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Europe midday: Spanish yields falling slightly

Date: Thursday 21 Jun 2012

-Spanish bank audit due
-Spanish 10 year bond yields down 23bp to 6.51%
-Merkel balks at sovereign debt purchases-Bbg
-Finnish parliament ratifies ESM
-Fed lowers US growth forecasts, weak China data
-Mixed Eurozone economic data
-Berlusconi raises specter of early vote-WSJ
-ECB´s Coeure says EFSF should buy bonds-FT

FTSE-100: -0.33%
Dax-30: 0.22%
Cac-40: 0.16%
Stoxx 600: 0.00%
FTSE-Mibtel: 1.19%

The main European equity benchmarks have turned around, following a lower opening which market commentary attributed to a less aggressive than hoped for Federal Reserve and weak Chinese manufacturing data out overnight.

In particular, some observers saw a chance that the US central bank would announce another round of fully-fledged quantitative easing. As well, the Fed lowered its growth forecasts for the American economy this year.

No less relevant, the latest reports indicate that Chancellor Angela Merkel´s remarks yesterday evening, regarding the possibility of the European rescue funds purchasing sovereign bonds directly, may have been somewhat prone to misinterpretation. Thus, and according to Bloomberg, her complete remarks were, “there is no concrete planning that I know about, but there is the possibility of purchasing sovereign bonds on the secondary market (…) but this is a purely theoretical statement about the legal situation.” She has added that this option is not “up for debate (at present).”

The above when for some observers the speculation surrounding possible Eurozone debt purchases on the secondary market have been an important factor behind the recent rally.

Against that backdrop, the Spanish Treasury has today auctioned €2.2bn in short and medium-term debt. Yields on the two year debt on sale rose very sharply, but less so farther out on the curve. Spanish 10 year debt yields are now falling by 24 basis points to the 6.51% mark.

Air France to shed workers



Flag-carrier Air France needs to cuts its work force by 5,000 persons by the end of 2013, which amounts to a reduction of approximately 10%.

Chinese firms Hebei and Baosteel are interested in buying Thyssenkrupp's steel plant in Brazil, the FTD reports.

KPN, the Dutch telecom group's attempt to sell its German unit to Spain's
Telefonica has fallen through.

Airbus expects to sell at least 30 A380 superjumbos this year, a senior
executive has said, according to Reuters.

From a sector stand-point the worst performing sectors on the DJ Stoxx 600 now are: oil (-0.94%), basic resources (-0.86%) and automobiles (-0.67%).

Mixed economic data



The Eurozone manufacturing sector purchasing managers´ index for the month of June has come in at 44.8 points (Consensus: 44.9) below previous month´s reading of 45.1.

The Eurozone service sector purchasing managers´ index for the month of June has come in at 46.8 points (Consensus: 46.4) below previous month´s reading of 46.7.

Oil skids lower



Front month Brent futures are down by 0.641 dollars, to the 92.1 dollar mark, after the US Energy Department yesterday reported an unexpected increase in weekly oil inventories.

AB

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