Italian borrowing costs reached breaking point on Wednesday after Prime Minister Silvio Berlusconi's promise to resign failed to raise optimism about the country's ability to deliver on long-promised economic reforms.
Italian 10-year bond yields shot above the 7 percent level that is widely deemed unsustainable, reflecting investors' concerns that they may not get their money back, a fear that also showed up in a jump in the cost of insuring against Italian debt default.
BNP Paribas SA and Commerzbank AG (CBK) are unloading sovereign bonds at a loss, leading European lenders in a government-debt flight that threatens to exacerbate the region’s crisis.
BNP Paribas, France’s biggest bank, booked a loss of 812 million euros ($1 billion) in the past four months from reducing its holdings of European sovereign debt, while Commerzbank took losses as it cut its Greek, Irish, Italian, Portuguese and Spanish bonds by 22 percent to 13 billion euros this year.
- Financials received a boost after Societe Generale reported a decline in their exposure to PIIGS nations, together with positive corporate earnings from Lloyds Banking Group
- According to a government source, Greece’s two major parties have not reached a deal yet on coalition government. However, according to a minister, the Greek PM has said farewell at the cabinet meeting, and has told the cabinet that by tonight he will probably have settled the name of the new PM
- According to reports, Italy’s main opposition parties will abstain in today’s vote. Also, Italy's Northern League leader Bossi asked Berlusconi to resign
- Bank of Canada governor Carney said the BoC stands ready to reactivate its extraordinary liquidity facilities if needed, adding that European bank deleveraging could trigger sharp swings in global liquidity
- SNB’s Jordan said that CHF is overvalued, however he also commented that it would be wrong to engage in a competitive devaluation of the currency
The global economy is showing signs of withstanding a European recession triggered by the debt debacle in Greece.
- Political and debt concerns pertaining to Italy remained the main focus in the market today. News that the Italian PM Berlusconi may resign soon strengthened appetite for risk, however the news was later denied by Berlusconi
- ECB's Mersch said that the ECB constantly discusses the possibility of ending bond-buys if Italy does not meet reform pledges
- Market talk of the ECB buying the Italian government debt helped the Italian/German 10-year government bond yield spread to come off its widest levels
- CHF came under pressure across the board following dovish comments from SNB's Hildebrand allied with an unexpected decline in the Swiss CPI data
FX traders are gearing up to test Jun Azumi’s resolve to keep intervening in currency markets to weaken the yen from its postwar high.
While Japan’s Finance Minister directed the central bank on Oct. 31 to sell what analysts estimate was about 8 trillion yen ($102 billion), sending it down as much as 4.7 percent against the dollar, the move failed to increase volatility. Traders avoid currencies with increasing price swings because they boost the odds of sudden losses.
The U.S. jobless rate unexpectedly fell in October while employers added the fewest workers in four months, reinforcing Federal Reserve Chairman Ben S. Bernanke’s prediction of a “frustratingly slow” recovery.
- There were conflicting reports that Greek PM Papandreou has resigned. It was also reported that the EU referendum is off the table
- Also, according to party sources, Greek socialist MPs are forging proposal for coalition government headed by former ECB vice-president Papademos
- EU Commission said that the only option is for Greece to stay in the Euro as treaties don’t foresee an exit from the Eurozone. It also said that the Greek tranche payment is conditional on austerity implementation
- Market talk that Qatar is willing to invest into the EFSF, however earlier the Chinese President said that the Eurozone problem should mainly be solved by Europe
- According to a senior G20 official, the G20 is assessing the cost of a Greek default
Greece's government was on the brink of collapse on Thursday, casting doubt on plans to hold a referendum on staying in the euro zone, as European leaders contemplated a Greek exit to preserve their single currency.
- Market talk that China may contribute towards the EFSF. Meanwhile, Japanese PM Noda said Japan will consider continued buying of EFSF bonds
- According to an EFSF spokesman, the EFSF is putting off the sale of its 10-year securities
- Weakness in the USD-Index boosted EUR/USD, GBP/USD and commodity-linked currencies
- According to the German foreign minister, the Greek rescue plan cannot be renegotiated
- Markets look ahead to the FOMC rate decision followed by Fed’s Bernanke press-conference
Greek Prime Minister George Papandreou said a referendum on Europe’s rescue package will confirm the nation’s membership of the euro as he stuck to plans to hold the vote amid signs his government may collapse.
Prime Minister George Papandreou's shock decision to call a referendum on Greece's bailout drew veiled threats from Germany on Tuesday and hammered markets edgy over the euro zone crisis.