Yesterday there was also real news. The Bundesbank's grudging cut in its repo rate deepened market pessimism about a fall in interest rates below 5 per cent in Germany. The Italian bond auction was bereft of buyers and led to sharp price falls in European bond markets, undermining equity markets in their wake.
From across the Atlantic came news of the fastest quarterly growth in 10 years in the fourth quarter, and a sharp hike in manufacturing prices disclosed in the respected NAPM (purchasing managers) survey. The best guess must be that the US economy has clambered on to a higher growth path. American markets sold off sharply on fears of another rise in the Federal Funds rate.
The question for Europe is whether bond markets will go on behaving as if they were merely an extension of Wall Street. Given the respective cylical positions, this is not rational. But neither is it a good background for today's monetary meeting between the Chancellor and the Governor.Reuse content