European Market Update

European Market Update

US equity markets closed on Monday due to Hurricane Sandy and might not reopen until Wednesday; Europe remains cautious on the periphery

European markets opened with a risk-off tone which provided a slightly firm tone for both the USD and JPY currencies against its European counterparts. Dealers were a bit jittery ahead of Eurogroup conference call on Greece this Wednesday. Negotiations on Greek new austerity measures and reforms are set to continue until then. Disappointing numbers from Spain highlighted the extent of the Spanish economic contraction, with rising unemployment adding to pressures on the retail sector. Overall the markets began to set into a holding pattern ahead of Tuesday's BoJ policy decision and wait out the effects from Hurricane Sandy that closed the US equity markets for Monday (and possible Tuesday).

The EUR/USD tested below 1.2890 before stabilizing. Senior directors of Spanish banks were said to be preparing to make public statement calling for the Govt to seek a rescue package seemed to provide an excuse for profit-taking in Euro shorts.

The market consensus for the BOJ is for it to announce an additional ¥10T in its asset purchase target.