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Today's Markets - June 25, 12 (4 comments a day)

Today's Markets - June 25, 12 (4 comments a day).

Today's Markets - June 25, 12 (4 comments a day)
09:00 A.M

European equities are trading slightly lower this morning ahead of the important EU summit later in the week where investors are hoping that at least some progress will be made in regard to stimulating growth in Europe and a possible European banking union.

While the overall situation in the aftermath of the Greek election and the Spanish banking stress tests is expected to continue to stabilise ongoing deepening worries about global growth with central banks around the world still refusing to provide major active stimulus might be putting renewed pressure on stocks as the day progresses.

After last week’s high profile earnings warning from P&G traders will be on the lookout for any further warnings out of the US ahead of next month’s earnings season with the strong US Dollar and the European financial crisis increasingly negatively impacting US companies.

Markus Huber - Head of German HNW Trading - ETX Capital

10:00 A.M

ETX Capital calls UK FTSE 100 up 2 points, Germany's DAX up 2 points and France's CAC-40 down 4 points.

Stocks are to open largely flat, as investors hold back from building positions given a lack of major news over the weekend to offer direction. With little in the way of economic data from the region today, markets are likely to remain relatively rangebound, though hopes continue to build ahead of the EU summit later this week. Later in today’s session, US new home sales data will be in focus. Expectations are for a pick-up in new home sales given the recent run of positive housing data from the US.

Ishaq Siddiqi - Market Strategist, ETX Capital

12:30 P.M

Equities and the euro currency have declined today, while core government bonds have gained sharply, indicating the mood in Europe is firmly one of risk aversion. Spain formally requesting a bank bailout from the EU earlier did little to shake markets, though Spanish 10-year bond yields have edged higher since the start of the session.

The UK’s FTSE 100 is down around 0.8%, while the Euro Stoxx 50 index drops 1.6%. Meanwhile, both Spanish and Italian national indices are registering losses over 2.5%. By contrast, the German September bunds contract is up around 96 ticks.

Uncertain EU leaders will be able to spur regional growth and arrest the ongoing debt crisis later at this week’s summit, investors are reluctant to build positions in case of any major disappointment. At the end of last week, hopes grew that EU leaders will be able to agree on bolder measures following the announcement of growth boosting measures worth EUR130 billion. However, the meeting offered little signs that Germany will ease its position on using bailout funds to buy distressed peripheral bonds or to move closer toward Eurozone banking union.

As long as Germany retains this stance, a solution to the debt crisis will be unlikely in the near-term, pressuring riskier assets such as equities and the euro. If EU leaders disappoint markets with measures later this week, expect a continued flight to quality into core government bonds. Leaders will have to beat market expectations on a unified delivery in order for markets to be comforted that significant progress is being made in putting an end to the debt crisis. Until the EU meeting, stock markets are likely to tread cautiously, while the euro will remain under pressure.

Looking ahead, the focus will be on US new home sales due later in the session, where expectations are for a pick-up in activity. Ahead of the US data, ETX Capital calls the DJIA down 91 points and the S&P 500 off around 11 points.

Ishaq Siddiqi - Market Strategist, ETX Capital

05:00 P.M

Heading into the European close, risk aversion has dominated the mood today with stocks markets selling off sharply, while traditional safe haven assets like core government bonds and gold prices have vaulted higher. Scepticism over the EU summit later this week has grown since the start of the session. The mini-meeting at the end of last week in Italy failed to yield any real progress by leaders of four major EU nations.

The EuroStoxx 50 index dropped around 2.7%, while both the main Spanish and Italian indices declined more than 3.5%. Bond yields for both countries also pushed higher. The euro slid against the dollar, while oil prices also slipped. By contrast, the September German bunds contract shot up 1.1%, while gold futures also perked up. On Wall Street, the DJIA fell more than 1%, while the S&P 500 lost around 1.6%.

Uncertain that euro zone leaders can deliver viable measures at the summit this week has caused the dent to sentiment today. Divisions between nations, particularly Germany’s resistance on using bailout funds to buy distressed peripheral bonds, has led markets to prepare for a major disappointment at the summit.

The worry here is if Germany doesn’t budge from its stance, it could lead to a collapse of bolder measures towards banking, fiscal and political unity. These worries together with ongoing global growth concerns and a lack of policy response by central banks have raised the scepticism ahead of the summit. If EU leaders can finally unite on policies, financial markets will be delivered a much needed shot in the arm. But disappointment here --which appears likely for now--- will see risk assets under significant pressure in the near term.

News that Spain formally requested EU aid for its bank bailout did little to rock markets. The request was just a formality but questions remain over the conditions attached to the aid. The country’s banking sector is reportedly under the knife later this evening, with Moody's looking to downgrade the credit ratings for a number of Spanish banks.

Economic data has been relatively thin, with no major reports from Europe. In the US, data has been mixed, with the Chicago Fed national activity index falling on the month. By contrast, US new home sales rose to a stronger than expected 369k in May from 343k in April. Both releases had little impact on markets, with stocks on Wall Street tracking losses in Europe.

Looking ahead, Tuesday’s session is again quiet on the European economic data front. In the US, more housing data and consumer confidence figures will be in focus. Attention however will be on both Italy and Spain testing the debt markets again. Italy will issue the third tranche of zero-coupon bonds from EUR2 billion to EUR3 billion. Meanwhile, Spain will sell EUR2 billion to EUR3 billion of three-month and six-month T-bills.

Ishaq Siddiqi - Market Strategist, ETX Capital

Lundi 25 Juin 2012