By FX Empire.com
Losses were seen across the broad markets in the morning as sentiment continues to be fragile due to the uncertainties that still persist in Europe after the Italian bond yields climbed again above 7%.
As conditions in Europe continue to be unstable, risk aversion was fueled in the early hours, increasing demand on the safe haven USD which gained against the other majors, and weighing down on the Asian stocks.
However news that “ECB bought larger-than-usual sizes and quantities of the Italian debt” eased some of the fears, as the Italian 10-year bond yields fell below 7% by 0.29% to 6.77% at 9:05 a.m. in London.
Yet contagion fears persist, and the risks of a recession are still the highest in Europe. Now the attention is turning to France since it has a large debt to GDP ratio. But in France yields are way below crisis levels.
Yields on European bonds including French, Italian, and Spanish yields all rose Tuesday on rising fears from the Europe’s debt crisis.Germany is preparing today to sell 6 billion euros of two-year notes, while Spain and France are preparing to sell securities tomorrow.
The euro fell today to the lowest in a month against the USD, yet after reports that the ECB is buying Italian, Spanish, and Portuguese bonds, the euro was provided with a bullish momentum, trading around 1.3530.
The pound however continues to be weaker, trading around 1.5758 after UK released a disappointing jobs report, where the jobless rate rose to a 15 years high, increasing pressure on policy makers to boost stimulus.
Data today from Europe include Europe’s CPI that remained unchanged in Oct, and UK’s inflation report which confirmed that conditions in UK worsened, global demand slowed and the lack of action from Europe is weighing down on growth.
Today Italian Prime Minister Mario Monti will announce his new government, while Greek Prime Minister Lucas Papademos faces a vote of confidence today to keep Greece in the euro zone and secure financing from Europe.
In China, the finance ministry sold 28 billion yuan ($4.4 billion) of 10-year bonds at a lower than expected yield of 3.57%, fueling speculations that the country is on its way to ease its monetary policy.
The Asian stocks drop today mid rising concerns that the euro zone debt crisis is worsening, while the Indonesian central bank lowered its 2012 growth forecasts. Nikkei 225 fell by 0.92% while Hang Seng fell by 2.00% at closing today.
European stocks recovered this morning’s losses as “market participants do not want to give up hope on a resolution of the EU crisis”, said Stephane Ekolo. FTSE 100 rose 0.34%, DAX rose 0.69% and CAC 40 rose by 0.26% as of this writing.
The USD is trading around the 77.95 level as of this writing, from the opening at 77.89, yet the rising fears from the euro zone debt crisis amid high levels of uncertainty, it is likely that the USD may gain some bullish momentum.
The AUD is trading around 1.0140, while the persistent risk aversion that keeps the dollar’s momentum rising, is weighing down on commodities, where oil is trading around $98.90 per barrel and gold is trading around $1772.85 per ounce.
Originally posted here
