Sharechat Logo

While you were sleeping: EU's dark shadow

Thursday 27th September 2012

Text too small?

Protests in Spain and Greece put the European sovereign debt crisis centre stage, renewing investors' worries about the risk the euro zone's problems pose to global growth and corporate profits.

Those concerns are underpinning demand for fixed-income securities including US Treasuries, and helped fuel appetite for today's auction of US$35 billion of five-year bonds.

"It was a good auction," Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York, which as a primary dealer is obliged to bid in US debt offerings, told Bloomberg News. "It is suggesting more and more fear -- that things could spiral out of control in Europe. The demand for dollars and Treasuries continues to rise."

All eyes are on Spain, which is scheduled to announce its budget tomorrow. And on Friday, Moody's will publish its latest review of the nation's credit rating. In contrast to rising demand for US government bonds, the yield on Spain's 10-year bond surged more than 30 basis points back through the 6-percent mark.

Figures released on Tuesday suggested Spain will miss its public deficit target of 6.3 percent of gross domestic product this year, and on Wednesday the Bank of Spain said the economy continued to shrink markedly in the third quarter, according to Reuters.

Spain's prime minister, Mariano Rajoy, has so far resisted the calls to ask for an EU financial bailout but may not be able to hold out much longer. In a speech in New York earlier today, Rajoy said all Spaniards were going to have to make sacrifices.

Europe's Stoxx 600 Index ended the session with a 1.8 percent slide. National benchmark indexes in Germany, France and the UK dropped. So did Spain's IBEX 35 Index, closing 3.9 percent lower.

In late afternoon trading in New York, the Dow Jones Industrial Average shed 0.16 percent, the Standard & Poor's 500 declined 0.38 percent, while the Nasdaq Composite Index fell 0.62 percent.

Meanwhile, the latest indicator on the US housing market continued to underwrite the view that at least this part of the economy is gaining forward momentum.

Sales of new homes eased 0.3 percent to a 373,000 annual pace in August after a revised 374,000 rate in July that was better than previously estimated and the strongest since April 2010, according to Commerce Department data. And the average price of a home in the US has now risen to its highest since March 2007.

"There are increased signs that the housing recovery is now on a more sustainable path, though its impact on overall economic activity will remain relatively modest at best over the near-term," Millan Mulraine, a senior economist at TD Securities in New York, told Reuters.

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar eases after another Brexit failure
SkyCity, Fletcher won't name their insurers
NZ stocks smacked by smelter review, SkyCity fire
No govt cash for Tiwai Point - Woods
Strong dairy exports narrow Sept trade deficit
Rio Tinto reviewing future of Tiwai Point smelter
SkyCity convention centre damages dispute murkier after fire
Air NZ ends LA-London service; 155 jobs at risk
Kiwi dollar up against UK pound on Brexit ructions
Contractor retentions regime a lemon, industry told

IRG See IRG research reports