E.U. Equities Higher as China Data Offsets Italy Downgrade Surprise

(eToro Blog) Share prices in European equity markets got a bounce this morning as investors heaved a huge sigh of relief that the China GDP data wasn’t as bad as it could have been. Indeed, it was actually pretty dismal, with second quarter growth rising only to 7.6%, the slowest pace of quarterly growth in more than three years. Given that and the recent report that inflation is easing back in China there is a fair amount of scope for more easing, and that is what is giving the markets buoyancy today says one analyst from Commerzbank.

Coming on the heels of an unexpected credit rating downgrade for Italy which normally would have roiled markets, the timing of the China data was serendipitous for equity traders, because bearish sentiment was at least tempered. Moody’s credit rating agency said that further downgrades of the Eurozone’s third largest economy could be forthcoming, citing deterioration of economic prospects, the country’s vulnerability to Eurozone political shocks and difficulties in enacting necessary economic reforms.

Further, Moody’s said a future downgrade could depend on whether or not the Italian government is able to obtain reasonably priced funding from the private debt market. Naturally, Moody’s action has all but assured that investors will seek a premium for Italian debt, and later today, the government will be holding another sovereign debt auction of 3-year notes. At the last auction of similarly dated paper, the yield was 5.38%.

The DAX is up 28.92 points of 0.45% while the CAC40 is up 8.32 points or 0.27%. OpenBook’s sentiment on the DAX is currently bullish, but only by a slight margin while sentiment is decidedly bullish on the CAC-40. German trader groundsero began trading on OpenBook earlier this month, and has already recorded some decent gains. Within the past 24-hours, the trader closed out eight positions in the DAX, predominantly longs but most recently a pair of shorts, with gains which ranged on the longs from a low of 8.12% to a TP-hitting high of 102.33% and on the shorts, an average 13%. The trader has allocated more than 20% of his portfolio to the DAX, the highest allocation within his portfolio, and has earned 16.8% for the effort.

By all measures an indices trader, German trader xjurokx has a large allocation in the CAC40, with 24.4% over the past month for a return of 13.1%. The trader also has profitable holdings in the NSDQ100 and the SPX500. A long position in the CAC40 yesterday returned a small gain of 1.22% for the trader.

Copyright 2012 eToro Blog