Will ECB support Italy?

7 December, 2016

ECB
The yield of the Italian sovereign debt fell on Tuesday as the focus moved to the political uncertainty on the market. After Renzi’s crash on the weekend and the expectations of the ECB measures to deal with the possible fallout of the financial markets. The news about Prime Minister Renzi’s resigning sent the yields of the government bonds to 2.06%. However, on Tuesday, the gains of the 10-year Italian government bonds fell by 5 basis points to 1.96 percent. The expectations that the Italy won’t need an early election, together with the hope for the ECB support, helped to kerb the bonds selloff. The Governing Council of the regulators will hold a meeting on Thursday and is expected to make changes in the QE, particularly about extending the program term which expires in March 2017.

Crude oil

Oil prices slipped on the profit taking after a rapid rally which reached 16-month peaks after OPEC was able to reach an agreement to reduce the production for the first time in the last eight years. The US crude soared by 14% last week, which was the sharpest weekly rise since early 2011. Meanwhile, Brent added almost 15% over the course of a week. Crude oil production is expected to decrease by 1.2 million barrels per day starting from January 2017th and the agreement will be reviewed six months after.

German data

The German industrial orders grew at the fastest pace in more than two years this October, showed the data on Tuesday. Suggesting that the industrial sector will support the growth of the Europe’s largest economy in the coming months. Demand in the sector grew by 4.9%, despite the lower-than-normal amount of wholesale orders. It was the biggest gain since July 2014. The report provided a minor impact on the EUR/USD which trades almost flat at the time of writing.

Gold

Gold prices trade in a red territory on the 10-month lows, which were reached during the previous session on the expectations of Decembers rate increase. This continues to put pressure on the precious metal. Extension of easing measures by the ECB increases risk appetite, which additionally puts a dent on the safe heavens. Futures for December delivery traded at 0.42% lower on Tuesday opening.


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