24 November 2011 at 14:48 GMT
A quiet, Thanksgiving Day generally, with the Euro in a relatively tight 1.3340 to 1.3412 range, as I write. German Q3 Final GDP came out as +0.5 per cent, as previously reported, and the influential German IFO business survey surprised to the upside on all three measures, (current assessment, business climate, and expectations), with readings of 116.7, 106.6 and 97.3 respectively, compared to expectations for 115.0, 105.2 and 96.0. Apparently the home-grown feel good factor outweighed fears for the future of less prosperous Eurozone neighbours.
ECB liquidity help
Maybe the most significant news of the morning was that the European Central Bank (ECB) is thinking of offering Europe's cash-starved banks liquidity for two or three years, whereas hitherto the longest maturity has been 13 months. Interest rate futures markets expressed some glee at the idea, dropping their Libor expectations by a handful of basis points at the near ends of the curves. The effect on the Euro was, however, minimal. I guess we already know that if the ECB is willing to do anything, it is to act as lender of last resort to banks, if not governments, (yet). On that subject, conspiracy theories continue to proliferate, along the lines the ECB might be prepared to buy unlimited amounts of sovereign bonds in return for the quid pro quo of a strictly formulated and regulated fiscal union. That seems like an increasingly likely outcome from where
we stand - the fact remains whether this probably permanent increase to the money supply would give anything but a temporary relief bounce to the Euro.
Is there any safe haven left?
Following yesterday's frightful German Bund auction, (with 40 percent of the offering left on the shelves), the question arises whether US Treasuries, for instance, or Japanese Government bonds, (JGB's) will suffer the same fate shortly? US Treasuries are certainly on the defensive today - but that may be due to a small dead-cat bounce in equities or poor Thanksgiving Day liquidity. If anything, an intensification of funding problems for even the core of Europe will probably see US Treasuries come into their own as the last safe-haven standing - with positive dollar implications. The Japanese government should be watching events like a hawk in my view - with terrible demographics and a debt mountain the size of Everest, even the traditionally domestically funded
JGB market may be the next shoe to fall. Ultimately bad for the yen.
Italy's bond yields creep up again
At the time of writing, Italy's 10-year bond yield has crept over 7.0 percent again; maybe markets were a tad unnerved by German Economic Minister Roesler's description of European Commission President Barroso's Eurobond proposals as 'harmful'!
Sterling weakens, Aussie dollar strengthens
Sterling sits near seven-week lows against the dollar as Bank of England Economic Advisor David Miles warns that the Eurozone debt crisis is having a substantial effect upon the UK, but the Aussie dollar recovered just a little after its recent plummet - no special news, maybe just a little risk going on due to the small bounce in equities.
Economic Data highlights
• German November IFO rises to 106.6, Current Conditions 116.7
• German final Q3 GDP +0.5% Q/Q & +2.5% Y/Y
• Fitch downgrades Portugal to junk status from BBB- to BB+
• UK Q3 GDP confirmed as 0.5% quarter-on-quarter and year-on-year.
• Risk of recession in the UK - BoEs Broadbent
• Yuan ends down on stronger Dollar
. Indian Rupee strengthens on the day, but downtrend intact
Upcoming Economic Calendar Highlights (all times GMT)
• 14:00 Riskbanks Wickman-Parak joint autumn meetings
• 17:00 Riksbank Gov Ingves to speak in Stockholm
• 20:30 ECBs Gonzalez-Paramo to speak in Oxford
• N/A Merkel, Sarkozy & Monti meet to discuss EZ crisis