Overnight
# Equity markets fell as ECB President Draghi disappointed markets with a lack of immediate action on lowering European interest rates. The EuroStoxx600 fell 1.25% and the S&P500 fell 0.74%.
# The ECB kept rates unchanged at 0.75%. Whilst there was a lack of immediate measures announced, President Draghi did say that current elevated sovereign bond yields were unacceptable and that the ECB “may undertake outright open market operations of a size adequate to reach its objectives”. These comments appear to suggest that the ECB are one step away from joining the FED and BoE in ushering in an era of quantitative easing.
# Spanish bond yields jumped back over the 7% danger zone whilst German yields fell in a reaction that we have all become familiar with. Earlier in the night Spain had managed to sell €3.13b of bonds, which was more than its target. It sold 10-year bonds at a yield of 6.65% compared with a 6.43% yield at the last auction a month ago. However by the end of the night Spanish 10-year yields were at 7.17%.Coming days will tell if this is a kneejerk reaction or the start of another worrying leg down in European assets.
# The EUR/USD had a wild ride ending the session at the lower end of a very large range. After trading just under 1.2300 at our close the EUR jumped to a high above 1.2400 before getting crushed to 1.2150 on the disappointment. By comparison the NZD/USD moves were relatively muted meaning the NZD/EUR cross again forged new lifetime highs of 0.6660 ( We’re starting to get into pretty heady levels on this cross. In early 2009 this pair traded at 0.3850).
# The Bank of England (BoE) left its policy rate and bond-buying target unchanged Thursday as policy makers wait to see whether stimulus efforts and a push to boost bank lending rekindle growth in the U.K.’s ailing economy.
# US Weekly Jobless Claims came in at 365k against f/c 370kand a previous 357k revised from 353k.
# In a story that warms the heart of an ancient trader (being me), problems arose for one firm in the ‘algo’ trading space. Knight Capital Group, whose shares plunged 63% after the brokerage said it is pursuing ways to “strengthen its capital base” after glitches in its electronic-trading system caused price swings in about 150 stocks, a misstep the company said will likely cost it $440 million (algorithm trading is where super-fast computers make trading decisions based on complex mathematical formula’s imbedded in them. The trading is so based upon speed that some firms have physically relocated next to exchanges to ensure their flows are processed first. These systems can trade hundreds, if not thousands of trades per minute).
Ahead
# China non-manufacturing PMI
# U.S. Non-Farm Payrolls
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