All Eyes on The Euro

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ECB Provides Unprecedented 3-Year Loans Worth €489Billion to Banks
The European Central Bank (ECB) stepped up its response to the Eurozone crisis by providing €489billion in unprecedented 3-year loans to 523 banks across the region. The money will be lent at the ECB’s benchmark rate of 1%. The ECB has sought to reduce banks’ funding difficulties in the hope of averting a dangerous credit crunch that would drive the Zone into a deep economic recession. Meanwhile, the apex bank also expanded the kinds of collateral banks can use to obtain loans, amidst rising reluctance by banks to lend to households and businesses.

ONCE again, investors spent last week battling with the effects of Europe’s ongoing debt crisis. Italian, French and Spanish bonds all fell sharply despite support from the ECB.
The European Central Bank bought bonds in the secondary market as part of its Securities Markets Programme (SMP). However, yields on these troubled countries continued to rise as investors reacted to the failure of Eurozone policymakers and the ECB to agree on a course of action to wrest back control of the situation.

Towards the end of the week rumours grew that the ECB was planning to lend money to the IMF which would then bail out troubled countries. Such a move would bypass rules which prevent the ECB from buying sovereign debt directly. However, there are bound to be objections to the plan, specifically from Germany and the Bundesbank. So for now, traders and investors are keeping a close eye on the euro.
GFT quotes two-way prices on stock indices around the clock, even when the underlying markets are closed. The FTSE 100 index is called to open down 13 points at 5350. The German DAX is expected to open down 8 points at 5792 and the French CAC 40 is forecast to open down 6 points at 2,991.

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