Financial markets tumbled as sovereign debt crisis worsened and the focus was turned to Spain. The disappointing Spanish bond auction sent yield higher and revealed the weak confidence towards the country. Wall Street slumped with the DJIA and S&P 500 losing -1.13% and -1.68% respectively. Commodities plummeted with the front-month contracts for WTI and Brent crude declining -3.67% and -3.27% respectively. Gold slid -3.06% during the day.
Spain sold 10-year bonds worth of 3.5B euro at an average yield of 6.975%, the highest since 1997. Spanish yields moved higher after the auction until the ECB was reported to have intervened. In Italy, Mario Monti announced more austerity measures in addition to the implementing those passed by the previous administration. The new government will reinstate property taxes, change pension rules, trim the size of the government and modify labor laws. Fitch Ratings warned that it may cut Italy's credit rating to a low investment grade if Italian bonds fail to access to public funding. Yet, it stated that the new government 'will prove itself to be credible in pursuing fiscal and structural economic reform'.
Regarding the next tranche of funding to Greece, the IMF refused to release the money unless the Greek government showed commitment to fiscal consolidation. The lender stated that 'it's important that the unity government now shares its commitment to the implementation of the economic program'. The review and release of the tranche can be proceeded 'once broad political support' is assured.
US economic data came in better than expected. Initial jobless claims fell -5K to 388K in the week ended November 12 while previous week's data was revised up by +3K to 393K. The 4-week moving average fell to 396K, the lowest level since April. Housing data stayed unchanged at 0.63M in October, compared with market expectations of a drop to 0.61M. Building permits increased to 0.65M in October, higher consensus of +0.6M and September's 0.63M. Philly Fed manufacturing index, however, fell to 3.6 in November from 8.7 a month ago. The market had anticipated a rise to 10.