Börse&Märkte

Portugal's 10-year bond yields rise over 7%/CDS blow out

Portugal’s 10-year bond yields jump to the 7.78% level, raising alarm bells across the market as investors fret about the deteriorating political situation in the country. Portuguese CDS blows out, wider by 64 basis points at 553bps and the PSI20 index slides. Despite reassurances by politicians, the market is fearing that more bailouts may be in order amid scepticism that Portugal will not be able to meet obligations of its bailout terms given the differing stances across the political landscape.

 

Portugal’s socialist opposition warned they will push for a renegotiation of the country’s bailout terms which if successful, would alter the level of austerity implemented in the country, leaving Portugal vulnerable to financial collapse. With Germany’s elections due in September, it’s unlikely that policymakers will be able to reach an agreement on how to help Portugal stay afloat until after the outcome of those elections. Indeed, the country’s president warned earlier this week that any delays could harm the bailout programme further. The euro takes a knocking on the back of that, while stock prices in Europe have eased from session highs 

 

US consumer confidence hit sentiment on both sides of the Atlantic with the Michigan confidence report dipping to 83.9 in July from 84.1 in June, driven lower mostly on Fed tapering worries. Earlier, prices were supported by earnings out of US banking giants JPMorgan and Wells Fargo, both beat market expectations with 2Q reports, kicking off the US financial reporting season on an optimistic note. JPM’s profit rose $6.5billion in 2Q, while revenues advanced by $26billion, smashing Wall Street’s expectations. Wells Fargo meanwhile reported a solid set of figures too, beating market expectations but rising mortgage rates have worried the market – Wells being one of the country’s biggest mortgage lenders.

 

Before that, stock markets in Europe were posting tentative gains, still riding the dovish central bank wave after Ben Bernanke, head of the Federal Reserve suggested he isn’t ready to tinker QE on Wednesday, inspiring a global-risk rally. However, Asian markets were mixed after China’s finmin warned that GDP this year could come in at 7% and not 7.5%, spooking investors that the slowdown in China will be deeper than anticipated and that policymakers are comfortable with that.

 

Some saw the finmin’s comments as a way to prepare the market for disappointing GDP figures from China which will be officially released on Monday. Next Monday also sees the release of Chinese industrial output and retail sales followed by US retail sales, Empire State manufacturing and business inventories. Earnings season in the is in full gear with US banking heavyweight Citigroup and French media and advertising giant Publicis Groupe reporting 2Q figures.