Reply #42: Spain, Italy recover to buck the trend [View All]

[Ghost Dog]

Europe midday: Spain, Italy recover to buck the trend LONDON (SHARECAST) - Benchmarks in Spain and Italy have escaped the nosedive on Friday lunchtime as economists digested the comments made from European Central Bank (ECB) president Jean Claude Trichet the day before.

One of the ‘details’ of yesterday’s press conference by Trichet that (apparently) vexed the markets the most was the impression that the purchase of Italian and Spanish debt had somehow been vetoed. However, comments made today by ECB Governing Council member Luc Coene have provided some optimism in these heavily indebted nations.

“"We already did it in the case of Greece, Portugal and Ireland, so I don't see why there would be lets say a sort of veto against that possibility,” he said in a radio interview. "I certainly think the central bank is ready to take significant measures to help the situation <…> But first countries need to take measures."

The FTSE MIB in Milan rose 66 points to 16,194, while the Ibex in Madrid jumped 81 to 8,767. However, the sell-off continued elsewhere with the Dax in Frankfurt losing 2.34%, falling 150 to 6,265. The Cac in Paris was down a lesser 0.76%, 25 points lower at 3,295.

/... http://www.sharecast.com/cgi-bin/sharecast/story.cgi?story_id=4416962

The pressure eased in late morning trading, however, on speculation that the European Central Bank was in the market buying bonds in an effort to hold back the tide and gain time for the eurozone.

The spread or difference in the rate of return on Spanish 10-year government bonds and the benchmark German bond, the strongest in the eurozone, was 417 basis points (4.17 percentage points) and 416 basis points for Italian debt in early deals.

At 11:40 SA time, the spread had narrowed sharply to 376 basis points for Spain and 385 basis points for Italy.

The yield on the Spanish 10-year bond still remained above the danger level of six percent but was down at 6.053 percent, off early highs of 6.310 percent and compared with 6.271 percent at the close Thursday.

In contrast, the German 10-year bond was at just 2.316 percent, reflecting how fearful investors have become, seeking to put their money into the safest assets available as the markets are roiled by debt and growth concerns. The French 10-year bond was meanwhile at 3.210 percent, up from 3.123 percent, with its spread to the German paper at a record 89.5 basis points.

/... http://www.iol.co.za/business/international/spanish-italian-debt-premiums-hit-record-1.1112920