Financial markets are still marred by uncertainty as we walk through the last three months of the year, where traders strongly anticipate two key rate decisions from the Bank of England and its European Counterpart, seen by some slashing its benchmark interest rate to help the ailing economy. Spanish and French risk will be gauged as well as debt-burdened governments prepares to sell more debt on Thursday.
The ECB will be closely watched today and a market consensus believes the monetary policy committee will keep hold its policy steady, with rates steady at 0.75 percent for the third consecutive month, but as far as we`re concerned some see the ECB cutting its interest rate for the first time since July to 0.50 percent in a prominent bid to spice up the economic bitterness and halt the sovereign debt fiesta.
The 17-nation euro economy shrank 0.3 percent in last three month, compared with flat growth seen in the first quarter of the year, as manufacturing and services continue to slump, while unemployment rose to a sky-high 11.4 percent, all on the back of the government`s austerity drive and budget cuts risking to push the euro area economy into its first double-dip recession since the crisis broke out in 2009.
The ECB`s Governing Council is actually meeting for the first time since the central bank uncovered its long-awaited program of bond purchases, dubbed Outright Monetary Transaction (OMT), and so traders will be looking mostly for further details about the recently unveiled strategy aiming to tame outrageous yields of troubled euro zone governments, beaten by harsh austerity measures amid debt turmoil.
Euro are member states under bailout are seen tapping the ECB`s new crisis-fighting strategy for help, however the central bank would only act if countries applied for aid to the euro region`s new permanent rescue fund, the European Stability Mechanism, however the ECB wouldn`t take such a move before Spain, which takes the heart of the crisis, files a much-awaited request for a full-blown bailout.
Europa Press said on Tuesday the Spanish Prime Minister Mariano Rajoy told regional presidents he will not ask for a bailout this weekend amid speculations Spain is close to requesting a bailout, believed to be seen after 21st October elections in Rajoy`s home region of Galicia. Moreover, Reuters reported on Monday from a senior European source that Spain is ready to request a bailout.
Coming up on Thursday, the Bank of England is strongly expected to hold its asset purchasing facility at for third straight month at 375 billion pounds, after the U.K. economy slumped into recession amid the deepening debt crisis in its largest trading counterpart, the euro zone which suffers the a three-year old crisis that paralyzes the European economy and worldwide as crisis festers to peripheral countries.
Spain and France are preparing to auction medium to long-term bonds on Thursday, as the Madrid-based Treasury sells 3.75 percent bonds maturing in three years, 3.3 percent bond maturing in two years and 5.5 percent bonds maturing in five years. The Paris-Based Treasury also sells 4.25 percent bonds maturing in six years, 2.25 percent bond maturing in 10 years and 4.5 percent bonds maturing in 2041.
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