MidSession Review 30/08/12

The Italian auction results were as strong as expected, performance partly attributed to the upcoming ECB meeting. According to Nomura Italy has now completed 66% of their annual medium-long term issuance needs.

The Italian government sold a total amount of 7.29 Euro billion of debt versus Eur 5.25 -7.50 billion planned:

• 0.793 billion euro CCTeu June 2017, target was Euro 0.5-1 billion, bid to cover ratio 2.42 versus 1.81 at previous auction,the yield was 5.33 percent versus 4.60 percent at previous auction.
• 2.5 billion euro BTP 4.75% June 17 target was Euro 1.75-2.50 billion, bid to cover ratio 1.46 versus 1.34 at previous auction, the yield was 4.73 percent versus 5.29.
•  4.0 billion euro BTP 5.5% November 2022, target was Euro 3-4 billion, bid to cover ratio 1.42 times versus 1.29 at previous sale, the yield was 5.82 percent versus 5.96 percent.

The Italian auction was unable to drive equity benchmarks higher, the morning session closed  with Italian Ftsemib 0.58% lower to 14,857.10, Spanish Ibex 0.88% lower to 7,241.60 as Spanish 10 year government bond yield rose 1.72% to 6.574. While  benchmark German bunds advanced for the sixth time in seven days, with the yield dropping five basis points. A gauge of European credit risk increased for a seventh day. The German Dax was down 0.79% to 6,955.03 pressured by worst than expected unemployment change number, the index came out at 9k versus 8k expected, increasing the unemployed workforce for a fifth straight month: again supporting the view that Germany is just another piece of the European domino. The Stoxx50 traded 0.61% lower to 2,419.48 as the banking sector fell 1.15%.

The common currency was 0.14% higher against the dollar at 1.2547$, edging towards last weeks high of $1.2590, with any hint of Fed easing likely to weaken the greenback further. The euro also gained after Chinese Premier Wen Jiabao, who met with German Chancellor Angela Merkel in Beijing today, said he was confident the euro zone could pull out of its debt crisis and that China was willing to keep buying the region's government debt. Wen said Beijing would step up talks with the European Union, the European Central Bank and the IMF – also known as the troika – to help struggling euro area nations. Reuters report.

In a day when investors are looking forward for Bernanke to show his cards, uncertainty is the word of the day. The uncertainty over how far the Fed will satisfy market speculation that it will unveil another round of QE.

Gold suffered today from the uncertainty climate falling 0.30% to 1654.5$ an ounce as nervousness ahead of the meeting of central bankers in the United States curbed risk appetite.

In this day of uncertainty as a trader your job should be to control the only thing you have control on : “yourself”.

Originally posted at www.77sigmatrading.com