adminMarkets were betting the ECB would cut its key interest rates, already at all-time lows, and possibly even announce additional anti-crisis measures, while the Bank of England was similarly expected to provide stimulus to boost Britain’s recession-hit economy.
Following last week’s EU summit, which delivered more than originally hoped for in moves to break the debt crisis, financial market tensions appeared to have eased somewhat. Stock markets have generally been higher all week and in late morning deals yesterday, London’s benchmark FTSE 100 advanced 0,28 percent to
5 700,78 points, Frankfurt’s DAX 30 index rose 0,56 percent to 6 601,00 points and in Paris the CAC 40 edged up 0,10 percent to 3 271,55. By contrast, the euro eased against the dollar to US$1,2512.
Nevertheless, with the details of many key aspects of the summit measures still to be worked out, doubts are beginning to re-emerge on the financial markets, especially for the eurozone’s problem countries
Spain paid sharply higher borrowing costs on benchmark 10-year bonds yesterday, with the yield — the rate of return earned by investors — jumping to 6,430 percent from 6,044 percent in the last comparable sale on June 7.
Meanwhile, Ireland — one of the earliest victims of the crisis — returned to the debt markets for its first issue of bonds in nearly two years, raising the target amount of 500 million euros.
In Greece, auditors from the ECB, the EU and the International Monetary Fund, who are in Athens to review the crisis-wracked country’s finances and progress on bailout conditions, were meeting Prime Minister Antonis Samaras, who is hoping for some easing in the tough measures Athens agreed to in return for bailouts.
As the positive sentiment engendered by last week’s summit threatens to fizzle out, the financial markets are looking to central banks to keep the momentum going.
“Eyes will be on Europe once again but this time it will be to see what monetary policy modifications the ECB and Bank of England will take to counter a region in decline,” said Andrew Taylor, market strategist at GFT trading group.
The Bank of England is set to keep its key interest rate at a record-low 0,50 percent — where it has stood for more than three years — and pump out another US$78 billion in fresh cash, analysts said.
The central bank’s Monetary Policy Committee has so far poured some £325 billion into the economy under its Quantitative Easing stimulus policy since March 2009, when it also slashed its key rate to its current all-time low level. — AFP.
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