By Francisco Miñana
Date: Thursday 07 Jun 2012
European markets opened Thursday on the front foot in the wake of the widely expected decision by the European Central Bank (ECB) on Wednesday to extend existing refinancing operations through the end of the year.
The ECB decided against a rate cut but announced that it stands ready to act on renewed signs of deterioration. In this manner, ECB president Mario Draghi leaves it up to European policy makers to take the necessary measures.
The main European equity benchmark indices opened with an average gain of 0.4%.
In the foreign exchange market, the euro has been rising since the rate decision. The euro/dollar is rising towards $1.2600 ahead of an appearance by Federal Reserve president Ben Bernanke at the Senate and the euro/yen is rising towards 100. The dollar/yen is trading around 79.50 and making it less likely that the Bank of Japan will intervene. The sterling pound falls versus the dollar and the euro ahead of the Bank of England’s upcoming rate decision. Carry trade currencies are rising versus the greenback and the yen.
Turning to the debt markets, we see that Spain’s risk premium remains below 500 basis points (bp) ahead of an important Spanish bond auction. The Spanish 10-year bond has a yield of 6.22%. Italy’s risk premium is at 434 bp with a 10-year yield of 5.69%.
At the macroeconomic front, positive jobs data was released in Australia to go along with the better than expected gross domestic product (GDP) figures released yesterday. As a result, the aussie dollar is benefiting. Coming up, the unemployment rate in France and Switzerland ticked higher to 10.0% and 3.2% respectively. In the United States, there will be weekly unemployment claims and consumer credit data for April.
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