This week will be a minefield for investors
What a week we have in front of us. It has all the ingredients for a great play. Long-term auctions in Europe, a new EU summit, a possible Greek PSI deal, manufacturing data from China, jobs data from Germany and the US, ISM manufacturing figures and
144 new earnings releases in the S&P 500 and Stoxx 600 Indices.
Debt auctions getting serious today
Sovereign bond yields in Spain and Italy have had a southern trajectory in 2012 due to the LTRO programme, better than expected debt auctions and stabilisation in forward-looking Eurozone economic indicators.
Most debt auctions in Europe have been in shorter maturities such as bills but today Italy is set to raise longer term debt with maturity in 2016, 2017, 2021 and 2012 at 10:00 GMT. This will be the first real test of many this year in longer maturities and actually the true battlefield in Europe. If the auctions go well it will provide confidence to financial markets that Europe has seen the worst and longer term debt is able to roll over at acceptable yields. It could be fuel for risk assets.
Another EU summit needs to follow actions from the ECB
With ECB's decisive action providing cheap financing for struggling banks through its LTRO programme, it is about time that EU leaders take the baton from the ECB and push the solutions forward. EU leaders will meet this afternoon in Brussels with the aim of finishing the last issues on the deficit-control treaty from December 9, 2011 and the ESM rescue find to be set up this year.
In the shadows of today's meeting though the Greek PSI negotiators continues to work on a deal and the whole outcome could turn out to be ugly. Nevertheless, we believe a constructive deal will be reached, as it is the interest of all participants in financial markets to resolve the debt situation in Greece.
Chinese manufacturing data and then jobs data
On Wednesday Chinese manufacturing data is scheduled to be released and will give investors the latest temperature check on the Chinese boiler. This figures will be important for Asian markets so follow this closely. Wednesday also provides investors with the important ISM manufacturing figures from the US which always set directions in risk assets.
Then the mother of all figures, US nonfarm payrolls, is on the tap Friday ending a action packed week. Analysts are looking for 150K net change in jobs down from 200K in December.