Negative sentiment as Eurozone remains in focus

A negative start for European markets set the sentiment for the rest of the session. The choppy trading day saw the Spanish 10 year bond yield hit 7%, the level at which other euro zone states were forced to seek support. However across the Atlantic, a strong start from the US caused a late rally as investors continue to believe an extension of Operation Twist in is the cards.

With help from the US markets the FTSE experienced a rally into the close seeing it recover from its lows of 5424, however it failed to cross the line and finished down 0.3% on the day.

Investors focus was squarely on the Eurozone crisis as Spain’s bond yield climbed to 7% after the rating agency Moody’s cut the country’s credit rating. Moody’s cited the newly approved Eurozone plan to help Spanish banks as the cause for concern and consequently the affect that it will have on the country’s debt burden. A further warning that Spain could be cut to junk within 3 months did little to calm investors and the markets sunk to their lowest level by mid morning with demand for riskier asset classes such as stocks feeling the pressure.

On a slightly more positive note the Italian Debt auction at 10AM was considered successful in the short term with the full planned amount of 4.5billion Euros sold at yields below the market level. However the bench mark 10 yr yield rose to 6.3% the highest since January.

The markets remained depressed for much of the session with increasing focus towards the weekend’s Greek election, where huge uncertainty still remains as to the outcome. It seems likely that we will see another choppy session tomorrow as traders decide what positions to hold going into the weekend.

Meanwhile US markets traded up triple digits as investors put their hope on a third round of asset purchases to support the world largest economy. This optimism crossed to European markets but failed to lift them into the black. Barclays and RBS topped the leader board up over 2.3% and 3% whilst Man Group over took downgraded B Sky B on the looser board, shedding almost 4%.

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