The first EU summit in 2012

Today European leaders gather  in Brussels for the first time in 2012. Apart from reaching an agreement on common fiscal rules they will also struggle to solve the problems connected with Greece and its bondholders.

After a very good week for the euro currency and European bond market investors need more fuel to carry on buying risky assets. On Friday 10-year Italian bond yields were below 6%, Spanish below 5%, Belgian below 4%. Only Portuguese 10-year bonds rose last week (above 15%), because of the concerns that Portugal will need a new aid package and new kind of austerity measures. However the market did not react on growing problems with Portugal and even on Fitch decision to cut the credit rating of the EU countries. Fitch downgraded five euro zone countries – Italy, Spain, Belgium, Slovenia and Cyprus.

The probability of the agreement between Greece and its creditors is very high, but it is hard to say what kind of new measures will the EU summit bring. Euro zone leaders are supposed to focus on a new treaty with new fiscal rules. However only a clear and strict message to the market about the new fiscal discipline can prevent investors from any kind of a deep correction.

Events to watch

These week another group of big Wall Street companies will publish its earnings results – Amazon, Exxon Mobile, UPC, Master Card, Electronic Arts. Apart from company results, we will get to know the number of non-farm payrolls in January and final data on the manufacturing and services sectors in the USA and Euro zone.

Paweł Kordala

Investment risk warning
X-Trade Brokers Dom Maklerski S.A. does not take responsibility for investment decisions made under the influence of the information published on this website. None of the published information can be treated as a recommendation, disposition, promise, or guarantee that the investor will achieve a profit or will minimize risk using the information published on this website. Transactions including investment instruments, especially derivatives using leverage, are in its nature speculative and can provide both profits and losses that can exceed the initial deposit engaged by the investor. more