European Closing Thoughts

We highlighted in the morning meeting the thick macro economic calendar with GDP numbers and ECB monthly bulletin followed by key US data.

European GDP numbers came as expected or better on the Quarterly figures giving a little pop to the upside in most markets. The ECB monthly bulletin mostly echoed Draghi's November policy statement with cuts to GDP estimates and increases in the inflation expectations.

As has been the case recently Spain and Greece continued to dominate market talk. Talk of Spain considering an IMF credit line as an alternative to the European bailout helped stabilize the Euro currency. Various ECB and EU commentators were also on the wires again highlighting the irreversibility of the Euro and reminding us once again that the ECB stands ready should Spain request a bailout.

In Europe the Dax remained choppy on the weaker German year on year GDP figure losing 0.8% on the day, however the Spanish IBEX gained ground on the options pertaining to Spain, gaining 0.4% on the day. The IBEX was the single green figure in a sea of red though with other European indexes all falling on continued concerns; the FTSE 100 lost 0.82%, the Italian FTSEmib also losing 0.5% and Euro Stoxx50 losing 0.4%.

US data in the afternoon session prior to US open highlighted a better than expected Empire number but a poor jobless number coming in at 439k as opposed to the 375k expected. This put pressure on the dollar and allowed the Pound and Euro to recover further against the dollar.

Towards the close IMF reiterated their targets of debt to GDP ratio of 120% for Greece by 2020 and highlighted the challenges surrounding the US fiscal cliff which could have global consequences  the Fed themselves highlighting the likelihood of a US recession should the challenge not be resolved.

The rather markets responded to this mixed bag of data the S&P500 fell 0.2% breaking new lows since August with the Dollar Index following suite in a push lower losing 0.2% as well.

Looking to this evening Fed Chairman Bernanke and FOMC member Fischer will be speaking, this could well cause some further dollar and US market weakness.

Originally posted at www.77sigmatrading.com