Choppy day for European share markets which have spent the session flipping between gains and losses with little data from the euro zone to shake markets up. French industrial output surged but Italian GDP was weaker than expected, sliding 0.6% in Q1, a reaffirmation that the periphery in the euro zone continues to remain deep in a recession with little help from the ECB to stimulate the economy as demonstrated last week by the governing council. In afternoon trade, equities in the US got a bit of a boost after S&P ratings raised the US’s credit rating outlook to stable from negative. S&P stripped the US of its AAA rating back in 2011 and has maintained a AA+ rating on the country since. S&P is feeling more optimistic on the US economy and today’s move certainly would suggest that the country’s credit rating will not be under the threat of another downgrade. Fedspeak caught some attention in afternoon trade; sitting on the fence with monetary stimulus, Fed head of St. Louis, James Bullard said weak inflation readings may prompt the Fed to continue with its stimulus programme but did say the improvement in the jobs market does support a reduction in the pace of buying asset purchases. Friday’s US payrolls provided support to US markets on Friday and Asian indices overnight but poor data from China sapped sentiment. Japan’s economic indicators were better, with GDP being revised higher and trade surplus coming in better than expected, helping the Nikkei index rally, snapping a three-day losing streak. In Europe, Greece’s ASE index slid by over 5% during the session on reports that the government was not able to dispose of Depa, the state owned gas company. Depa is one of the host of big assets the Greeks net to get rid of in order to meet the EU privatisation target of EUR2.6billion by the end of the year. So this is a big setback for the government as it hasn’t been able to muster up confidence to foreign investors to attract a successful sale. The failure to do so not only undermines the confidence of the Greek government but also shines a negative light on Greek state-owned assets which are regarded as too risky and toxic to snap up despite the relatively cheap price-tags. As Depa is one of many assets yet to unload, markets are concerned Greece will not be able to reach its target, will fail in selling other assets and that would lead to euro zone debt tensions to resurface once again. ________________________________________ Ishaq Siddiqi Market Strategist
Posted on: Mon, 10 Jun 2013 14:51:41 +0000
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