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Eurozone banking fears resurface

Published Friday, July 11th, 2014

The much-feared contagion effect made an ugly return within the Eurozone yesterday after concerns regarding Portugal’s banking sector sent periphery bond yields higher. The worries were brought about as the country’s largest bank missed debt repayments, citing financial difficulties at its parent company, and saw its shares suspended from trading after sliding more than 17%. The upshot was a considerable rise in Greek and Spanish borrowing costs, having been close to multi-year lows, whilst the yield spread between Portugal and Germany increased to its highest in over a year. The rush into haven assets bolstered the yellow metal which hit a four-month high with efforts now turning to limiting the reverberations across the bloc’s periphery.

Encouraging economic data from the US failed to counter the woes taking place in the euro-area with profit-taking sending Wall St lower. Investors welcomed yet more robust labour market figures as US jobless claims slipped in the latest week to one of its lowest levels since before the recession. The positive macro outlook was supported by rising US wholesale inventories during May in what is a further indication of a strong rebound in 2Q. Nevertheless, the overwhelmingly cautionary mood prompted by events across the pond sent both the Dow and S&P500 0.4% lower.

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Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.