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Hot out of the oven, the big news out of Europe
overnight came from Spanish PM Mariano Rajoy,
who announced that he would be ripping €65bn out of the economy over the next
two years as he announced budget cuts to satisfy the EC in return
for the bank bailout. Among the measures:
- VAT
rising from 18pc to 21pc
- For
the newly unemployed, benefits will be cut from 70pc of basic salary to 50pc
- Certain
bonuses paid to top civil servants will be cut and the Christmas bonuses for
top public officials will be eliminated
- Public
administration is to be reformed to save €3.5bn including a drastic cut in the
number of publicly-owned enterprises
- Ministerial
budgets will be cut by €600m this year
·
Also in the cuts was a subsidy to the coal mining industry,
members of which took to the streets and clashed with riot police in Madrid,
6 demonstrators were hospitalised.
·
USDMYR opened at 3.1800-3.1860 and as usual we expect very range trading and light flows for today.
·
The markets rewarded Spain
however with their 10yr yield retreating 23bps to 6.5%, which is
60bps of the high made earlier this week. Italian borrowing costs fell 13bps.
·
German CPI was the only significant
data out and it fell 0.1% MoM in line with expectations,
leaving the YoY figure at 1.7% which will make the ECB feel more comfortable
with their easing measures.
·
In the US,
stocks fell and gold was hit as the FOMC
minutes poured cold water on hopes the Fed is close to launching the much
anticipated QE3. “A few members” thought additional easing would be
necessary while a few thought not and a few more thought they should wait and
see. So we’ll need to see further deterioration in the data before the trigger
is pulled.
·
Stocks in Europe were mixed
with the DAX, FTSE and IBEX (Spain) rising and the CAC
and FTSE MIB (Italy)
falling slightly.
·
Safe havens assets also rose with
Bund yields falling 5bps and gilt yields off 2bps as Germany issued yet more debt at
record low yields.
·
In the US of A, the S&P
recovered from a 0.5% fall following the FOMC release to close
exactly flat while the DOW finished down 0.38%. O
·
Oil and gas stocks were the best
performers as oil rose 2.72% to $86.17. Gold
recovered also after falling $10 to close flat at $1577.20. US
treasuries were flat with the yield hovering just above 1.5%.
·
The EURUSD also made fresh lows on the FOMC minutes, it ‘s
down at 1.2239 last while AUDUSD made gains as market short EUR and long AUD
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