European bond yields continue to increase

The Spanish bond sales yesterday saw yields surge above 6%, which did little to mitigate the uncertainty surrounding the Eurozone or to ease the spreading market contagion. French bonds were also sold at highs of 3.79%, with 10 year French yields up 8 basis points, which highlights the continuing aversion to purchasing more Euro debt. Reports of the European Central Bank (ECB) actively being involved in the bond sales assisted the downward pressure on the EUR, but it wasn’t sufficient enough to prevent the EUR depreciating against both the sterling and dollar. Today the ECB has acknowledged a cap of 27 billion euros in weekly bond sales.

The sterling rose yesterday following positive UK retail sales data and there was a fall in the US jobless rate. These trends however are not expected to continue today as there are growing fears of a global recession, along with data showing UK consumer and investor confidence is at a record low. Germany PPI figures of 0.2% for October were above market expectations of 0.1% which reinforces Germany’s position as Europe’s strongest economy.

Talks to alleviate pressures on the EU

Following their continual efforts to stabilise the euro, there will be talks today between UK PM David Cameron and German Chancellor Angela Merkel which will be aimed at resolving tensions over the eurozone crisis.

While Germany are urging for closer integration within the Eurozone, the UK asserts that there needs be safeguards for EU states (such as the UK) which do not use the euro, along with resisting the proposed financial transactions tax in the EU.

Economic data

  • German Producer Price index (YoY) came in at 5.3% from last month levels of 5.5% showing average changes in prices for output
  • German Producer Price index (MoM) were in at 0.2% above previous levels of 0.3%

Day

Country

Event

Concensus

Previous

Friday

EU

Germany

Germany

US

Consumer Confidence

Producer Price Index (YoY)

Producer Price Index (MoM)

Leading Indicators (Mom)

 

5.30%

0.10%

0.60%

-19.9

5.50%

0.30%

0.20%

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