A Quick Review of Wednesday’s Happenings

By FXEmpire.com

US eco data was mixed overnight, as the ADP employment report confirmed another substantial gain in private sector jobs of 209,000 in March. The February reading was revised up to 230,000. Meanwhile the ISM non-manufacturing report eased from 57.3 to 56.0 in March, while the business activity index slipped from 61.2 to 58.9, with the new orders index also falling from 61.2 to 58.8. But it was still fairly positive.

In Europe, the ECB left its refinance rate unchanged at 1 per cent at its fourth policy meeting of 2012. Again there was no discussion of the need for further monetary policy easing. The ECB governing council still expects a “moderate recovery in activity” in the course of the year, although the economic outlook remains subject to “downside risks.”

The Spanish government auctioned EUR2.6 billion of bonds maturing in 2015, 2016 and 2020. Bid-cover ratios were respectable at 2.41, 2.46 and 2.96 respectively. But yields were significantly higher than at auctions in March, explaining why the Spanish Treasury chose to sell just EUR2.6 billion compared to a maximum target of EUR3.5 billion. This was the beginning of the tumble, Investors fears began to rise and have not subsided since.

European markets dropped after the disappointing Spanish debt auction reignited fears about the euro zone debt crisis. The eurozone banking index fell 3.1 per cent, while the FTSEurofirst 3 fell 2 per cent. The DAX in Germany lost 2.8 per cent and the UK FTSE fell 2.3 per cent.

Wall Street retreated, with investors still digesting the Fed’s stance on fewer stimuli. In addition the rise in Spanish bond yields added to investor concerns. The S&P materials sector fell by 1.4 per cent, while the CBOE Volatility index, or “fear gauge”, rose 5.4 per cent. At the close, the Dow Jones was lower by 125 points or 1 per cent with the S&P 500 down by 1 per cent and the Nasdaq 45 points, or 1.5 per cent, weaker.

US treasuries rose on Wednesday (yields lower) as the stock market sell-off enticed buyers to switch to safe-haven assets. US 2-year yields softened by 3 points to 0.35 per cent and US 10-year yields dropped by 8 points to 2.23 per cent.

Crude oil prices fell for a second straight session on Wednesday after the release of the latest inventory. US crude oil inventories soared by 16.1 million barrels in the second half of March – the largest two week gain since 2001. Crude fell by $US2.54 or 2.4 per cent to $US101.47 a barrel while London Brent crude fell by $US2.52 to $US122.34 a barrel.

And then we started a new day

Originally posted here