Europe midday: ECB intervenes in markets?

Date: Thursday 31 May 2012

-Draghi (ECB): More optimistic on use of ESM-Bbg
-Draghi (ECB): Resolution system should never use taxpayer money
-Draghi (ECB): Creating banking union could clarify vision
-Draghi (ECB): cannot fill vacuum on fiscal front
-Dudley (Fed): Further easing requires sharp increase in risks
-Spain delays regional budget data to Friday

FTSE-100:0.85%
Dax-30: 0.41%
Cac-40: 0.78%
Stoxx 600:0.45%
Ibex 35: 0.48%

The major European equity benchmarks are now bouncing a bit further following a speech from the President of the European Central Bank, Mario Draghi, in which he bluntly called on governments to act.

Particularly worth noting, he went on record as favouring the creation of a banking union and on the injection of European rescue funds directly into banks.

At first glance all of the above would seem to constitute almost a ‘verbal intervention’ of sorts, although it would now have to be backed up by positive 'noises' from governments to have a lasting effect.

Spanish and Italian 10 year bonds are now registering large gains, with the yield on the former falling below 6.5% again.

Acting as a backdrop, The Wall Street Journal comments today on what it describes as increased ‘regulatory nationalism’ in the Eurozone, as the links co-operation between the different national financial systems fray.

Meantime, and evincing the severity of the current tension, the Swiss central bank has this morning announced that it will cap its currency “with the utmost determination,” so as to avoid excessive strength in the unit. In parallel, The Financial Times writes about how the best capitalized banking groups are dealing with “excess deposits” as savers look for havens.

Telefonica looks to cash in

Another sign of how harsh the current climate may be Telefonica’s announcement that it may divest some of its European and Latin American assets so as to raise cash with which to lower its debt. Until not so long the firm was undoubtedly one of Europe’s high-flyers, but the crisis seems to be humbling it.

Swiss Re is to sell its US unit REALIC to Jackson National Life Insurance for $600m.

From a sector stand-point the best performance on the DJ Stoxx 600 is now to be seen in: technology (1.4%), oil (1.13%) and utilities (0.73%).

Positive economic data almost across the board

French consumption of manufactured goods rose by 0.6% month-on-month in April (Consensus: 0.3%).

German retail sales grew by 0.6% in that same month (Consensus: 0.2%).

Swiss GDP expanded at a 0.7% quarter-on-quarter rate in the first three months of the year (Consensus: 0.2%).

The Eurozone consumer price index for the month of May has fallen to 2.4% year-on-year from 2.6% in the month before (Consensus: 2.5%).

Euro below 1.25, and 1.24 …

The euro/dollar cross is now 0.24% higher, at 1.2399.

Front month Brent crude futures are rising by 0.279 dollars, but to just 103.76 in ICE trading.

AB

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