Euro dips on lukewarm Italian debt sale

Fri Jan 13, 2012 8:12am EST
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By John Stonestreet

LONDON (Reuters) - The euro dipped on Friday and shares traded flat as an Italian bond sale failed to meet high expectations and Greece's debt swap deal hung in the balance, but markets welcomed trade figures pointing to resilience in the euro zone economy.

Underpinned by a flood of three-year loans to banks from the European Central Bank, Italy's three-year debt costs fell below 5 percent for the first time since September, spurring hopes it would be able to make it through a looming refinancing hump.

But the tender raised less than half the 10 billion euros secured the previous day at far lower yields by Spain, the other major euro zone economy on the front line of the debt crisis.

The debt turmoil weighed on trading and corporate deal-making at U.S. investment bank JPMorgan (JPM.N: Quote), which kicked off the financial reporting season across the Atlantic with a year-on-year drop in quarterly income.

"JPMorgan results are certainly closely eyed as they set the tone for the financial sector earnings," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

"This time, they didn't have any market surprises so investors will be focused more on other things today like the move in the euro."

On Wall Street, stock futures pointed to a flat opening and in Europe shares eased back to trade in narrow ranges after sharp gains ahead of the Italian debt sale.

The FTSEurofirst 300 .FTEU3 index was up 0.5 percent at 1,024.00 by 1215 GMT, off Thursday's five-month high of 1,031.08. The MSCI global index .MIWD00000PUS rose 0.3 percent.   Continued...