Aug 10
25
European Central Bank seeks bids to sterilise bond buys
International Market Report 25th August 2010
The Nikkei dropped 1.7% or 149.75 points to close at 8,845.39. The Topix dropped 1.3% to to close at 807.31. The Dow closed dropped 133 points to 10,040 while Nasdaq dropped 35 points to 2,213. The S&P 500 ended 15 points lower at 1,051.
Yesterday, the ECB called for bids to drain €60.5bn (£50bn) from Eurozone money markets to offset recent bond purchases. The operation will be a variable rate tender with a maximum payout of 1% interest. Banks have been limited to just two bids in the operation and the deposits they park can be used as collateral to reborrow from the ECB in its lending operations. The ECB has already stated that it will repeat the sterilisation process next week. The ECB carries out the sterilisation operations to balance out the cash it puts into the financial system whenever it buys bonds. Yesterday, Japanese equities tumbled as an ever-strengthening yen sparked a heavy sell-off of exporters such as Sony and Nikon. The Nikkei Stock Average dropped to a 15-month low below 9,000. Data showed yesterday, that during the month of June Eurozone industrial new orders rose more than expected during the month of June.
Yesterday, European Union statistics office Eurostat said that Industrial orders in the 16-nation currency zone increased 2.5 per cent month-on-month taking the annual gain to 22.6 per cent. Eurostat also revised May industrial orders upwards to 4.1 per cent month-on-month and 23 per cent annually. It said that the annual gain in May was the biggest for a decade.
Due for release today is the EUR German Ifo Business Climate, USD Core Durable Goods Orders, USD New Home Sales and AUD Private Capital Expenditure.
