The yesterdays bond auctions which were carried out in France and Spain witnessed a decline in borrowing costs in the first case and a solid demand in the second, which caused most European stocks to rise. The UK held a very successful auction, at which 4-year bond yields fell.
The global recovery is threatened by the growing tensions in the euro area rumors are spread between the traders which is predicted to announce soon by World Economic Outlook. Global GDP growth is to be cut from 4pc to 3.3pc, with drastic revisions for an arc of countries in Southern Europe.
France managed to sell 7.965 billion Euros worth of bonds out of target of 6.5-8.0 billion. The country’s 10-year bond yields fell three basis points to 3.11%. Still the most successful auction held on Thursday in the Europe was the one which took place in the UK.
The country managed to sell 4 billion pounds of debt. Bids exceeded supply twice over and 4 year bonds were sold at the lowest yield ever of 0.893%. The Negotiators working on a pact to be signed by 26 of the 27 European Union states with Britain remaining odd man out toughened up the treaty in many respects ahead of planned talks between finance ministers from all 27 states.
European Union finance ministers will meet on January 23 to discuss the draft, which waters down earlier provisions on restructuring after European Union mandated losses for Greek, bondholders helped exacerbate the sovereign debt crisis. The treaty, which is not final and could change, still calls for clauses in bond contracts that would prevent small clusters of investors from blocking a restructuring.
For now the draft says that this legal inscription should be preferably constitutional but could also be otherwise guaranteed to be respected throughout the national budgetary processes.
The European stocks gained for a fourth day, extending a five-month high for the Stoxx Europe 600 Index, as Spain and France sold bonds at lower yields and fewer Americans than forecast filed claims for jobless benefits.
Commerzbank AG (CBK) led a rally in financial shares, surging 15 percent, after outlining measures to boost capital. Spain sold 6.6 billion Euros of bonds maturing in 2016, 2019 and 2022 today, compared with a maximum target for the sale of 4.5 billion Euros.
The yields on the 2022 and 2019 securities declined, while the 2016 borrowing costs increased. Germany, the biggest contributor to bailouts and a promoter of strict fiscal discipline, has insisted on handing the court a meaningful role in policing budgets. Collective action clauses are common in U.S. and U.K. law and aren’t a backdoor way of threatening bondholders, said a European Union official on condition of anonymity.
The clauses would enable a restructuring to go ahead by a vote of a supermajority of bondholders, denying a veto right to solitary investors. Today’s rally in stocks was helped by optimism that the U.S. economy will be able to weather Europe’s debt crisis. Claims for jobless benefits last week dropped to the lowest level, pointing to an improvement in the U.S. job market that may help bolster spending in the New Year.
Bank of America Corp., the second-largest U.S. lender, swung to a fourth-quarter profit as the company sold assets and built capital faster than expected. The Dow Jones Transportation Average, a proxy for the economy, increased 1.6 percent. Gauges of diversified financial and transportation shares added at least 1.5 percent, leading the gains among 24 industries in the S&P 500.
The Stoxx 600 became overbought for the first time in last 14 months today, as the 14-day Relative Strength Index, which tracks momentum by comparing closing prices with daily trading ranges, rose to 70.47. When the RSI climbs above 70, analysts say the underlying security is likely to fall. The US and China will remain the two main growth blocs in the world economy.
It is predicted that the US will grow at an unchanged rate of 1.8pc, and China will motor ahead at 8.2pc, down from 9pc. Asian stocks rose, with a regional benchmark index heading for its fifth straight weekly advance, as fewer Americans than forecast filed claims for jobless benefits and after Spain and France sold bonds at lower yields. Japanese officials said that The European government bond auctions are going well and investors are starting to reverse their risk-avoidance stances globally.
EUR/USD
EUR/USD pair is Currently trading at 1.2966, the steady rise seen over the past three days has proven EUR short covering is finally in full motion and further room to run north is expected as longs gain confidence after the first close above, likely eyeing for an initial target around 1.3080 region with a break above shifting focus to 1.3155, Buying on dips is now favored, with bids expected at 1.2880 the Support levels are at 1.2952, 1.2923, 1.2872 and the Resistance levels are at 1.2971, 1.3014, 1.3043.
USD/JPY
USD/JPY is currently trading at 77.18; there has been an important change of sentiment since the European session, when the pair found technical support at 76.72 to top out at 77.32, breaking in the process, is now likely to have a go towards heavy stops reported just above 77.50. A break above would then target 77.52-57, with break higher encouraging more bulls to jump on board. Corporate sell-orders are clustered at 77.35, trying to prevent further gains. The Support levels are at 77.03, 76.73, 76.51 and the Resistance levels are at 77.32, 77.53, 77.91.
