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Markets and Rates - July 10, 12 (4th comment today)

Markets and Rates - July 10, 12

Markets and Rates - July 10, 12 (4th comment today)

08:45 A.M

ETX Capital calls the FTSE 100 up 9 points, the CAC-40 up 2 points but the DAX down 9 points.

European markets are to open largely flat today, as investors weigh up developments out of yesterday’s Eurogroup meeting with weak trade data from China released overnight.

EU finance ministers in Brussels yesterday announced plans to jump-start as much as EUR100billion in loans to shore up Spain’s banks and eased conditions for the country’s deficit reduction programme. These developments are likely to help Spanish bank share prices recover from recent lows today and see the country’s bond yields ease from the dangerous 7% mark.

Markets in Asia fell for a fourth day overnight, after Chinese trade data pointed to more signs of stress in the global economy, building nerves ahead of the country’s 2Q GDP figures, due Friday. Commodity prices have declined following the Chinese data, placing pressure on European basic resource and energy stocks. Also whacking both of those sectors is the weaker-than-expected 2Q earnings report from US aluminium giant Alcoa.

Looking ahead, the UK and France both print industrial production numbers. The UK also publishes manufacturing production and trade balance data. No major data from the US. Eyes remain on finance ministers in Brussels as the second day of the Eurogroup gets underway.

Ishaq Siddiqi - Market Strategist - ETX Capital -

09:30 A.M

European equity markets are trading little changed this morning with the main focus will be on the German constitutional court scheduled to hear a complaint on the ratification of the ESM and implementation of new tough budget rules. While the German government hopes and expects a quick decision the German constitutional court isn’t necessarily known for being too much pro Europe and pro European integration meaning a decision could potentially take several weeks which would give plenty of room for uncertainty and wouldn’t bode too well for equity markets.

In Europe and the US the data schedule is once again fairly limited today making it likely that equity markets continue to be range-bound with a moderate downside bias.

Earnings season is in the US is off to a good start with Alcoa posting a beat on earnings and revenues however even more important the company despite worsening fundamentals in Europe and sluggish growth in the US is not revising down its outlook and remains optimistic that business will improve as the year progresses.

The Libor scandal is going into the next round with Barclay’s chairman Agius scheduled to testify today. Focus seems already slowly turning to potential tough future legislation in order to prevent a repeat while details being revealed through the testimony of persons involved into the scandal grabbing fewer and fewer headlines.

Markus Huber - Head of German HNW Trading - ETX Capital -

12:00 P.M

L’euphorie n’aura guère duré…

Les avancées lors du Sommet européen de la fin de la semaine dernière n’ont guère dissipé les craintes des investisseurs qui doutent de la capacité des dirigeants à mettre en œuvre les mesures annoncées. En effet, le montant de l’aide pour le secteur bancaire espagnol n’est pas encore connu alors que la Finlande et les Pays-Bas sont opposés à toute intervention sur le marché de la dette souveraine. En ce sens, nous suivrons avec attention les conclusions de l’Eurogroupe qui se tient aujourd’hui. Par ailleurs les marchés n’ont guère salué la baisse des taux de la BCE de 25 points de base à 0,75%. Le geste était certes largement anticipé mais la BCE s’est montrée quelque peu résignée sur sa faculté à lutter contre la dégradation de la conjoncture. Car ce sont bel et bien les effets du ralentissement de la croissance mondiale qui pénalisent les indices actions. Les derniers indicateurs d’activité dans l’industrie et les services sont ressortis en repli dans toutes les régions (Etats-Unis, Europe, Chine) et l’économie américaine a créé moins d’emplois que prévu au mois de juin. Dans ce contexte, les marchés européens ont consolidé en fin de semaine, le CAC 40 marquant un recul de 0,87%.

Cette semaine, outre la réunion des ministres des finances européens, nous surveillerons le PIB chinois et les minutes du FOMC ainsi que les chiffres de l’inflation, du moral des ménages et de la balance commerciale aux Etats-Unis. Nous prendrons également connaissance des premiers résultats trimestriels qui débutent avec ceux de Alcoa ce lundi.

Cholet Dupont (commentaire du jour)

01.00 PM

Regional markets have vaulted higher today, shrugging off poor China trade data out overnight. Instead, markets have been comforted by better economic data from the UK and Italy. Industrial production in the UK rose by 1% in May, surprising on the upside, while UK trade balance narrowed from GBP9.7billion in April to GBP8.4billion. These positive indicators helped to boost the UK’s FTSE 100 index, now up 1%, while the pound which rose to intra-day highs soon after the data.

Meanwhile, Italian industrial output rose unexpectedly – the country’s 10-year bond yields have eased today, now at around 5.8%. Italy’s fiscal outlook has improved over the past few weeks following the outcome of the EU summit together with yesterday’s euro-positive developments out of the Eurogroup meeting in Brussels. Italian Prime Minister Mario Monti yesterday also reiterated that Italy doesn't intend to tap the ESM to stabilize bond-yield spreads for now. The FTSE MIB index is up around 1.9% today.

Similarly, the Spanish IBEX-35 has added 1.6% of gains, while the country’s 10-year bond yields have eased off the dangerous 7% mark seen yesterday to around 6.7% today. EU finance ministers in Brussels yesterday announced plans to jump-start as much as EUR100billion in loans to shore up Spain’s banks and eased conditions for the country’s deficit reduction programme. The meeting is in its second day today, with markets carefully watching the headlines out of Brussels.

During today’s session, the market jumped higher on speculation that leaders have agreed on the terms of the Spanish bank bailout. Chatter that Germany’s constitutional court has approved the ESM was also cited behind today’s rally across European markets, but the talk was taken with a pinch of salt as lawmakers are still in discussions, with a ruling due later in the day.

With no major economic and corporate data out of the US other than Wall Street having its first chance to react to Alcoa’s decent 2Q results, much of the attention will be out of headlines on the ESM ruling in Germany. An approval of the ESM by Germany will mark a key event in the story of the European financial crisis. But it still won’t stop worries about the ESM’s firepower to recede, with some participants unconvinced the facility will be able to prevent contagion from Greece and Spain with both countries still in financial distress.

Ishaq Siddiqi - Market Strategist - ETX Capital -

05:00 PM

Regional markets are on course to end in the positive zone Tuesday, while Spanish bond yields eased off dangerous highs after Eurogroup finance ministers agreed on giving Spain EUR30 billion by the end of the month to start its bank bailout programme and another year to meet its budget deficit target.

The IBEX-35 rose 0.8%, while the FTSE 100 was up 0.7% and the EuroStoxx 50 index gained 0.8%. Italy’s FTSE MIB rose 0.6% while the country’s bond yields eased further – economic data from both Italy and the UK lifted sentiment across the region. UK and Italian industrial output both rose unexpectedly. Alcoa’s decent 2Q results helped mining shares in Europe, though the stock was struggling on Wall Street.

Toward the end of the session, European markets trimmed gains but were still mostly positive while US markets pared earlier gains to trade lower. The afternoon pullback is largely thanks to EU finance ministers unable to calm concerns about the region's crisis in the second day of the Eurogroup meeting, despite efforts to help Spain.

The euro dropped against the dollar as such, with leaders failing to make no real progress on launching the region’s rescue funds. Additionally, comments from Italy's PM Monti saying that although the country does not need a Greek-style bailout, it wouldn't necessarily be opposed to the ESM buying Italian bonds and that it wouldn't be prudent to say Italy will never need help. These remarks hit the euro, but stocks have so far remained positive.

Elsewhere, Germany’s constitutional court is today set to hear a complaint about the ratification of the ESM, however German Finance Minister Wolfgang Schaeuble said a considerable delay in the implementation of the ESM could cause further uncertainty on markets and weaken confidence in the euro zone.

Tomorrow’s data menu is rather thin on the ground, with German inflation for June and US trade data the only major releases due. The attention will be on the latest Fed meeting minutes, due after the European market close. The Fed last month extended Operation Twist instead of pumping more QE, so tomorrow’s minutes should shed some light over how many members wanted more stimulus measures.

Ishaq Siddiqi - Market Strategist - ETX Capital -


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Cotations, indices et taux. Mise à jour quotidienne par Finyear.
Quotations, indices and rates. Updated daily by Finyear.

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Mardi 10 Juillet 2012

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