is up 0.65%, the UK FTSE is up 0.42%, the CAC is up 0.87% and the DAX is up 0.69%. The SPX daily equity index future is currently up 0.08%. Brent crude is now up $0.53 a barrel after initial falls and Comex gold is up $3.94 at $1624.00.

Economic calendar releases that may affect the afternoon session sentiment

13:30 US – Change in Non-farm Payrolls December
13:30 US – Unemployment Rate December
13:30 US – Average Hourly Earnings December
13:30 US – Average Weekly Hours December

All eyes are on the jobs and unemployment figures from the USA. A Bloomberg survey of analysts yielded a median estimate of +150,000, compared to a previous figure of +120,000. The estimated median figure from a Bloomberg survey of analysts was a rate of 8.70%, compared with last month’s figure of 8.60%.

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