By Francisco Miñana
Date: Tuesday 22 May 2012
The main European equity benchmark indices opened with an average gain of 0.7 per cent this morning as they followed yesterday's positive tone on Wall Street and this morning's Asian gains.
One of the news items standing out this morning is a Financial Times piece that says that "secret aid" from the European Central Bank has propped up Greek banks. It was also reported that the US President asked the ECB to buy Spanish and Italian debt. Spain’s risk premium was at 475 basis points and Italy’s at 445bp. The German bund yield was at 1.46%.
In the foreign exchange market, the euro was gaining strength on the hopes for a European agreement on growth at this week's summit. Meanwhile, the new French government continues to insist on the need for Eurobonds to face the crisis. The euro/dollar traded near 1.2800, the euro/yen stopped rising at 101.77 yesterday, and the euro/sterling pound corrected after reaching 0.8100 this morning. The euro/Swiss franc was still hovering at 1.2000.
Carry trade currencies gained momentum as some risk returns to the table. The dollar lost strength versus the Swiss franc and the sterling pound but gained versus the yen. The US dollar fell 0.3% against the Singapore dollar even though Singapore’s sovereign fund claims that emerging economies will enter a stress period in the next two years.
Coming up at the macroeconomic front, there will be a six- and 12-month debt auction in Spain, economic forecasts for the Eurozone by the OECD, and consumer confidence data in the Eurozone.
In the United States, there will be existing home sales data and the Richmond Fed manufacturing index.
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