Reassuring words from the European Union's Jean Claude Juncker kept European markets buoyant overnight with the official ruling out a potential default of the Greek economy, stating assistance from from the EU I completely rule out a bankruptcy of the Greek state. This proved to be a stabilising factor for the Euro and Sterling early in the session with both currencies squeezing out mild gains. The Bank of England kept its benchmark interest rate at a record low of 0.5 percent overnight for the seventh consecutive time. As anticipated the central bank also announced the continuance of the 200 billion pound quantitative easing program. Despite data suggesting the economy is in recovery mode, the bank recently warned of a slow and protracted recovery with economist's now predicating interest rates to remain at current levels until 2011.
Switzerland become the latest economy to start the unwinding of economic stimulus with the Swiss National Bank announcing it will stop purchases of corporate bonds, whilst keeping the benchmark interest rate at 0.25 per cent. The Bank also indicated it will continue to keep a close eye on the unwanted strength of the Swiss Franc stating it will act decisively to prevent any excessive appreciation in the Swiss Franc.
US markets showed conviction overnight bolstered by a decline in unemployment and a narrowing trade deficit. US Initial Jobless claims for the week of December 5 rose to 474,000 which were higher than the estimated consensus of 455,000. The positive news came from continuing claims for the week of November 28, with the number of people seeking ongoing unemployment benefits fell to 5,157,000 from 5,460,000 in the previous week. The weak US dollar has assisted the US economy in the month of October; with Trade Balance figures released overnight showing a narrowing deficit of US$32.9 billion against an upwardly revised US$35.65 billion for September. As a result the greenback has made a small loses against counterparts with the Dollar index which measures the dollar's value relative to six major foreign currencies retreating .04 per cent to 76.01.
Following on from a surge from better than expected employment figures yesterday, the Aussie dollar has held on to gains overnight, reaching highs of 91.9 US Cents. At the time of writing the Aussie is buying 91.6 US Cents - we expected the local unit to be well supported by what is shaping up to be a positive day on the equity markets.
Yesterday saw 31,200 new jobs created in the month of November, surpassing the 5,200 expected to bring the unemployment rate down to 5.7 per cent. The prelude to the latest jobs surge was Monday's ANZ Job advertisement data, which rose 5.2 per cent for the month of November. This of course has trader's weighing up the likelihood of a fourth consecutive interest rate hike when the Reserve Bank of Australian reconvenes in February 2010. However, the likelihood of another rate rise in February is far from decided - yesterday saw early signs of economic consolidation with the Westpac-Melbourne Institute Consumer Confidence Index falling by 3.8 per cent in the month of December to a reading of 113.8. We also saw the Trade Deficit widened to AUD$2.38 billion in the month of October which suggest exports are slowing attributed to a stronger Aussie Dollar.