While neither of the major central banks is necessarily eager to rush into any kind of intervention like cutting rates or purchasing bonds as this might be seen as a panic reaction, which could easily have the opposite of the desired effect, in the end with the global economic outlook deteriorating fast and periphery bond yields continue to surge there might be soon no other choice left then to act in a swift and decisive manner before the situation gets even more out of control.

Of course it is questionable if central banks indeed are willing to step into the market so close to the Greek elections on Sunday, with any action probably more likely in the beginning of next week depending of course also on how the Greek electorate has voted.

No doubt coordinated action between several of the major central banks would be a lot more effective as this would also be a sign of unity when it comes to containing and combating the European financial crisis.

The Italian 6.5 Billion Euros 364 day Bill auction today is expected to be manageable in light of the short maturity and the recent spike in interest rates to the upside, making it an attractive investment especially for the banks which still have money left over from the ECB’s LTRO earlier this year. Besides periphery yields of Spain and Italy and Euro Zone industrial production figures which are expected to show another big decline compared to the previous month, investors will also keep a close eye on US advance retail sales, with any signs that a so far resilient consumer is starting to give way too, making Fed action ever more likely.


Markus Huber - Head of German HNW Trading - ETX Capital
www.etxcapital.com