Whilst investors are winding down for the year-end and trading volumes are set to dwindle, the threat of mass credit ratings downgrades for the euro zone countries still stalks the market. However, the European Central Bank lending programme yesterday eased fears about an immediate ‘credit crunch’, although it’s not regarded as resolving the huge indebtedness of some euro zone countries.
The euro was higher at around $1.3110, above an 11-month low of $1.2860, with traders seeing major support around $1.3000, the December 14 low. The euro briefly touched a one-week high near $1.32 on Wednesday.
Greece’s creditors are resisting pressure from the International Monetary Fund to accept bigger losses on holdings of the indebted nation’s government bonds. The IMF is pushing for creditors to accept greater losses in order to reduce Greece’s debt-to-gross domestic product ratio to 120 percent by 2020, a key element of the Oct. 27th agreement by European Union leaders.
Greece’s debt will balloon to almost twice the size of its economy next year without a write-off accord with investors. The IMF and EU leaders want to bring the country’s debt down to a sustainable level. As part of Greece’s 130 billion-euro second bailout, investors would take a 50 percent hit on the nominal value of 206 billion euros of privately owned debt. Exchanging bonds for securities with a 5 percent coupon would leave investors with a 65 percent total loss in the net present value of their holdings of Greek government debt.
Market Overview
The Stoxx Europe 600 Index rose 0.9 percent as of 8:00 a.m. in London. Standard & Poor’s 500 Index futures added 0.3 percent, reversing an earlier drop of 0.3 percent. The MSCI Asia Pacific Index lost 0.5 percent, retreating from a one-week high. Oil climbed 0.6 percent in New York, while copper advanced a third day. The Dollar Index declined 0.3 percent.
The dollar weakened 0.4 percent to $1.3095 versus the euro, after rising yesterday when European banks took larger than forecast loans from the central bank. The borrowings equal about 63 percent of the European bank debt maturing in 2012, according to Goldman Sachs Group Inc.
The euro gained 0.4 percent against the dollar to $1.3102 as of 8:28 a.m. London time. It fell to $1.2946 on Dec. 14, the weakest level since Jan. 11. The 17-nation euro bought 102.23 yen from 101.86 yesterday. The dollar was little changed at 78.05 yen. Sweden’s krona gained 0.6 percent to 6.8545 per dollar, after gaining as much as 1.2 percent yesterday to 6.7846, the strongest level since Dec. 12.
Crude for February delivery climbed as much as 0.6 percent to $99.28 a barrel on the New York Mercantile Exchange, extending a three day advance. Figures from the Energy Department yesterday showed U.S. stockpiles declined 10.6 million barrels last week to 323.6 million, the largest drop since Feb. 16, 2001. They were forecast to decrease 2.13 million barrels, according to a Bloomberg News survey. Imports slipped to a three-year low.
Market snapshot at 9:15 am GMT (UK time)
Asia Pacific markets enjoyed mixed fortunes in overnight/early morning trading, the Nikkei closed down 0.77%, the Hang Seng closed down 0.21% and the CSI closed up 0.10%. the ASX 200 closed down 1.1% currently down 14.39% year on year. European markets have so far railed in this morning’s session; the STOXX 50 is up 0.98%, the UK FTSE is up 0.87%, the CAC is up 0.96% and the DAX is up 0.93%. The ASX (Athens exchange) is down 0.49% and down 54.5% year on year. The main Italian index, the MIB is currently up 1.12% but down 27.63% year on year. The SPX equity index future is up 0.36% whilst ICE Brent crude is up 0.08% at $107.8 a barrel. Comex gold is up $1.80 an ounce.
The pound rose for a third day versus the dollar before a report economists said will confirm that the U.K. economy expanded at a faster pace in the third quarter. The pound appreciated 0.3 percent to $1.5719 at 8:40 a.m. London time. It also climbed 0.3 percent versus the yen, to 122.72, and weakened 0.2 percent to 83.36 pence per euro, after strengthening yesterday to 83.03 pence, the strongest level since Jan. 13.
Sterling has advanced 1 percent in 2011 against nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The dollar is 0.7 percent stronger and the euro has lost 1.2 percent, the indexes show.
Economic calendar releases that may shift sentiment in the afternoon session
13:30 US – GDP Annualised Q3
13:30 US – Core PCE (YoY) Q3
13:30 US – Initial & Continuing Jobless Claims Weekly
14:55 US – Michigan Consumer Sentiment Dec
15.00 US – Leading Indicators November
15:00 US – House Price Index October
There is a raft of information due from the USA this afternoon. The ‘pick’ is arguably; jobs data, the Michigan survey and the house price index.
A Bloomberg survey forecasts initial jobless claims of 380,000, compared with the previous figure released which was 366,000. A similar survey predicts 3,600,000 for continuing claims, compared with the previous figure of 3,603,000.
Economists surveyed by Bloomberg yielded a median forecast of 68.0 for the Michigan sentiment compared with the previous release of 67.7. A survey predicts a change of +0.20% for annual house price inflation, compared with last figure of +0.90%.
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