EU Sovereign Debt Still Weighs in Europe Before German Bond Sale

Markets are trading lower in Europe ahead of Wednesday’s 5 billion German bond sale, snapping Europe’s recent four day rally. Global markets all rallied on Tuesday following strong manufacturing numbers from the United States, Australia, China, and Germany.

Also new unemployment numbers from Germany showed that Germany’s seasonally adjusted jobless level dropped in December to a 6.8 % unemployment rate.

On the other spectrum, Spain’s labor office released new jobless figures which showed jobless claims rising by 1,897 to over 4.2 million. Spain is currently dealing with high unemployment levels, reportedly over 22% according to the latest October Eurostat figures that was reported yesterday in the Wall St. Journal.

Bloomberg’s Mark Barton reported on Wednesday that overnight ECB deposits reached a new high with 453.2 billion of reserves parked at the ECB instead of being loaned to other European banks. The 453.2 figure is up from 445.7 billion on Dec 30th. Risk tolerance is lower for Europe’s banks amidst higher capitalization requirements from the European Banking Authority.

Later on Wednesday, Germany will sell 5 billion euros of bonds. Germany’s last bond sale  in late November 2011 was surprisingly disappointing, only selling 3.9 billion of the 6 billion that was expected to be sold.  Spain will also sell 1 billion worth of bonds on Wednesday.  On Thursday France will be selling bonds worth 16.9 billion.

Inflation numbers  for Euro zone (CPI) will be released on Wednesday. The estimate is for the CPI inflation level to drop to 2.8 %.

France’s PMI services number for December was 50.3 %; Italy was 44 % for December while Germany’s PMI Services was 52.4%. Germany’s PMI of 52.4 % and Italy’s PMI of 44% was slightly lower than expected, according to analysts’ estimates for December.

Sarkozy and Merkel will officially be meeting next Monday.

On Jan. 30th the EU will hold another EU Summit to discuss debt issues in the Euro zone.

United States

On Wednesday Factory Orders will be announced.

Concerning political news, Republican Mitt Romney won in the Iowa Caucus by only 8 votes. He is favored to win in the New Hampshire Caucus.




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