-Free German Democratic Party might support transaction tax
-Germany to auction EUR5bn in 5 year debt
-Banks deposited EUR787.3bn overnight at ECB

FTSE-100: 0.86%
Dax-30: 0.94%
Cac-40: 0.85%
Stoxx 600: 0.89%
Ibex 35: 0.68%

‘Germany (…) has done the minimum necessary to keep vulnerable countries afloat —and demanded crushing public-spending cuts in return (…) the German government must decide whether saving the euro is worth putting the country’s own prosperity at risk,’ rightly or wrongly thus writes The Wall Street Journal this morning. In any case, the truth seems to be that Europe faces a looming moment of reckoning.

Against that background, all eyes will today be on the European Central Bank (ECB) and the outcome of its policy meeting this afternoon, at 1:30PM. While only a small minority (less than 20%) expects an interest rate cut today there are those who expect that the Eurozone’s monetary authority will indeed announce new quarterly refinancing operations, with an aim to alleviating some of the funding stress for banks and ‘as an insurance against the intensification of deposit flight.’

Some mixed ‘market chatter’ is also to be heard this morning as regards the possibility of further monetary easing by the US Federal Reserve.

Moody’s Investors Service yesterday cut the credit ratings of six German banking
Groups, including Commerzbank due to the risk of a worsening in the Eurozone crisis.

Troubled Spanish mortgage lender Bankia may receive less than the EUR19bn in aid that it had asked for.

Dutch supermarket group Ahold has reported weaker than expected first quarter earnings figures.

From a sector stand-point the best performance is now to be seen in shares of the following groups of stocks: basic resources (1.96%), automobiles (1.33%) and financial services (1.28%).

Spanish industrial output comes in weaker than expected

Spanish industrial production fell at an 8.3% year-on-year rate in April, less than the 6.5% contraction expected by the consensus.

German industrial production data may surprise on the downside at 11AM.

Other asset classes steady

The euro/dollar cross is now rising by 0.25% to the 1.2480 dollar mark.

Front month Brent futures are up by $0.503 to the $99.34 per barrel mark in ICE trading.

AB