Europe midday: PBoC cuts rates by surprise

Date: Thursday 05 Jul 2012

-ECB cuts rates by 25 bp
-China cuts rates by 25bp
-Bank of England increases QE by 50bn pounds
-Finland to ask for collateral from Spain

FTSE-100: 0.67%
Dax-30: 0.79%
Cac-40: 0.49%
Stoxx 600: -0.64%
FTSE-Mibtel: 0.36%
Ibex 35: -0.57%

European equities are still trading in a mixed fashion on a rather volatile day, with periphery benchmarks still under water (following a brief foray into the blue) but British and German indices somewhat higher.

The above despite the announcement of an interest rate cut (as expected) by the European Central Bank (ECB) and a further dose of quantitative easing out of the Bank of England. Worth noting perhaps, some observers had been musing before the ECB´s announcement that a decrease in its deposit rate would constitute a sign of serious worry by the central bank over the current situation in the Eurozone.

Furthermore, the People´s Bank of China has announced a surprise reduction in its one year lending rate, by 31 basis points, to 6%.

Now the market´s focus passes to the ECB President´s press conference, at 13:30.

A small barrage of macroeconomic data is also scheduled for release this afternoon Stateside. As well, investors are awaiting tomorrow´s non-farm payrolls reports; with some observers believing that it could affect expectations for a third round of quantitative easing from the Federal Reserve.

Volkswagen has reached an agreement with German tax authorities to carry out the purchase of the remainder of Porsche which it does not already own, for €4.46bn.

French Prime Minister Jean-Marc Ayrault said on Wednesday that gas prices in France will not rise more than the rate of inflation and that the government is preparing a plan to make gas and electricity more affordable for consumers, Reuters reports.

From a sector stand-point, and within the DJ Stoxx 600, the best performance can now be seen in shares of: basic resources (2.20%), automobiles (1.84%) and oil (0.80%).

Economic data on tap

German factory orders increased by 0.6% month-on-month in May (Consensus: 0.0%).

Oil and euro in holding pattern

The euro/dollar is now down by 0.68% to the 1.2440 dollar mark.

Front month crude futures are rising by 1,471 dollars per barrel on the ICE, to the 101.22 dollar level.

AB

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