The major market sell off experienced yesterday ‘across the board’ was due to the ECB revealing that it’s balance sheet had swelled to record highs as a consequence of its successful loan tender in the week preceding Xmas. As the deadline looms for bids in the Italian debt auction the bond markets reaction is bearish, the yield on Italy’s 10-year bonds has once again moved past the significant 7% mark.
The ECB’s balance sheet soared to a record 2.73 trillion euros after it lent financial institutions more money last week in order to keep the credit flowing to the Eurozone economy during the debt crisis, the Frankfurt-based bank said yesterday. The euro slid to its lowest level since January 2011 versus the dollar, curbing investor demand for commodities priced in the U.S. currency.
The euro has now weakened to a decade low versus the yen before Italy auctions as much as 8.5 billion euros of debt. European shares and U.S. equity-index futures are flat or have risen marginally. The 17-nation euro fell as much as 0.5 percent versus the yen before trading at 100.50 yen as of 8:03 a.m. in London. German two-year note yields fell one basis point, approaching a record low. The Stoxx Europe 600 Index rose 0.3 percent, while Standard & Poor’s 500 Index futures rose 0.4 percent after the gauge sank 1.3 percent yesterday. Gold futures retreated for a sixth day, set for the longest slump since 2009.
Italian 10-year yields rose three basis points to 7.03 percent. They were little changed yesterday after the Treasury sold 9 billion euros of 179-day bills at a rate of 3.251 percent, down from 6.504 percent at the previous auction on Nov. 25.
Gold for February delivery fell as much as 1.2 percent to $1,545 an ounce before trading at $1,551.50. It is set for the longest losing streak since March 2009. Silver for immediate delivery slid 0.5 percent to $26.9625 an ounce, a fourth day of losses. Three-month copper retreated 0.8 percent to $7,402 a metric ton in London, extending yesterday’s 2.3 percent drop.
Oil rose 0.3 percent to $99.64 a barrel in New York, following a 2 percent slide yesterday. U.S. inventories increased 9.57 million barrels last week, according to the industry-funded American Petroleum Institute. An Energy Department report today was forecast to show supplies fell 2.5 million in a Bloomberg News survey.
Market snapshot at 9:45 am GMT (UK time)
The main Asian/Pacific markets fell in overnight early trading with the exception of the CSI which closed up 0.15%. the Nikkei closed down 0.29%, the Hang Seng closed down 0.65% and the ASX 200 closed down 0.43%. The Sensex 30 index, the main Indian gauge closed down 1.31%, down 22.92% year on year.
European indices are flat or marginally down in the morning session; the STOXX 50 is down 0. 10%, the UK FTSE is down 0.16%, the CAC is down 0.11% and the DAX is up 0.23%.
Economic calendar releases that may affect sentiment in the afternoon session
There are three crucial data releases this afternoon which could impact the afternoon session significantly.
13:30 US – Initial & Continuing Jobless Claims Weekly
14:45 US – Chicago PMI December
15:00 US – Pending Home Sales November
A Bloomberg survey forecasts initial jobless claims of 375,000, compared with the previous estimate of 380,000. A similar survey predicts 3,600,000 for continuing claims, the same as the previous figure.
For PMI a Bloomberg survey of analysts yielded a median estimate of 61.0, compared to the prior reading of 62.6.
For pending home sales a Bloomberg survey of analysts yielded a median estimate of +1.50% month-on-month, compared with the previous figure of +10.40%.