Market news
13.01.2011, 09:08

Asian session review: Euro strengthens before bond sales

The euro holds higher before bond sales.
Yesterday Portugal sold 599 million euros ($778 million) of bonds due in 2020 at a yield of 6.716 percent, the country’s debt management agency said today. That compares with 6.806 percent at the previous auction on Nov. 10. Investors asked for 3.2 times the amount of 10-year bonds sold, up from 2.1 times at the November sale. Spain and Italy will sell bonds tomorrow.
European leaders are contemplating aid for Portugal, debt buybacks, lower interest rates on rescue loans and guarantees against excessive debt, according to two people with direct knowledge of the talks.
The plan, which may include a loan to Portugal of about 60 billion euros ($78 billion) and purchases of outstanding Greek debt, would mark an attempt to contain the crisis that has frustrated unprecedented efforts by policy makers to calm markets and raised questions on the health of the euro economy.
Euro-area finance ministers will discuss elements of the package next week, though the debate is so sensitive in Germany that decisions may wait until a scheduled summit of political leaders on Feb. 4, said the people, who declined to be named because the deliberations are private.

EUR/USD printed lows at $1.3090 before recovered to $1.3140.
GBP/USD holds within $1.5714/$1.5780.
USD/JPY also between Y82.90/Y83.14.

UK data for Thursday at 0930GMT includes industrial production and manufacturing output, where IP is seen rising 0.7% m/m, 3.4% y/y and the manufacturing measure is expected to rise 0.5% m/m, 5.4% y/y.
The European day is dominated by policy decisions from the Bank oF England at 1200GMT and the ECB at 1245GMT. Neither of the central banks are expected to deliver a change in policy with the Bank of England MPC still split.
However, the usual post-meeting press conference by ECB President Jean-Claude Trichet will be as closely-watched as ever amid the recent peripheral bond buying by the ECB and ongoing concerns over the peripheral markets.
US data also starts at 1330GMT with weekly jobless claims data, trade data and also PPI.
Initial jobless claims are expected to fall 3,000 to 406,000 in the January 8 week.
The international trade gap is forecast to widen to $41.0 billion in November after narrowing to $38.7 billion in October. Analysts will be watching the data closely to help set up their 4Q GDP forecasts.
Meanwhile, producer prices are expected to jump 0.9% in December. The core PPI is expected to rise 0.2%, as the power to pass on higher input prices remains very weak.

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