“The Creator Made Italy From Designs by Michael Angelo” – Mark Twain 1835-1910
European shares and the single currency have risen on Friday after positive comments on the region’s outlook from the European Central Bank and the success of Spain’s bond auction yesterday, attention is now focused on Italy’s first debt sale of the year.
Italy sells three-year bonds along with 2018 paper, and a good result could lead to further squeeze in the difference between the rates it pays compared to German government bonds, a key measure of investor confidence. Italy’s 10-year government bond was yielding around 6.5 percent on Friday compared to levels of around 7.0 percent before the Spanish debt auction.
Italy like Spain, a focal point for investor anxiety about the euro zone, will hope to match the success of Thursday’s Spanish auction when it sells up to 4.75 billion euros of bonds this morning. The sale marks its first step in a challenging campaign of issuance for 2012.
The yield, or interest rate, on ten-year Italian government bonds has fallen further below the 7% mark ahead of a bond sale which is expected to attract a lot of demand. Yields dropped 17 basis points to 6.48%, the lowest since 9 December. Two-year bond yields plummeted 40 basis points to 3.98%, the lowest since September.
Hopes have also grown that Greece could reach a bond swap deal with private creditors to reduce its debt load by the end of next week, with a formal offer possible by early February, a finance ministry source said told Reuters on Thursday.
The euro touched a one-week high of $1.2879 before Italy sells bonds due in 2014 and 2018. The 17-nation currency is heading for a 1.1 percent climb versus the dollar this week, the first weekly advance since the period ended Dec. 2.
Stock markets in Europe have been buoyant in the early morning part of the session. The FTSE had climbed more than 40 points to 5703, a 0.7% rise, in the first minutes of trading. Germany’s Dax was 1% higher, France’s CAC and Spain’s Ibex ross 0.9% while Italy’s FTSE MIB advanced initially by 1.3%, ahead of a three-year bond auction.
Banks were the main risers. In London, Royal Bank of Scotland, Barclays and Lloyds Banking Group, along with miners Kazakhmys and Vedanta, led gains on the FTSE.
Brent crude oil was seen rising above $112 a barrel due to worries over supply disruption from Nigeria and receding fears over the eurozone debt crisis. Brent crude is now trading at $112.15 after rising more than $1 to $112.50 a barrel.
Market snapshot at 10.10am GMT (UK time)
Asian markets had mixed fortunes in the overnight early morning session. The Nikkei closed up 1.36%, the Hang Seng closed up 0.57% but the CSI closed down 1.68%. The ASX 200 closed up 0.36%. European bourse indices have risen in the morning session due to increased sentiment and perception that the debt crisis is in fact manageable. Eyes are on a successful Italian bond auction.
The STOXX 50 is up 0.59%, the FTSE is up 0.32%, the CAC up 0.81% and the DAX up 0.53%. The IBEX is continuing its moderate recovery over recent days to be up currently by 1.07%. ICE Brent crude is currently up 0.76% whilst Comex gold is down $3.6 an ounce. The SPX equity index future is positive, up 0.4%, suggesting Wall St will open in positive territory and continue its modest weekly rally.
Economic calendar releases to be mindful of during (or at the opening of) the NY session
13:30 US – Import Price Index December
13:30 US – Trade Balance November
14:55 US – U. of Michigan Consumer Sentiment Jan.
Economists surveyed by Bloomberg yielded a median forecast of -$45.0 billion for the USA trade balance. The previous figure showed a figure of -$43.5 billion, the trade deficit is expected to deepen. Any significant departure from this in the actual reported figure could result in high volatility in the USD.
Economists surveyed yielded a median forecast of 71.5, compared with the previous release of 69.9 for the Michigan confidence numbers.