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FX Day Trading - 14 September 2011
ECB underwrites Southern Europe
EU leaders meet
Spain to auction bonds
Researchers at UNICEF have discovered that British children are "caught in a materialistic trap". Instead of devoting time and attention to them, busy parents shower their kids with expensive goods in the hope that it will keep them quiet and out of mischief.
It doesn't, of course; they go out looting Foot Locker and setting fire to furniture shops.
Researchers at every investment bank in the Europe have discovered that Greece is caught in a liability trap. Instead of devoting time and attention to the issue, distracted EU leaders shower the country with platitudes in the hope that it will make the problem go away.
It doesn't, of course; investors go out fly-tipping Club Med government bonds and torching French bank shares.
Financial spread betting investors and traders took a break yesterday but the EU leaders were still busily peddling their chestnuts. Speaking of the possibility of a default by Greece, Chancellor Merkel said in a radio interview that "We need to avoid all disorderly processes with regard to the euro".
In what was apparently an appeal to investors' better nature, the chancellor said a default would result in "domino effects" that would inflict potentially catastrophic damage on the rest of the eurozone.
To an extent Frau Merkel's efforts paid off. Investors called a temporary halt to their attacks on European bank shares and the euro but they were not soft about it.
They still made the Italian government pay through the nose to borrow five-year money, with Italian bonds at 5.6%. Admittedly that is less than the 37.1% they would theoretically demand from Greece but it is still eye-wateringly usurious compared with the 0.89% and 1.24% at which Germany and Britain can pick up five-year loans.
Ahead of an EU finance ministers' meeting on Friday, Nicolas Sarkozy, Angela Merkel and George Papandreou will take part in a conference call today, presumably to remind one another not to panic. Following the meeting they will announce that Greece still has the full backing of Germany and France, just as a football club might talk of a struggling manager.
Before that, however, Spain's government must auction eight- and nine-year bonds. If it can get them away at less than 5% it will be the miracle that EU leaders are doubtless praying for.
On this side of the Channel attention will focus on unemployment and the doleseekers' claimant count.
Yesterday's inflation figures created no waves because they were close to forecast and irrelevant to interest rates.
The employment numbers are more important because they affect both confidence and economic activity. Much the same is true of US retail sales, which come out after lunch.
Tonight the Reserve Bank of New Zealand is fully expected to keep its overnight cash rate unchanged at 2.5%.
But all the ecostats in the world would not be enough to distract the market's attention from what many investors think is the denouement to the Greek debt crisis and perhaps a step towards the dissolution of the euro.
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'Italian Bonds Continue to Rise Ahead of EU Finance Summit', Article by Moneycorp, last update: 14-Sep-11
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