EU equity indices advanced today as market participants reacted to a deal in Washington which kept the US economy away from the edge of the fiscal cliff. DAX index in Germany rose to highest level since early 2008 and London's benchmark FTSE 100 share index broke through the 6,000 level for the first time in 18 months, also supported by unexpected jump in factory activity which grew at its fastest pace since September 2011. In terms of EU related data, the latest CPI reports from Germany (regional reports) came in higher than prev – in reaction to that, German 10y IL bond yield rose to c. -0.280% as opposed to c. -0.340% at 7am this morning. Even though the so-called fiscal cliff has now been averted, lawmakers will now try to address the debt ceiling issue in a timely manner to avoid any negative sovereign debt rating action. The risk on sentiment weighed on the USD, which in turn supported EUR/USD and GBP/USD, up around 40pips at last check. Commodity complex, as well as precious metals also benefited from the renewed risk on sentiment. Going forward, market participants will get to digest the release of the latest ISM Manufacturing report at 1500GMT.
Print 11:59, 02 Jan 2013 - Market Analysis - Source: RANsquawk
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