The European markets and the US markets rallied on Friday on account of the news that the Italian PM would be stepping down,and the approval of the austerity measures by the Parliament.As expected the Italian PM stepped down on Saturday.The Italian 10 year bonds were trading at 6.48% well below the critical 7% levels.A couple of days(November 9th) back it was trading above 7.5% that would have pushed Italy into insolvency.After Silvio Berlusconi's announcement that he would resign once the austerity measures are passed,things seemed to settle down.The short selling ban which was supposed to expire on 11th November in Italy was extended till January 15th to limit the volatility in the market. FTSE MIB closed by almost 4% on Friday.
Economist Nouriel Roubini says, Italy's fiscal reforms will fail to borrow money from the markets at affordable rates which would increase the chance of a debt default and its exit from Euro zone. ECB Governing Council member Athanasios Orphanides said in an interview on Sunday,"A possible haircut of the Greek debt is unnecessary and it is harmful for Greece and for the euro area as a whole. I still hold this view."
After the 10 year bond yields of the world's third largest Bond Market(Italy) started trading above the 7% mark, the attention is shifted to Italy from Greece.The European Financial Stability Facility (EFSF) announced last week that it had sold €3bn 10-year bond to support Ireland.The shocking part of this bond sales is, to achieve the target the EFSF had spent more than € 100m to buy its own bonds.This comes at a time when the EFSF officials had spent weeks in traveling all over the world to persuade key investors(Read,China,Japan) to buy its bonds.This is going to set alarm bells ringing in the minds of the future buyers.
In our markets Sensex dropped 1% led by the dismal IIP numbers.KFA fell down by 9.63% on account of cancellation of flights led by the resignation of pilots in large numbers and the cash and carry method suggested by the oil marketing companies for the airliner at the airports.Top banks like ICICI and SBI which have over 5% stake in KFA , fell down by 3.99% and 3.52% respectively.
Events to watch today- Italian bond auction. EU Industrial production data for September.
As expected the Asian markets are trading in the positive territory today following the Friday's rally in US and European indices.
SGX Nifty is trading at 5260 at 07.05 AM IST.
FTSE futures is trading up by 15 pts at 07.05 AM IST.
Dow Futures is trading up by 53 pts at 07.05 AM IST.
Today is November 14th.Children's day.Buy chocolates for the kids in your neighborhood.And always remember,when you BUY something,have a STOP-LOSS.Ask the children to Brush(Stop loss-Read,Tooth decay) their teeth after having the chocolate.Have a meaningful day :)
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