Fear has once again spread through the markets as traders shunned a German Bund issue yesterday, with just under €4bn of the €6bn issue actually being taken up.
Bond traders and investors generally see the German government as one of the most stable, but this poor sale sent yields higher to 2.15 percent. The knock-on effect was the same for Italian and Spanish bonds, whose yields on 10-year bonds hit 6.99 percent and 6.71 percent respectively. To put this into perspective, Portugal, Ireland and Greece all needed bailouts when their yields hit 7 percent. Just to throw another ingredient into the mix, France has been told by rating agency Fitch that it may need more fiscal austerity in order to keep its AAA rating. The UK couldn’t escape the negativity, and the FTSE100 shed 1.3 percent making it 8 consecutive down days, which is its longest losing run since 2003. It closed at 5139.78, its lowest level since October 5th and the eurozone panic was once again a major reason.
As far as economic data is concerned, the US closure of markets due to the Thanksgiving holiday limits the output of figures. Investors main focus will therefore be on the second release of UK third-quarter GDP, due at 0930 GMT.
Unsurprisingly the euro fell yesterday after the poor sale of German Bunds, and even managed to hit its lowest level against the dollar since October 6th at 1.3320. It does seem that this morning though, there are a few risk-hungry traders looking to pick up the euro at bargain prices, as it has bounced marginally to 1.3375. Bear in mind that it is Thanksgiving today, and so this is likely to be playing a part in the slight strengthening we’re seeing in the euro.
Gold furthered its recovery in early trading yesterday, but after breaking through Tuesdays highs, its strength weakened and things soured for the bulls involved in the yellow brick, letting it fall 7.3 dollars to close down at 1692.3 by the end of the day. Once again, the greenback triumphed as a safety haven over the precious metal, and with the market struggling to remain above the 40 day moving average for the past few sessions, the short term technical picture is looking bleak. Currently, the shiny brick is trying to claw back some of yesterday’s damage, and is sitting up at 1696.9.
Among the commodity sector, crude oil suffered in the sell off on Wednesday as long positions were unwound ahead of today’s Thanksgiving holiday. Things weren’t helped by the poor bond auction in Germany either, and this put pressure on black gold prices, which would have fallen further if it wasn’t for a report from the Department of Energy showing a much larger than expected crude draw. At the time of writing, Brent is trading up at 107.62.