Rumoured ECB loans to IMF will keep all eyes on the euro

ONCE again, investors spent last week battling with the effects of Europe’s ongoing debt crisis. Italian, French and Spanish bonds all fell sharply despite support from the ECB.

The European Central Bank bought bonds in the secondary market as part of its Securities Markets Programme (SMP). However, yields on these troubled countries continued to rise as investors reacted to the failure of Eurozone policymakers and the ECB to agree on a course of action to wrest back control of the situation.

Towards the end of the week rumours grew that the ECB was planning to lend money to the IMF which would then bail out troubled countries. Such a move would bypass rules which prevent the ECB from buying sovereign debt directly. However, there are bound to be objections to the plan, specifically from Germany and the Bundesbank. So for now, traders and investors are keeping a close eye on the euro.

GFT quotes two-way prices on stock indices around the clock, even when the underlying markets are closed. The FTSE 100 index is called to open down 13 points at 5350. The German DAX is expected to open down 8 points at 5792 and the French CAC 40 is forecast to open down 6 points at 2,991.

This week brings a pile of important economic releases, starting today with US existing home sales. Tomorrow we will get another look at US third quarter GDP which is expected to be in line with last month’s reading of 2.5 per cent.

We will also see the minutes of this month’s FOMC meeting when Chicago Federal Reserve Bank president Charles Evans dissented on the policy statement. He felt further monetary stimulus was required to boost the US economy.

Wednesday sees the release of the HSBC Chinese Manufacturing PMI, and Services and Manufacturing PMIs from Germany, France and the Eurozone. There is also a crush of US data including Durable Goods and Consumer Sentiment ahead of Thursday which sees all US markets closed for Thanksgiving. Friday is likely to be quiet as many US traders will grab a four-day weekend.

Martin Slaney is director of global product management at GFT