Monti departure keeps investors cautious
00:00, December 10 2012
· By Sales Trading
European markets, having spent most of the day in negative territory, have slowly pulled back the majority of their losses as investors digest the news that Italian PM Mario Monti will be stepping down at the end of this month, two months before he was scheduled to, subject to the 2013 budget being approved.
While Italian bond yields have shot higher and the FTSEMib has stayed in negative territory, the fact that Monti is standing down is not so much of a surprise, more than the actual timing of his departure, which is why Italian stock markets are down sharply on the day and yields are higher.
Monti was due to step down in the New Year anyway so the fact he has pre-empted his own departure merely wrong footed the markets in terms of timing.
The downside on the FTSE100 was always likely to be fairly limited given the better than expected Chinese industrial production and retail sales data seen over the weekend, which has generated some encouraging signs of a possible rebound in that economy.
Amongst the worst performers we've seen Rolls Royce shares continue to fall on allegations that the company handed $20m to intermediaries in a bid to win contracts.
Banking shares have also had a poor day given the uncertainty in Europe with Barclays and Lloyds slipping back.
Standard Chartered's settlement with US authorities should help draw a line under recent share price volatility, and the fine itself $327m appears cheap when considering some of the numbers being bandied about when the scandal fist broke.
On the plus side Associated British Foods is higher ahead of this week's AGM.
US markets opened slightly lower initially, but have recovered some ground as the on-off negotiations into the US fiscal cliff continue to resonate and keep investors cautious.
Early moves include Apple shares, sharply lower after a negative note from Jeffries, while Best Buy was also lower, also on the receiving end of a downgrade.
Downside is likely to remain limited ahead of this week's FOMC meeting, the final one of 2012 on expectations that the committee will announce some new measures to replace the expiring "operation twist"
Rising Italian and Spanish bond yields have helped keep a lid on the euro today, though it has pulled off its lowest levels of the day.
The best performers have been the New Zealand dollar boosted by some positive manufacturing data out late last night while the yen has pulled back some of Friday's losses ahead of this week's forthcoming weekend election. Disappointing Q3 GDP data along with expectations of further Fed easing have limited the US dollar's gains here with the 82.85 level remaining a key level.
The pound has had a good day against the euro pulling back some ground after some of its recent declines, making the most of a day outside of the spotlight after last week's downgrade speculation. A slightly more upbeat outlook from the OECD about the UK's growth prospects may have also helped on the margins.
Oil prices have pulled back some of their recent declines on the back of the pickup in this weekend's Chinese industrial production and retail sales data. The slower inflation numbers have also raised expectations that the Chinese authorities won't be as reluctant to consider further stimulus measures if the need arises.
Gold prices have picked up a little in the wake of a slightly weaker US dollar ahead of this week's FOMC meeting.
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