By FXEmpire.com
A Recap of Monday Morning European Markets
Germany will back a temporary increase in euro-zone funds to help prevent the debt crisis in the bloc’s periphery from jumping to other member states, with officials in Berlin signaling support over the weekend, according to a report Monday by the Financial Times. The report cited unnamed senior European officials as saying consensus appears to be building behind a proposal to keep the 440 billion euro ($583.63 billion) European Financial Stability Facility functioning when a new fund kicks in around mid-year. The result would boost overall rescue funding to EUR940 billion, the report said
In the forex market, the euro was rising versus the majors on reports that Germany may increase the European financial firewall. One option is to let the EUR440bn European Financial Stability Fund run simultaneously with the EUR500bn European Stability Mechanism during a transition period for a combined firewall capacity of EUR940bn.
The fear is that current capital requirements for the bailout of Greece, Portugal, and Ireland may drain available resources in case Spain and Italy must be saved from an attack against their debt.
The dollar remained relatively strong due to underlying risk aversion. Carry trade currencies fell versus the greenback and were flat versus the yen. The kiwi barely reacted to a New Zealand trade surplus of NZD 161m in February compared to the previous month’s deficit of NZD -199m.
Monday morning, Spain saw improvements in mortgage data. The number of property mortgages rose 21.1% over the last month but fell 37.1% on the year. Borrowed mortgage capital rose 33.9% month-on-month and fell 34.0% year-on-year. The average mortgage was for EUR122,973, 5.0% higher than in January of 2011 and 10.6% higher than in December 2011.
In the US, investors will be looking at the Chicago Fed national activity index, pending home sales, and the Dallas Fed manufacturing index.
In central bank news, Long term refinancing operations are a useful tool in curbing tail risks in European markets and will be available in cases of fiscal instability, said Benoit Coeure, executive board member of the European Central Bank, on Monday.
Speaking at a conference hosted by Barclays Capital in Tokyo, Coeure didn’t rule out the possibility of another LTRO, saying such tools should be kept on the table “just in case the market situation worsens.”
“These are devices that are useful to curb tail risk in euro markets; it’s something that we probably we wont use, but is available in case of catastrophes,” he said.
The ECB recently flooded the eurozone banking system with over EUR1 trillion of liquidity against eligible collateral to prevent a credit crunch.
Originally posted here
