- Italian bond yields rise by 5bp
- Spanish bond yield flat at 5.18 per cent
- Euro falls below 1.32
- Volatility spikes higher
- Banks deposited 165.3bn euros overnight at ECB

FTSE-100: -1.59%
Dax-30: -1.73%
Cac-40: -1.75%
FTSE Mibtel 30: -2.69%
Ibex 35: -1.42%
Stoxx 600: -1.22%

The main European equity benchmarks were still registering moderately at the midday mark following last night's drop on Wall Street after the Federal Reserve released the minutes of its last policy meeting.

Were markets being too complacent? To a certain extent that might be true, as the spike higher in volatility has shown, certainly much commentary is pointing in that direction today.

Nevertheless, a notable and relative quick change in the tone of Fed speeches is notable in and of itself, not to mention if it comes as other central banks turn more guarded, which can lead to volatility in interest and currency markets in particular, analysts at Digital Look explain.

Having said that, one must be careful not to 'over-interpret.' Thus, at least a handful of analysts are today warning that the US Fed is not about to suddenly change its policy.

This is part of what Barclays Research was telling clients this morning: "We characterize the debate as fairly balanced, and although concerns about the costs of balance sheet expansion are rising (...) However, the lack of resolution to the sequester budget cuts leaves downside risk to our growth forecast, and if the sequester is allowed to proceed in its current form for the remainder of the year, it would raise the risk that tapering could begin later than we have in our baseline."

Italian long-term bond yields are coming under pressure ahead of this weekend's elections.

Spanish 10 year bond yields are now flat after the country's Treasury this morning sold €4.2bn in debt, more than was expected. Nevertheless, some observers continue to insist that more likely than not Spain will have to ask the ECB for help and Europe will face renewed tensions before politicians and populations 'bite the bullet' on the necessary reforms.

Positive company news-flow

German insurer Allianz reported a higher than expected fourth quarter net profit of €1.22bn.

AXA said its full-year 2012 net income fell by 4% ona like-for-like basis when compared with the same period of a year-ago.

French retailer Casino is confident that it will continue to grow sales and profits this year.

French aerospace group Safran posted a 24% rise in full-year operating profit.

Weaker than expected Eurozone services sector

Dutch unemployment rate rose to 7.5% in January, from 7.2% in the month before.

The Dutch consumer confidence gauge for that same month retreated sharply, to a reading of -4 after -35 in the month before.

The Markit Eurozone manufacturing sector purchasing managers' index for the month of February has come in at 47.8 versus 47.9 for the month before (Consensus: 48.5).

The Markit Eurozone service sector purchasing managers' index for the month of February has come in at 47.3 versus 48.6 for the month before (Consensus: 49).

Sharp fall in the single currency

The euro/dollar is now down by 0.78% to the 1.3180 dollar mark.

Front month Brent crude futures are now falling slightly, by 1.084 dollars to the 114.36 dollar per barrel mark on the ICE.



AB

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