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Dec 15 • Market Commentaries • 2664 Views • Comments Off on Markets Stable For Now

The euro steadied slightly in the morning session hovering at 13000 just off new 11-month lows on Thursday, with investors’ collective eyes fixed on the Swiss National Bank (SNB) meeting to consider its campaign of currency intervention, while a Spanish bond auction will offer more signs on the depth of Europe’s debt crisis.

The prospect of more sovereign ratings downgrades and a gloomy outlook for the euro zone economy after two-years of turmoil has depressed demand for European stocks and much of the region’s debt, prompting safe-haven buying of the U.S. dollar, Treasuries and German government bonds.

The Swiss central bank is not expected to alter rates or intervene further, however, some investors are worried that the recent fall in the euro could prompt it to raise the permissible exchange rate with the franc. The SNB set a cap of 1.20 francs to the euro on September 6 to try to shield the economy from recession, after investors seeking a safe-haven from the euro zone debt turmoil almost pushed the unit to parity against the single currency in August. There is no sign of the surge in inflation which the intervention policy risks, rather Switzerland is increasingly threatened by a downward deflationary spiral.

European stocks rose moderately in the morning session after falling the most in three weeks yesterday, Spanish government bonds advanced as the nation sold debt. Asian stocks slumped on reports that showed economic growth in the region is slowing.

The Stoxx Europe 600 Index had climbed by 0.3 percent at 10:00 a.m. London time after losing 2.1 percent yesterday. Standard & Poor’s 500 Index futures advanced 0.6 percent. Spanish five-year yields fell 13 basis points. The euro was little changed at $1.2970, while the Swiss franc appreciated against all its major peers after the central bank maintained its currency ceiling. Oil, gasoline and aluminium led commodities higher. China’s yuan reached a two-week low against the dollar.

Spain sold 6 billion euros ($7.8 billion) of bonds maturing in 2016, 2020, and 2021 today, exceeding a 3.5 billion-euro target. European services and manufacturing output contracted for a fourth month in December. The region’s economy is likely to slip back into a recession and plans to end the debt crisis haven’t eliminated the risk of a breakup, Ernst & Young LLP said. Foreign direct investment in China fell for the first time since 2009.

The euro was little changed after falling to $1.2946 yesterday, its lowest level since Jan. 11. It weakened 0.2 percent to 101.14 yen. The franc gained the most against the 17- nation currency in seven weeks after Swiss National Bank policy makers, led by Philipp Hildebrand, kept the minimum exchange rate at 1.20 francs per euro at a meeting in Zurich.

The yuan dropped for a third day after the People’s Bank of China set its daily fixing 0.04 percent weaker at 6.3421 per dollar. The currency, which is allowed to fluctuate as much as 0.5 percent on either side of the central bank’s reference rate, fell 0.05 percent to 6.3735 in Shanghai, the weakest level since Nov. 30, according to the China Foreign Exchange Trade System.

 

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Market snapshot at 10.40 am GMT (UK time)

Asia Pacific markets picked up the bearish relay baton from the European and USA trading sessions on Wednesday and fell sharply in the early morning’s session. The Nikkei closed down 1.67%, the Hang Seng closed down 1.79% and the CSI down 2.36%. The ASX 200 closed down 1.21%. European indices are up in the morning session; the STOXX 50 is up 0.21%, the UK FTSE is up 0.25%, the CAC is up 0.2% and the DAX is up 0.52%. Brent crude has partly recovered from its spectacular collapse of yesterday up $0.69 per barrel. Gold has also recovered moderately up 0.93% $14.6 an ounce at 1488.65.

Economic calendar events that could affect the sentiment in the afternoon session

13:30 US – PPI November
13:30 US – Current Account Q3
13:30 US – Empire State Manufacturing Index December
13:30 US – Initial and Continuing Jobless Claims Weekly
14:15 US – Industrial Production November
14:15 US – Capacity Utilisation November
15:00 US – Philadelphia Fed December

The stand out data releases today should be the Jobless numbers in the USA and the Philly Fed report.

A Bloomberg survey forecasts initial jobless claims of 390,000, compared with the previous figure released which was 381,000. A similar survey predicts 3,663,000 for continuing claims, compared with the previous figure of 3,583,000. A Bloomberg survey of economists gave a median forecast of 5.0 for Philly Fed numbers. Last month the index came in at 3.6.

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