US Dollar
Asian stocks rose today, following broad gains on the major US stock markets. The most representative index S&P 500 increased by 3.43% yesterday as investors are getting more optimistic with the Europe’s debt deal and after some favorable macroeconomic reports which renewed confidence in the global economy were released in the US. The deal to boost Europe’s bailout fund and write off a part of Greek debt was hailed by US President Barack Obama as an “important first step” to resolve the crisis.
Treasuries dropped yesterday, sending 10-year notes' yields up from 2.20% to 2.37%, after Commerce Department figures in their first estimation showed the US economy grew at a 2.5% annual pace in the third quarter, following a 1.3% increase in the prior three months. Moreover another report showed that personal consumption advanced by 2.4% in the same period, more than expected and more than in the previous month, strengthening confidence that the world’s largest economy is expanding.
Today reports may show that both US consumer spending and personal income increased in September as well by 0.6% and 0.3% respectively. Both figures are projected to be higher than in the previous month. Finally investors will be closely watching University of Michigan confidence index, which may climb in October to 58 from 57.5. The Dollar Index, which tracks the US unit against a basket of six currencies, slid yesterday to the lowest level since early September – 74.72 from 75.95 earlier in the day.
Euro
European debt deal, which includes boosting the region’s stability fund, “voluntary” write offs of Greek debt and recapitalization of banks triggered strong rallies in stock markets. The French CAC 40 index rocketed by 6.28% while German DAX gained 5.35% by the end of the European session. The euro surged as well to the highest level in seven weeks against the dollar and the yen. The single currency gained yesterday almost 400 basic points against the greenback, touching 1.4246, but remained almost flat this morning, slightly below 1.42.
After the deal was announced, investors’ confidence improved further when French President Nicolas Sarkozy held successful talks with his Chinese colleague Hu Jintao seeking support to increase the firepower of the European Financial Stability Facility and resolve the region’s sovereign debt crisis. Later Bloomberg informed without mentioning exactly the source of information that Japan plans to support the increase as well, but is currently waiting for details from European officials.
