Market Review – 11/07/2011 21:57 GMT
Euro tumbles on fear of European debt crisis is spreading
The single currency plunged across the board on Monday on concerns that European debt crisis could spread to larger European economies like Italy and Spain, stoking broad-based risk aversion. DJI and S&P 500 ended the day down by 151 points or 1.2% and 24 points or 1.8% respectively.
Italian 10-year bond rose as much as 41 basis points to 5.68%, sending the premium over German bunds to a euro-lifetime record high of 283 basis points.
Despite opening higher in New Zealand market, st speculators sold euro across the board on weekend Reuters news that European Council President Herman Van Rompuy had convened an emergency meeting of top EU officials for Monday morning to discuss efforts to assemble a 2nd rescue package for Greece as well as growing concerns about market pressure on Italy, price fell from 1.4300 to as low as 1.4187 in Asia and intra-day selloff accelerated in European midday after triggering stops below 1.4150 and then 1.4073 on contagion fears, price eventually tumbled to a seven-week low of 1.3986 in New York morning before staging a minor recovery. Eur/jpy, eur/gbp and eur/chf also tanked from 115.12 to a multi-month low of 112.35, from 0.8891 to 0.8797 and from 1.1948 to a fresh lifetime low of 1.1672 respectively.
The British pound tracked intra-day movement of the single currency closely. Despite Friday’s strong rebound from 1.5931 to 1.6078, intra-day weakness in euro continued to pressure cable through out the day, the pound breached June’s low of 1.5912 to a day’s low of 1.5882 in New York morning before staging a modest recovery.
Versus the Japanese yen, although the dollar staged a recovery from last Friday’s low of 80.51 to 80.83 in early European morning, active cross buying in the Japanese yen sent price down to as low as 80.11 in New York midday before a correction on short-covering. Aud/jpy and gbp/jpy tanked from 86.62 to 85.30 and 129.42 to 127.45 respectively.
Euro FINMIN released a statement after an emergency meeting that ‘ministers have tasked a working group to propose measures to reinforce current policy response to Greek crisis; ECB confirms its position that credit event or selective default should be avoided; we reaffirm commitment to safeguard stability in euro area; we stand ready to adopt further measures to improve euro area systemic capacity to resist contagion.’
Data to be released on Tuesday include:
U.K. BRC retail sales, RICS house prices, Japan Domestic CGPI M/M n Y/Y, Tertiary Industry Index, Japan BoJ 2-day meeting starts today, Australia NAB business confidence, German CPI final M/M n Y/Y, HICP final M/M n Y/Y, EU FINMINs meeting in Brussels, U.K. BoE Deputy Governor Bean Speaks, U.K. CPI M/M n Y/Y, RPI M/M n Y/Y, Trade balance, DCLG house prices Y/Y, U.S. Trade balance, FOMC meeting minutes, Canada Trade balance, Imports and Exports.