Europe midday: Markets want to know what Bernanke thinks about QE3

Date: Thursday 07 Jun 2012

-PBoC lowers benchmark interest rate
-Hatzius (Goldman) sees US QE3 as soon as June
-Rosengren (Fed): Risks to world economy again on rise
-Spanish long-term yields down slightly after auction
-Merkel douses hopes of ‘big bang’ at EU June summit
-Williams (Fed) says must stand ready to do even more
-Yellen: Fed has scope to do more

FTSE-100: 1.62%
Dax-30: 1.63%
Cac-40: 1.17%
Stoxx 600: 1.45%
FTSE-Mibtel: 1.11%
Ibex 35: 1.05%

The main European equity benchmarks have moved decisively higher following the Chinese central bank’s surprise decision to cut its benchmark interest rate and after a positive outcome to today’s auction of Spanish debt. Nonetheless, some market commentary seems to denote a certain impatience on the part of investors with the pace of progress in resolving the Eurozone crisis.

Precisely as regards the latter, Chancellor’s Angela Merkel’s is being described as having doused expectations for any sort of ‘big bang’ solution at this next June’s European Union summit.

Acting as a backdrop, there has been quite a bit of market chatter this morning regarding the possibility of further quantitative easing (QE) Stateside. In fact, some strategists believe that was the main reason behind yesterday’s rally and nothing that European Central Bank President (ECB) Mario Draghi said. Of note in this regard, this afternoon’s speech (at 2PM) by the president of the Federal Reserve, Ben S.Bernanke, will be closely watched for clues of any possible new QE measures.

Worth noting, John Hatzius at Goldman Sachs is being cited as saying that a third round of quantitative easing may be forthcoming as soon as this next month of June.

Bankia in the firing line

Spain's public prosecutor's office opened an investigation into nationalized lender Bankia on Wednesday.

Germany's private and public-sector banks have agreed to staggered pay increases of 2.9% in July of this year and another 2.5% in July 2013, together with a one-off payment of 350 euros.

From a sector stand-point, and on the DJ Stoxx 600, the best performance is now to be seen in the following industrial groups: automobiles (3.85%), basic resources (3.15%) and oil (2.24%).

Light data calendar (Swiss data, as expected)

Swiss unemployment rate falls to 3.0% in May, from 3.1%.

The Swiss consumer price index fell by 1.0% year-on-year in May, as expected.

The Bank of England has kept its main policy settings unchanged at this morning’s meeting of its monetary policy committee.

Euro at 1.26 on PBoC rate cut

Front month Brent crude futures are now gaining $1.21 to the $102.89/barrel mark in ICE trading.

The euro/dollar is higher by 0.19% to 1.26 dollar mark.

AB

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