US Assets Thrive on Euro Downturn

The Euro made significant loses today on the back of a survey that suggested German investor sentiment had remained negative for a sixth consecutive month, plunging the Eurozone into yet more uncertainty. Spanish hesitation to request a bailout has also been a major contributing factor but one that was only really highlighted by the surveys damning results.

After reaching a four month high against the yen and the dollar the 17-nation currency fell from grace in spectacular style, losing 0.4% and 0.5% on it’s counterparts respectively in just a few hours.

The hesitation from the Spanish government to request a bailout is putting what many consider to be unnecessary pressure on the currency, as people are reluctant to invest in it with so much uncertainty hanging over its head. One member of the European Central Bank’s Council has called for Spain to put an end to this uncertainty and formally request what now seems to be an almost inevitable bailout package.

Just 24 hours ago Spanish sovereign bonds were rallying to 6.05%, their highest rate for more than 10 days, but those gains were short lived being all but wiped out by 10am this morning due to their own uncertainty.

Spanish Deputy Prime Minister Soraya Saenz de Santamaria has publicly stated that his country will accept a bailout package but only under the right circumstances and with “acceptable” conditions. Spain are reluctant to accept a bailout that enforces tough austerity measures as they fear for the long term growth of their economy. However Luc Coene was quick to respond to these comments by saying “it will not last long before spreads will rise again, and then Spain will be somewhat forced to come back on its decision and submit to the conditionality program,” suggesting that the Eurozone as a whole will not be held to ransom by a struggling nation and that while they are willing to assist, Spain will not receive preferential treatment.

US Assets Capitalize

With so much uncertainty currently surrounding the Euro and concern about the long term stability of the Chinese economy it fell to the US to once again played the role of safe haven for investors and traders alike in the month of July. Net purchases of long term equities were more than $65bn for the month of July, a drastic increase from $9bn in June.