Europe mid session: Euro comeback continues
Europe’s major stockmarkets have all traded up through Monday morning as the perception of a euro cataclysm appear to be receding.
At 12:35PM in Paris the benchmark Stoxx Europe 600 index, which includes a broad cross section of European equities, had climbed 0.65% to 242.30. The CAC 40 had also gained, adding 1.08% to hit 3,199. In Frankfurt, the DAX 30 had climbed 0.53% to 6,113, in Madrid the IBEX 35 was up 1.59% at 8,695 ,while in Milan the FTSE MIB had climbed to 15,841, a rise of 2.36%.
The news driving the markets is mainly from Italy, where the unelected new Prime Minister Mario Monti is set to present a €40bn austerity package before lawmakers this afternoon.
The plans include raising the pension age and ending the relationship between the rise in pensions and inflation. The government is requiring all transactions over €1000 to be placed electronically, thereby reducing tax avoidance. New taxes on luxury items such as yachts will be levied.
Meanwhile, Angela Merkel and Nicolas Sarkozy are due to meet later today to firm up proposals for ensuring the budgetary discipline of Euro area countries. These measures are expected to form part of a package to be discussed at a crucial EU heads of government meeting on the 9th of December.
The effect of these developments has been to bring down the so called risk premiums - the difference between German and other Euro area bonds. The difference between the interest on Italian and German 10 year notes is 398 basis points or 3.98 percentage points. For Spanish debt the figure is 306bp. Both are significantly down on Monday last week.
On equity markets RWE, the German utilities company, is the leading riser in Frankfurt, up 2%, followed by the steel producer Thyssen Krupp (+1.9%). In Paris, where the financial sector has massive exposures to the distressed Souther European states, it is a story of banks. BNP Paribas has risen 4.1% with Societe Generale not far behind, up 3.8% at 12:55pm.
At 11:55AM in London Brent crude for January delivery had risen 0.75% to $110.76 per barrel.
Gold had fallen 0.46% to $1,743 per ounce
The Euro has climbed 0.33% against the dollar this morning to hit $1.3436 at 12:58PM in Paris.