ZuluTrade Blog

Eurogroup meeting ended without an agreement on Greece...

Market View | Wednesday, November 21, 2012 3:59 AM GMT

 Good Morning ,

 

- On Tuesday morning, the euro quite easily regained losses after the Moody’s downgrade of France. Investors hoped that the

Eurogroup would finally strike a deal on Greece. This brought EUR/USD and EUR/GBP at/close to first important resistance

levels. This morning’s failure to remove Greece from the agenda triggers renewed euro selling.

 

- After nearly 12 hours of talks, euro zone Finance Ministers, the IMF and ECB

failed to reach a consensus on how to get the Greek debt down to a

sustainable level, without such an agreement the next aid tranche cannot be

disbursed to Athens. International lenders will reconvene next Monday .

 

- Overnight, the Eurogroup meeting ended without an agreement on Greece. The water between official creditors is still too deep and they will reconvene next Monday. Ahead of the meeting, Greece fulfilled all prior actions so it was really up to Europe. Several options were on the table but a final consensus wasn’t reached. Debt relief (by the official sector) or throwing extra money to Greece is still an absolute no go (for now) for Europe, so they are scrambling to find all sorts of technical measures (lowering interest rates, extending maturities…). Also the debt sustainability issue isn’t solved yet, although Europe tried to charm the IMF by promising that the debt to GDP ratio would fall below 120% by 2022 (the IMF sticks to 120% of GDP by 2020). In a statement, Juncker said they interrupted the meeting to allow for further technical work on some elements of the package. The failure (again) to agree a deal for Greece is a negative for sentiment on EMU bond markets today.

 

- On intra-EMU bond markets, French bonds underperformed following Monday

night’s Moody’s downgrade to Aa1. French spreads added 2 bps across the

curve, compared with -1 bps for (semi-) core countries. EFSF bonds were also

under pressure yesterday. When S&P downgraded France earlier this year, the

EFSF lost its AAA-rating three days later.


 - Overnight, Asian equities trade mixed. Japanese and Chinese equities trade positive after erasing losses on disappointment over the Eurogroup outcome in the final hours of Asian trading. Japanese trade data disappointed with a sharper than expected decline in exports but this didn’t impact markets.

 

- ECB’s Coeure warned yesterday that euro zone banking sector problems risk

dominating central bank policymaking to the neglect of its price stability

mandate.

 

- US Federal Reserve Chairman Ben Bernanke said yesterday that 2013 could be a

very good year for the US economy if politicians can strike a quick deal to

avoid the so-called fiscal cliff. Bernanke added that a credible long-term

framework to put the federal budget on a sound path was needed, but warned

against drastic action that would harm the recovery.

 

- Japanese exports weakened more than forecast in October hurt by the fallout

from a diplomatic row with important trading partner China and weak global

demand, adding to the signs that the Japanese economy might be slipping into

recession

 

-  Today, the eco calendar contains the US initial jobless claims and University of

Michigan consumer confidence. The Bank of England will publish the Minutes of

its latest MPC meeting.

 

 

Have a nice day !

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