Daily Market Report 27/09/12

Another day brought further disappointment as far as euro leaders are concerned, as the lack of progress across the southern economies continues to thwart any optimism. 

This time disputes between the IMF and European Commission flared up over proposals to restructure Greece’s debt. As the public launched a new wave of protests over the crippling austerity measures, the debate regarding potential debt write offs left the troika at loggerheads.

In the wake of the previous two nights’ riots in Madrid, the pressure continues to pile on to the Spanish economy to request formal help in the form of a bailout. Mariano Rajoy, unveiling his budget plans today, faces further dissent within parliament from Catalonian parliamentary leader Artur Mas, who is flying the flag for some form of fiscal freedom for Spain’s largest economic contributor. 

The worsening sentiment caused Spanish 10y bond yields to rise above 6% once again, which left Rajoy, when questioned, to guarantee that if rates were to remain consistently at such augmented levels, a bailout would be the necessary option.

These woes were reflected in the markets as investors fled from the euro into safer currencies, namely the dollar, and the yen. Despite also outperforming the euro, the sterling was affected by the exile from the single currency, causing a drop against the dollar. 

During the evening session however, the delicate balance between safety and risk continued to find its equilibrium as positive stock gains in Asia, boosted by a Chinese stimulus effort, led a rally for the dollar that has pushed through to this morning.

Finally, in a hectic day of economic announcements, investors will learn the true state of the UK economy with a series of telling indicators this morning, including GDP, current account, and business investment. Similarly across the pond, GDP, unemployment claims and durable goods sales are all key indicators that will once again shift the flow of funds in or out of the dollar.

Key Announcements Today:
  • 08.55am – EUR – German Unemployment Change
  • 09.00am – EUR – M3 Money Supply
  • 09.30am – GBP – Current Account
  • 09.30am – GBP – Final GDP q/q
  • 10.00am – EUR – Consumer Confidence
  • Tentative – EUR – Italian 10y Bond Auction
  • 13.30pm – USD – Core Durable Goods Orders
  • 13.30pm – Unemployment Claims
  • 13.30pm – USD – Final GDP q/q
  • 14.00pm – EUR – Spanish Budget
  • 15.00pm - USD - Pending Home Sales

See previous Daily Market Reports