Market News|December 4, 2010 10:02 pm

Euro Session Summarized

UK November manufacturing PMI 58.0, up sharply from 55.4 in October. Much stronger than median forecast of 54.6 and highest read since September 1994
UK Nationwide November house prices -0.3% m/m, +0.4% y/y, little weaker than median forecasts of -0.2%, +0.5% respectively

Portugal sells 500 mln euros of 12-month t-bills (indicative offer was for 500 mln)

China ForMin: Pressing task in Korea dispute is to prevent escalation

German EconMin: I don’t think Portugal and Spain will need to tap rescue mechanism. No decision on extending repayment of Greece’s aid, just a request to examine this

France’s Lagarde: Europeans are determined to defend their single currency
Eurozone November manufacturing PMI (final) revised touch lower to 55.3 from flash 55.5
Swiss November PMI 61.8, better than median forecast of 61.0

German retail sales +2.3% m/m, -0.7% y/y, compared to median forecasts +1.3%, +1.6% respectively
Trees don’t grow to the sky. Finally we’ve seen a thawing in risk aversion and a return of risk appetite. European stocks have performed well; periphery bond yields lower, periphery credit default swaps cheaper; oil up over a buck; gold up; US treasury yields higher etc etc.

EUR/USD up at 1.3100 from early 1.3020 having been as high as 1.3116 so far. Asian central bank, UK clearer, corporates seen notable buyers early.
Stops tripped through 1.3050 and we got up to 1.3090/00 area fairly quickly. Reports of decent sell orders there. Large French bank (said to have sold half a yard), hedge funds, Asian central bank seen notable sellers in said area.
Finally relief Portuguese auction went OK helped euro bulls overwhelm the 1.3090/00 sell interest. Small stops tripped through 1.3105 and we got to the 1.3116 session high. BIS has been a very notable seller (on a few occasions) at and above 1.3110 helping cap gains.

Cable marginally firmer, up at 1.5620 from early 1.5590 having been as high as 1.5647. The pairing got a very decent lift from the much stronger than expected manufacturing PMI data (see above)

USD/JPY up at 83.80 from early 83.40. Better risk appetite and resulting higher US treasury yields have helped support the pairing. Macro hedge fund buying notable. Stops now seen through 84.00.

EUR/CHF has seen sharp rally, up at 1.3150 from early 1.3025. The rally comes as Swiss gives back some of its safe haven gains as the general risk backdrop improves. Such was the speed of the early rally we even heard mutterings of Swiss National Bank buying the cross. This was never confirmed.

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