Overnight global equity markets unwound the previous week’s dismal performance as investors cheered Europe’s grand rescue package finalised on the weekend. Designed to reduce the risk of contagion stemming from Greece’s economic hardships, should a European nation require financial assistance a total of 750 billion Euros will be at hand. European nations will contribute 440 billion Euros in loans or guarantees with the European Union to contribute a further 60 billion Euros. The International Monetary Fund will also chip 250 billion Euros representing the largest single component.
Global equity markets responded with strong gains with the DOW and S&P gaining 3.9 percent and 4.4 percent respectively. Across the Atlantic, European markets rocketed with Frances CAC index gaining 9.66 percent and the DAX putting on over 5 percent.
The relief rally in the currency markets was short lived, with the Euro trading to highs near US$1.31 but the trajectory quickly turned south falling to current levels 1.2730 representing a 370 pip range. Sterling also hammered out some gains reaching highs of US$1.5050 before retracing to current levels of US$1.4830.
The Aussie dollar was able to squeeze out some gains returning above 90 US Cents to highs of 90.8 US cents. At the time of writing the local unit is buying 90.1 US cents and likely to be governed by what is shaping up to be another strong day in local equities. Another prime consideration today is economic data due for release from China. Consumer Price Index expected to rise to 2.7 percent from a previous 2.4 percent. Retail Sales and Industrial production are also set to be released at 12:00 AEST.