Debt: Euro, Shares Stabilise As Fears Ease

Uncertainty in Italy could hurt markets more, say investors

Uncertainty in Italy could hurt markets more, say investors

Thursday’s market activity showed promise as stocks, crude oil, and the euro all showed gains. The activity is attributed to the fears of a euro zone break up diminishing as well as a good result from an Italian debt auction.

Italy and Greece

Despite this, European shares did fall slightly during the course of a choppy day of trading. Gold prices also slid, to the dismay of “haven-seeking” investors.

Investors are ‘unsettled’ overall, according to analysts, because the debt crisis in Greece has been taken over by a frenzy of concern over the selection of a new leader in Italy. The Mediterranean country is a huge concern for the euro zone and the global economy as a whole.

Investors remain worried that Italy’s borrowing costs were unsustainable, but were given slight reprieve during a debt auction on Thursday. Italy paid its highest yield in 14 years to sell 12 month debt, to the relief of markets across the globe.

This had the effect of a rise in the euro as well as U.S. stocks, though the Nasdaq in New York briefly fell into the negatives after shares in Green Mountain Coffee Roasters plunged by 36% on the back of weak quarterly revenues.

Euro rebound

The euro was finally able to pull out of its one-month slump against the U.S. dollar, coming in at $1.3602 by the end of trading to show a 0.4 percent raise.

Despite U.S. economic data on jobs and trade balance being viewed as favourable, all eyes were focused on Europe and the steps its leaders would take to bail the euro zone out of its debt crisis.

However, the market reacted favourably to a weak dollar and an unexpected drop in oil prices, which sent Brent oil prices climbing above $113 a barrel.

The good market news of today has investors bracing themselves for the near future, as a rise in Italian bond yields would see the euro fall again. Signs that the political deadlock in Italy is easing has pushed bond prices lower, but analysts say another rise above 7 percent would make for unsettled investors and another sell-off.


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