Market sentiment improved amid a successful Italian bond auction, a proposed meeting between top Congressional leaders and President Obama on Friday about sequester and improvements in economic data. Wall Street climbed higher with the DJIA and the S&P 500 gaining +1.26% and +1.27% respectively. In the commodity sector, the front-month contract for the WTI crude oil settled largely unchanged at 92.76 while the Brent contract declined for the second consecutive day to as low as 111.65 before ending the day at 111.87, down -0.75%. Gold slipped for the first time in 3 days with the benchmark Comex contract dropping -1.23%.
In Italy, the 10-year bond auction worth of 4b euro was well-received although the yield increased more than half a percentage point to 4.83%. The Treasury also issued 2.5B euro of a 5-yaer bond at 3.59%. As the election result raised political uncertainty in the country, Silvio Berlusconi said that a stable coalition had to be formed before March 15 when the Italian parliament is scheduled to begin. According to the former premier, “if a message of stability isn't sent before then, we risk paying a very high price”. After a meeting, French President Francois Hollande and Italian center-left leader Pier Luigi Bersani released a joint statement saying that “the economic crisis and the suffering surrounding it are at this point so serious that even the European Union cannot and must not remain deaf to the clear message that emerged from the vote in Italy”.
In the US, the market is awaiting a meeting between top Congressional leaders and President Obama on measures to handle sequester, i.e. about $85 billion in spending cuts, that would begin on that day. US economic data was mixed. Durable goods orders declined -5.2% m/m in January, following a +4.6% gain a month ago. The market had anticipated a drop of -4% previously. Durable goods orders excluding transportation gained +1.9%, following a +1.3% rise in December. Pending home sales soared +4.5% m/m in January after falling -4.3% a month ago. The market had anticipated a +2% gain for the month.
Today, the initial jobless claims probably slipped -1K to 361K in the week ended February 24. GDP might have revised up to +0.6% gain in 4Q12 from previous estimate of -0.1% decline. Chicago PMI probably slipped -1.6 points to 54 in February.
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