Benzinga Market Primer, Monday July 9
Global financial markets traded in a risk-off mode on Monday morning, following the release of the U.S. employment report on Friday. Spanish 10-year yields have risen to 7.07 percent as traders worry that the new direct bank recapitalization may take too long to be implemented. Also, fears over the future of the Eurozone breaking apart completely have risen, as German lawmakers and justices have questioned Chancellor Angela Merkel's defence of the currency union and reasoning for bailouts. U.S. equity futures traded lower on Monday morning.
In other news:
- EU commissioners are set to grant Spain one additional year (to 2014) to meet the 3 percent budget deficit goals, as deteriorating economic indicators and higher bond yields make deficit cutting difficult.
- The Fed's Charles Evans once again publicly voiced concern over the economy and advocated his stance for further bond purchases, probably through mortgage backed securities.
- Nouriel Roubini, commonly known as Dr. Doom for his dark economic forecasts, predicted a worse collapse in 2013 than the one seen in 2008.
- Germany sold 6-month bills at a yield of negative 0.034 percent, lower than the previous 0.007 percent.
- The OECD measure of Composite Leading Indicators fell to 100.3 in June, lower than the previous 100.4. Forecasts had expected a reading of 100.5 and the previous was revised lower from 100.5 to 100.4.
Asian shares fell sharply overnight, on the back of weak economic reports globally. The Nikkei fell 1.37 percent on these fears and Chinese stocks fell a whopping 2.37 percent, as Premier Wen Jiabao publicly expressed fears of downside risks to the economy. In Europe, German stocks traded flat Spanish stocks traded lower by over 1 percent.
Commodities reversed Friday's losses Monday, led by strength in energy futures and and grain futures due to the heat wave. Brent and WTI crude both rose about 0.75 percent and natural gas futures traded higher by 1.8 percent. Corn, soybean, and wheat futures were also strong Monday, rallying over 2.5 percent on fears that the recent heat wave will hurt crop yields. Metals are reflecting the strength seen in other commodities this morning. Copper is higher by 0.6 percent, and gold and silver are higher in tandem.
The EUR/USD fell on headlines that no sovereign guarantee would be needed to bailout the banks directly using bailout funds--however, this was already agreed upon at the summit in Brussels nearly two weeks ago. The EUR/USD traded at 1.2298 on the news. Overall, the dollar was flat against a basket of currencies, measured by the Dollar Index, falling a mere 0.06 percent
The economic calendar is largely empty, so traders may be exposed to headlines and speeches that could move financial markets.
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