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US housing data provides afternoon boost to markets

Markets stabilised today after yesterdays heavy selling, with major European indices opening flat if not marginally higher. This came ahead of more key bond auctions across the eurozone, with Holland dragged into this category.

Italy paid 3.36% for two year zero-coupon bonds (debt that does not pay a coupon but instead trades at a discount, offering investors their reward through a capital uplift at maturity), ahead of the 2.35% paid only a month ago. A Spanish auction of short term debt saw the country’s borrowing costs double compared to their last auction. There were nerves ahead of the Dutch auction given the collapse of the government yesterday, although the €1.995 billion worth of bonds were sold in line with borrowing costs on Friday. For all of the auctions, and the latter in particular, there was significant demand and it seemed to calm markets.

Figures for the UK showed that the public sector net borrowing for March rose more than forecast to £18.17bn. Despite this, downward revisions to previous months meant that the Treasury were within the Office for budget Responsibilities forecasts of a £126 billion deficit over the 2011/2012 financial year, representing 8.3% of GDP. This showed improvement over the £136 billion (a deficit of 9.3% of GDP) in the year 2012/2011. Despite the positive trajectory in terms of annual deficit, the total debt of the UK rose to £1.02 trillion last month, representing 66% of GDP and the highest since records began in 1993.

ARM holdings was one of the biggest fallers on the index, after the chip maker released first quarter results for 2012 that were generally in line with expectations, although showed weaker than expected sales form Royalties. S&P equity research cut their price target to 575p from 640p, on lower terminal growth forecasts and given that the shares are trading at 54 times their 2012 earnings forecasts. They did however retain their hold rating given what they felt may be support from products to be sold by Microsoft which will feature Windows software powered by Arm’s chip’s.

Market dipped just after midday, although rallied back to and above their current levels on the back of new home sales data in the US, that showed sales of new single family homes increased more than forecast to 328,000 (at an annualised rate) in March. Markets in Europe had a particularly strong end of the day, with the CAC and IBEX higher by more than 2%. The UK’s FTSE 100 put on 44 points (0.8%) to finish at 5709.

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