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By Gaurav Kashyap, Head of DGCX Desk, Alpari ME DMCC
The Euro moved higher in trading this week following a successful round of bond auctions across Europe - Germany, Portugal, Spain & France all conducted auctions with the common theme of lower yields and higher bid-to-cover ratios.
Germany raised EUR3.44bn at an average yield of 0.17% with a bid-to-cover ratio of 2.2 (up from 1.4 at a similar auction one month earlier). Portugal also raised EUR1.25bn of 11 month T-bills at an average yield of 4.986% and a bid-to-cover ratio of 2.14. Spain sold EUR3.009bn in long term 10 year bonds at an average yield of 5.04% (down from 5.545% at a similar auction in December) while the 5 year debt sale raised EUR1.3bn at an average yield of 4.021%. And finally, France sold EUR3.43bn of 3 year bonds with an average yield of 1.89%, the yield down from 2.82% at a similar auction conducted in November.
The all round healthy European bond auctions were nicely complemented with some improving data -CPI across the Eurozone dropped to 2.7% act v 2.8% exp / 3.0% prev while German as well as Euro area ZEW figures improved.
US banks post mixed results
Across the pond, US markets posted some healthy gains in a shortened trading week. We are in the middle of Q4 earnings and it's been a mixed bag for the US banks. Banking giant Goldman Sachs reported better than expected earnings at $1.84 act v $1.23 exp despite falling revenues of $6.05bn act v $6.39bn exp.
Bank of America announced earnings per share of 15 cents on a net income of $1.99bn during Q4. Morgan Stanley on the other hand reported a net loss of $250m at -14 cents. Wells Fargo reported earnings per share of 73 cents on income of $4.1bn during the fourth quarter. Citigroup reported a profit of $1.16bn at 38 cents a share on the back of falling revenues.
On the tech side, Microsoft and Intel announced earnings largely in line with expectations with the surprise being Google which announced earnings per share of $9.50, missing Wall Street's expectations of $10.49. On the economic docket, US industrial production improved, but less than expectations at 0.4% act v 0.5% exp / -0.2% prev. Treasury data shows that more and more sovereigns are looking towards American paper, despite China and Russia cutting down their holdings - US total net TIC flows came in at $48.6bn act v $50bn exp / -$48.6bn prev. And finally, core producer prices came in at 0.3% act v 0.1% exp/ 0.1% prev on the month on month. Year on year improved to 2.0% act v 2.8% exp / 2.9% prev.
Weekly jobless claims dropped 50K which also supported risk moods in US equity markets.
New Zealand, Australia see currencies dip
In other news, data from New Zealand showed that consumer prices had slowed to 1.8% act v. 2.6% exp / 4.6% prev which saw the Kiwi slide against its peers. Slowing consumer prices have a negative impact on interest rate expectations. And finally, jobs figures from Australia hinted at softening hiring from Down Under. Data showed that 29.3K jobs were cut during the month of December, this is worse than the previous month's losses of 7.5K. The part-time job picture also worsened with 53.7K temp workers losing work.
The Aussie sold of rather aggressively following the data but found support after data showed that China's Real GDP improved more than expected (YoY Real GDP 8.9% act v 8.7% exp). In the UK, the jobs picture was slightly more mixed - the claimant count rate was unchanged while jobless claims dropped to 1.2K act v 7.0K exp / 3.0K prev. The ILO unemployment rate increased to 8.4% act v 8.3% exp / 8.3% prev.
Looking at the week ahead, pricing action will continue to be driven by the results of the European bond auction schedule expected to take place with Germany, France and Spain all conducting auctions.
Staff
