Portfolio

FX open: Euro rebounds from yesterday's decline

By Francisco Miñana

Date: Tuesday 24 Apr 2012

FX open: Euro rebounds from yesterday's decline

The European session got under way today with the main equity indices rebounding from yesterday’s major losses of around three per cent. The markets did not appear to be too pleased by the outcome of the first-round elections held in France over the weekend and the resignation of Holland's Prime Minister.

In the sovereign debt market, the German Bund remains strong while the Spanish 10-year bond yield has risen to 6.04%. Spain’s risk premium is now at 438 basis points while Italy’s is at 408bp. The French 10-year bond yield was at 3.11%, the British 10-year Gilt was at 2.13%, and the US 10-year remained below 2% at 1.92%.

In other news, the International Monetary Fund has insisted that Germany should accept the issuance of Eurobonds. German Chancellor Angela Merkel will likely decline.

In the foreign exchange market, the euro recovered from yesterday's generalised losses, which were more evident in the euro/yen and the euro/dollar. The Sterling pound was also recovering versus the dollar and the yen.

Carry trade currencies remain in the red but do not face the same kind of weakness as yesterday. Nordic currencies recover versus the euro and the greenback.

Looking at macroeconomic indicators, the Conference Board leading indicator in China fell to 0.8% in March from the previous revised reading of 1.0%.

In Australia, first-quarter CPI slowed to 0.1% quarterly and 1.6% annual from the previous reading of 0.0% and 3.1% respectively.

In France, consumer confidence for April rose by one point to 88.

Spain's mortgage data continues to show that the housing sector remains immersed in a crisis with property mortgage values falling again in February.

In the United States, the S&P/CaseShiller home price index, the Conference Board consumer confidence, new home sales, the home price index and the Richmond manufacturing index will all be released.

In central bank news, the European Central Bank (ECB) revealed that it remains reluctant to resume its purchases of sovereign bonds in spite of the resurging debt crisis for Spain and Italy.

FM

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