Growing expectation of a near term bailout request from Spain sent European equity benchmarks higher.
The Stoxx50 rose 0.69% to 2,516.16, the German Dax inched up 0.50% to 7,363.02, in Southern Europe: the Italian Ftsemib rose 1.10% to 15,694 and Spanish Ibex led gainers rising 1.53% to 7,903.20 as country's 10-year government bond benchmark yield fell to 5.78 percent.
At this point Spanish government bonds are pricing in the bailout, the question is are we so sure about it?
From one side Economy Minister Luis de Guindos said yesterday that Spain has studied the ECB's bond buying proposal after he met with European Economic and Monetary Affairs Commissioner Olli Rehn increasing market hopes in the bailout request, on the other side Europa Press today reported that Prime Minister Mariano Rajoy told regional leaders from his People's Party that he won't request a bailout this weekend.
So, who is bluffing? You need to think that: for the Maradona theory of bonds to work all participant should work together. (We presented the Maradona theory in previous posts).
In the mean time investors are still thinking on what to expect form this week's ECB policy meeting, it looks like analysts see Mr Draghi to leave interest rates on hold, but investor's focus will be on the tone of ECB head's press conference.
On the currency side: news coming from Spain weakened the US dollar , the ICE dollar index, which measures the U.S. dollar against a basket of six rivals, traded at 79.715, down from 79.796 in late North American trading on Monday. The euro traded at $1.2924, up from $1.2894 in late trading the previous day, while the British pound reached $1.6143 versus $1.6134.
Oil prices moved modestly higher, Oil (WTI) rose 0.17% to 92.64$ a barrel. While Gold prices were slightly lower to 1,780.20$ an ounce or 0.17% lower, retreating from a seven-month closing high reached yesterday.
With a thin US economic calendar Spain is on the driver seat, remember Moody's is awaited to step in. Volatility is expected in the next few hours but our job as traders is not to react but to follow our plan religiously.
Originally posted at www.77sigmatrading.com
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