‘Renewed Market Panic’ as Spain Fears Grow

"After three months that were calmer than expected, the euro crisis is back," says Holger Schmieding, London-based chief economist at Berenberg Bank.

"The speed of the recent surge in yields has elements of a renewed market panic."

Spain is due to auction 2-Year and 10-Year bonds this Thursday.

The ECB "should step up purchases of [government] bonds" said Jaime Garcia-Legaz, a deputy minister in Spain's Economics Ministry, speaking last week.

The ECB began buying distressed government debt on the secondary market in 2010 under its Securities Markets Program. It reactivated the SMP last August when Spanish and Italian yields spiked.

Spanish 10-Year bond yields hit 6.7% last November – while Italian 10-Year yields breached 7%.

Here in the UK, economic growth will be only 0.4% this year – half the official projected rate used by the government – according to a report published Monday by the Ernst & Young Item Club, a forecasting arm of the accountancy firm.

The report cites "corporate cash piles" worth an estimated 50% of GDP as one reason the economy is expected to "stall" in 2012.

"Business investment has picked up nicely in the US but UK companies remain extremely risk averse," says Peter Spencer, chief economic advisor to the Item Club.

"[This] is sapping strength from the economy...until these companies stop stashing the cash and start increasing levels of investment and dividends, the economy will remain on the critical list."

Over in New York, the so-called speculative net long position of gold futures and options traders on the Comex – measured as the difference between bullish and bearish contracts – fell for the second week running in the week ended last Tuesday.

The spec net long dropped 3.9%, Commodity Futures Trading Commission data published late Friday show.

Buying gold today? See how BullionVault can save you money...

Ben Traynor is editor of Gold News, the analysis and investment research site of gold ownership service BullionVault. He was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

About the Author
Ben Traynor

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVaultBen Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

Comments
comments powered by Disqus

Market Data

Sponsored By: