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FX Day Trading - 16 November 2011
Euro bond buyers go slow
Confidence votes due in Athens and Rome
BoE Inflation Report today
Following their eviction from Zuccotti Park in Manhattan, protesting campers have found inspiration in Leonard Cohen's lyrics. They intend to take Berlin. In the meantime Occupy Wall Street has had to rebrand itself as Vacate Wall Street.
There has been a similar shift of focus by the world's bond investors, who are moving out of Madrid and Paris and heading for Berlin. Tuesday was another bad day for most of Euroland's sovereign borrowers. Yields moved higher across the board, reflecting a growing reluctance among investors to buy any but the safest assets.
To hold Spanish 10-year bonds they demanded an extra third of a percentage point interest, as they did from Italy and Belgium. Ten- and 30-year UK gilt yields edged down to record lows.
The reason for online spread betting investors' heightened concern centres, as usual, on Greece and Euroland's other fiscally-challenged countries. Win or lose, the new Greek prime minister will end up costing the EU money. If he fails to unite the nation behind an austerity-backed bailout the country will go bust, creating yet bigger losses for the EU banking system.
If he succeeds, EU nations will have to stump up the cash even though, for most of them, feeble economic growth is sapping their ability to generate tax revenue. That Mr Papademos is already facing a vote of confidence after less than a week in office is not the most encouraging omen.
And then there's Italy, where the new premier Mario Monti is presenting his government for a vote of confidence on his third day in the job. Against that background it is hardly surprising that spread betting investors are finding it difficult to muster confidence in Greece and Italy, or that they have doubts about the whole euro shooting match.
Figures for third quarter gross domestic product (GDP) reinforced the perception of a yawning gap between Germany and its weaker Eurozone brethren. GDP growth in Germany for Q3 was a provisional 0.5%, similar to that of Britain.
In Portugal it fell by -0.4% while in Spain there was zero growth. For Euroland as a whole the figure was just 0.2%. Painting a similarly grey picture was ZEW's survey of economic sentiment: in Germany it was down by seven points to -55.2 in November and in pan-Euroland there was an eight-point drop to -59.1.
UK inflation slowed by more than expected in October, with the consumer price index (CPI) down from 5.2% to 5.0%. However, with the old link between inflation and interest rates severed, the news had no lasting impact on the pound. There will be more word on inflation today when the governor introduces the Bank of England's quarterly Inflation Report.
Before that, the pound will have to weather what could be an unhelpful set of employment statistics. The unemployment rate is reckoned to have ticked up to 8.2% in September and the number of dole claimants to have risen by another 21k in October.
Inflation figures for Euroland and the United States are due out today, together with US international investment flows and industrial production.
But let's guess that most attention will focus on Euroland once again, where France will auction two-to-five-year treasury notes and Spain will try shift €4bn of ten-year bonds. If investors demand too high a yield the euro will suffer.
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The above content does not constitute investment advice, it is provided purely for information purposes and is delivered as a personal view of the writer. Neither the contributing company (or writer) nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the content.
'Online Spread Betting: Eurozone Bond Yields Continue to Climb', Article by Moneycorp, last update: 16-Nov-11
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