Renewed worries about the eurozone put global Equities and the euro under pressure and drove investors to the safety of “core” government bonds, as
“Fears over eurozone contagion are becoming a self-fulfilling prophesy,” said Torben Kaaber, CEO of Saxo Capital Markets.
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Global Market Overview
The FTSE All-World equity index was down 0.3 per cent, as the S&P 500 slipped 0.3 per cent by midday in New York and the FTSE Eurofirst 300 provisionally closed 0.3 per cent lower.
On both Monday and Tuesday, the S&P 500 rose to within striking distance of its 2007 record closing high but ultimately disappointed those hoping to see it achieve a new peak.
The euro, meanwhile, was down 0.6 per cent against the dollar, having earlier touched a fresh four-month low of $1.2752, while Spanish and Italian government bond yields were both sharply higher.
Italy came back into the market’s crosshairs after Pier Luigi Bersani, head of Italy’s centre-left alliance, ruled out forming a coalition government and was reported as saying that only an “insane person” would want to govern the country.
This was quickly followed by a disappointing auction of €6.9bn of Italian debt. “Demand for both the 5-year and 10-year was lower than previously, reflecting ongoing political uncertainty in Italy and lingering concerns in Cyprus,” said Nick Stamenkovic, macro strategist at RIA Capital Markets.
The news out of Italy found a market already wary of the eurozone as investors continue to fret about the impact of Cyprus’s banking woes.
Although the island was saved by a €10bn bailout at the start of the week, the rescue scheme will inflict severe losses on wealthier depositors. [Dear Guest/Member you can't see link before click here to register] for a seven-day period to prevent a run on the banks, which are expected to reopen on Thursday after a near two-week break.
The uncertainty over Cyprus was reflected in fresh gains for highly-rated government bonds. The yield on the German Bund was down 6 basis points at 1.28 per cent while that on the 10-year US Treasury was also 6bp lower at 1.85 per cent. The dollar climbed to a seven-month against a basket of currencies, while gold was up 0.4 per cent at $1,605 an ounce.
The eurozone worries have hobbled the market’s recent “risk asset” rally, which alongside better US economic data has also been fed, many investors believe, by the ongoing ultra-accommodative policies of the world’s major central banks – such as the [Dear Guest/Member you can't see link before click here to register].
And one of these monetary guardians was again in focus on Wednesday after Reuters reported sources saying the Bank of Japan was likely to begin its open-ended programme of asset purchases immediately, rather than in 2014 as originally expected.
This further weakened the yen in Asian trading – though it is now little changed versus the dollar – and was enough to help Tokyo’s Topix index shrug off the impact of 80 per cent of its constituents trading without dividend rights and gain 0.2 per cent.
Investors will be looking ahead to the Bank of Japan’s policy meeting next week, the first under new governor [Dear Guest/Member you can't see link before click here to register], who is likely to introduce new easing measures in an effort to banish deflation.
“Fears over eurozone contagion are becoming a self-fulfilling prophesy,” said Torben Kaaber, CEO of Saxo Capital Markets.
More
On this story
Global Market Overview
The FTSE All-World equity index was down 0.3 per cent, as the S&P 500 slipped 0.3 per cent by midday in New York and the FTSE Eurofirst 300 provisionally closed 0.3 per cent lower.
On both Monday and Tuesday, the S&P 500 rose to within striking distance of its 2007 record closing high but ultimately disappointed those hoping to see it achieve a new peak.
The euro, meanwhile, was down 0.6 per cent against the dollar, having earlier touched a fresh four-month low of $1.2752, while Spanish and Italian government bond yields were both sharply higher.
Italy came back into the market’s crosshairs after Pier Luigi Bersani, head of Italy’s centre-left alliance, ruled out forming a coalition government and was reported as saying that only an “insane person” would want to govern the country.
This was quickly followed by a disappointing auction of €6.9bn of Italian debt. “Demand for both the 5-year and 10-year was lower than previously, reflecting ongoing political uncertainty in Italy and lingering concerns in Cyprus,” said Nick Stamenkovic, macro strategist at RIA Capital Markets.
The news out of Italy found a market already wary of the eurozone as investors continue to fret about the impact of Cyprus’s banking woes.
Although the island was saved by a €10bn bailout at the start of the week, the rescue scheme will inflict severe losses on wealthier depositors. [Dear Guest/Member you can't see link before click here to register] for a seven-day period to prevent a run on the banks, which are expected to reopen on Thursday after a near two-week break.
The uncertainty over Cyprus was reflected in fresh gains for highly-rated government bonds. The yield on the German Bund was down 6 basis points at 1.28 per cent while that on the 10-year US Treasury was also 6bp lower at 1.85 per cent. The dollar climbed to a seven-month against a basket of currencies, while gold was up 0.4 per cent at $1,605 an ounce.
The eurozone worries have hobbled the market’s recent “risk asset” rally, which alongside better US economic data has also been fed, many investors believe, by the ongoing ultra-accommodative policies of the world’s major central banks – such as the [Dear Guest/Member you can't see link before click here to register].
And one of these monetary guardians was again in focus on Wednesday after Reuters reported sources saying the Bank of Japan was likely to begin its open-ended programme of asset purchases immediately, rather than in 2014 as originally expected.
This further weakened the yen in Asian trading – though it is now little changed versus the dollar – and was enough to help Tokyo’s Topix index shrug off the impact of 80 per cent of its constituents trading without dividend rights and gain 0.2 per cent.
Investors will be looking ahead to the Bank of Japan’s policy meeting next week, the first under new governor [Dear Guest/Member you can't see link before click here to register], who is likely to introduce new easing measures in an effort to banish deflation.