Market Update 8/11/13

One line- Market weighs lower ECB rates with strong US GDP growth making the case for tapering, equities sold off while the dollar showed strength.

- The ECB surprised the markets by lowering rates yesterday from 0.5% to 0.25%. Economists predict that following the measure the bank will offer more long term refinancing options to European banks within 6 months. The euro fell 1% vs the dollar yesterday. http://uk.reuters.com/article/2013/11/08/uk-ecb-poll-idUKLNE9A700820131108

- US GDP figures yesterday surprised on the upside showing 2.8% annualized growth compared with a forecast of 2%. Jobless claims decreased by 9000 while the market looks ahead to non farm payrolls and the unemployment rate today. The news hit US stocks as it makes a tapering more likely in the near term. The S&P sold off 1.3%. http://www.bloomberg.com/news/2013-11-07/u-s-stock-index-futures-fall-before-gdp-report.html

- The S&P has downgraded France's credit worthiness to AA citing high unemployment and recent reforms to the tax system. The agency said that the governments fiscal reforms mean that unemployment is unlikely to fall below the target of 10% by 2016. French government bonds sold off with the ten year yield adding 23 basis points to 2.39%. http://www.ft.com/cms/s/0/7d380726-4840-11e3-a3ef-00144feabdc0.html?siteedition=uk#axzz2k2vuY75A

- Asian stocks sold off overnight in the wake of the US sell off, and European stocks are continuing the trend this morning. The Nikkei lost 1% while the FTSE is down 0.3%. The dollar rallied yesterday and is up 0.1% today, while the euro sold off. Commodities are up marginally this morning while rates are unchanged. http://www.ft.com/cms/s/0/f6ff5486-4824-11e3-b1c4-00144feabdc0.html#axzz2k2vuY75A

- John Kerry is set to make a trip to Geneva to negotiate with the Iranians regarding their nuclear programme. Yesterday Iran said it was close to reaching an interim nuclear agreement with the US and other world powers but that it faced opposition from Israel and obstacles in Congress. The Iranian foreign minister Mohammad Zarif said the two sides would begin to draft a preliminary agreement that would include moderate reductions in sanctions provided Iran freezes important parts of its nuclear programme. http://www.ft.com/cms/s/0/3be7c5ba-47d5-11e3-b1c4-00144feabdc0.html#axzz2k2vuY75A

- Twitter shares closed 73% higher following the IPO yesterday. The share price of $45 prices the company at $31.1 billion. An analyst from Evercore calculated that for this valuation to be justified every twitter ad must be as valuable as Google ads and they must triple the number of ads per user. The company has a quarter of the valuation of Facebook with just 8% of its revenues. http://www.ft.com/cms/s/0/aff12662-4768-11e3-b1c4-00144feabdc0.html#axzz2k2vuY75A

Data

S&P 1747.15 1.32%

FTSE 6677.16 0.30%
Nikkei 14,086.80 1.00%

EUR/USD- 1.3420 0.01%
USD/JPY- 98.20 0.11%
GBP/USD- 1.6074 0.14%

Gold- 1311.64 0.31%
Oil (Brent)- 103.84 0.37%

Copper- 325.45 0.18%

 

 

10 year yields

US- 2.61 (+1bps)
UK- 2.69 (+2bps)
Japan- 0.58 (0bps)