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Strong eurozone bond auctions hint towards successful LTRO

The sell-off in equity markets towards yesterday’s market close was largely attributable to Chairman of the US Federal Reserve, Ben Bernanke. Whilst stressing in his testimony to politicians on Capitol Hill that the jobs market was “far from normal” and that interest rates are likely to stay low until 2014, he failed to hint towards the third round of Quantitative Easing “QE3” that the market would have welcomed. Asian shares were lower overnight.

With markets under pressure, sentiment was lifted by a raft of successful bond auctions across Europe this morning, in what appeared to be beneficial effects from yesterdays huge lending by the ECB (3 year LTRO). Spain sold €4.5 billion of two, three and four year maturity bonds, paying a lower yield than at previous auctions. France was also a beneficiary, selling €3.92 billion of ten year debt at an improved average yield of 2.91%.

Economic data from the US however showed a mixed picture. Initial jobless claims fell by 2,000 to 351,000 last week, beating analysts’ expectations and representing data that is near four year lows. The recent data has been relatively upbeat and suggests the labour market is gaining positive momentum. Less encouragingly, an ISM Manufacturing purchasing managers index fell to 52.4 today, from 54.1 previously and against expectations of a marginal increase.

On the reporting front, WPP posted a strong set of 2011 results, the world largest marketing services group reporting an 18% increase in pre-tax profits to £1 billion. Growth was particularly strong in the emerging markets of Asia and Latin America, sufficient to boost the group’s full year dividend by 38% to 24.6p per share. Shares closed higher by 3.4% to 831p.

The FTSE 100 index initially opened up lower although quickly regained positive territory before continuing its ascent throughout the day. The index finished 55 points (0.9%) higher at 5927.

This was posted in Bdaily's Members' News section by James .