Yesterday's session was something of a roller-coaster for three reasons. Firstly, it was the last trading day of the month, which always elicits rebalancing and liquidity-induced flows. Secondly, the market had to digest the implications of the ECB's 2nd injection of 3yr funds, which is not easy when you don't know exactly where they have gone and what the participating institutions plan to do with them. Thirdly, there was Fed Chairman Bernanke's testimony, which reportedly disappointed markets because he did not lead us into Q3, but was he ever going to? Gold was one of the big losers of the day - down 5% on the day - together with Portuguese bonds, with investors worried about the progress of the country towards achieving the objects of their austerity program. There was talk of the ECB checking prices, although not necessarily buying bonds. For today, the focus is with the meeting of EU leaders. There's no point in setting ourselves up for disappointment by expecting anything major from it. The main focus for the markets is whether leaders are poised to increase the fire-power of the rescue fund(s), but Germany has played down any imminent announcement on this. That said, Germany is looking increasingly isolated in its opposition, principally beyond EU borders.
- Lessons from the German labour market
- Double the money