Europe mid-morning: Spain and Italy to lose market access, some say

Date: Friday 06 Jul 2012

-Nouriel Roubini expects Spain and Italy to lose market access
-IMF: ECB deposit rate cut important to reactivate interbank market
-Banks deposit €790.7bn overnight at ECB
-Spanish 10 year bond yields rise 14bp to 6.94%

FTSE-100: -0.08%
Dax-30: -0.23%
Cac-40: -0.16%
FTSE-Mibtel: -0.13%
Ibex 35: -1.17%
Stoxx 600: -0.15%

The main European equity benchmarks are now trading slightly lower, with periphery bond yields under renewed pressure. The latter may be linked to a report in German daily Handelsblatt, citing well-known economist Nouriel Roubini to the effect that Italy and Spain will lose market access in the next 3 to 6 months.

Acting as a backdrop, the International Monetary Fund´s executive director, Christine Lagarde, has defended yesterday´s decision by the European Central Bank to cut its deposit rate as necessary to reactivate the interbank lending market.

In parallel, economists are busy nudging up their forecasts for the non-farm payrolls data which will be released this afternoon Stateside, following yesterday´s ADP report. Thus, Goldman Sachs, for example, has increased its forecast to 125,000 from 75,000. Ironically, for some, a better report translates into a lower probability of further action by the Federal Reserve.

From a sector stand-point the worst performers now on the DJ Stoxx 600 are: automobiles (-1.68%), basic resources (-0.55%) and construction (-0.53%).

Shares of Peugeot are retreating after reporting a first half sales drop.

In parallel, Societe Generale, the French bank, has cut its funding line to local Greek unit Geniki and is studying possible exit strategies from Greece.

Better than expected data in France and Spain

Spanish industrial production fell by 6.1% year-on-year in May (Consensus: -8.1%).

The French trade deficit improved to €5.33bn in May (Consensus: -€5.5bn).

Single currency below 1.24

Front month Brent crude futures are down by 0.902 dollars to the 99.8 dollar per barrel level on the ICE.

The euro/dollar is off by 0.06% to the 1.2380 dollar mark.

AB

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