MidSession: Rising Political Risks

As expected in today's Morning Meeting European stock markets traded lower in the morning session as US markets are closed today as the East Coast braces for Hurricane Sandy.

The broader Stoxx50 fell 1.08% to 2,469.24, in the regional benchmarks' space the German Dax fell 0.75% to 7,177.66, the Spanish Ibex  fell 1.07% to 7,692.20 while the Italian Ftsemib led losers trading 1.97% lower to 15,278.15 as political risks were on the rise again after Silvio Berlusconi threatened to  pull out the plug to Mr Monti Government.

The Berlusconi Hurricane sent Italian government bond yields 8.9 bps higher to 4.982 percent, while the Spanish equivalent were up 5.5 bps to 5.639 percent. German government bonds also hit two week high as the weakness on equity markets added to the demand for less risky assets.

On the currency side, the Euro lost ground versus the dollar trading 0.36% lower to 1.2893$, meanwhile the greenback steadied at 79.63 yen, off a four-month high of 80.38 yen touched on Friday, ahead of the Bank of Japan's policy decision on Tuesday. Markets expect the BOJ to take further easing measures.

The rising dollar pressured the yellow metal which traded 0.22% lower to 1,708.10$ an ounce, while in oil markets all eyes are for the Hurricane Sandy, with refineries cutting runs brent crude fell $1.04 to $108.51, while US crude was down 78 cents to $85.50.

In US trading is suspended for today, following an earlier decision by the NYSE to close floor trading, the CME Group said it will halt stock-index futures and options at 9:15 a.m. New York time.

A good news came from the US, minutes before publishing the MidSession Review: US consumer increased their spending in Septmener by the fastest rate since late winter. Consumer spending rose a seasonally adjusted 0.8% last month while personal income climbed at a slower 0.4% pace, the Commerce Department reported. Economists surveyed by MarketWatch had forecast a 0.7% increase in consumer spending and a 0.4% rise in personal income.

It's important to observe that the spending rose at fastest pace than wages and therefore suggesting that the recent pace of spending is not sustainable in the long run cause consumers are pulling money out of their savings. Therefore to sustain this pace wages will have to rise at a faster rate and companies will have to boost hiring.

The question now is: will this macroeconomic reading be able to alleviate fears in Europe? Temporary it will offer some supports to European markets, but will it last?

Let's find out.

Originally posted at www.77sigmatrading.com