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Bunds fall before Thursday's ECB meeting
Whether falls in Spanish and Italian bond yields can be sustained depends on the fine print of the scheme, which is intended to cut borrowing costs.

Any ECB intervention is also conditional on the euro zone's ESM/EFSF rescue funds being deployed, leaving any bond purchases dependent on the outcome of a German Constitutional Court ruling on Sept. 12 on whether the ESM can go ahead.

"The market is still hopeful that the ECB will further loosen monetary policy and that something will happen on the bond buying," said Orlando Green, a strategist at Credit Agricole.

"The risks are that the ECB underwhelms ...The bond buying programme could take a bit longer given the event risk of the German constitutional court ruling."

http://in.reuters.com/article/2012/09/03/markets-bonds-euro-idINL6E8K3DKU20120903


Stocks got off to a strong start before stumbling slightly when Federal Reserve Chairman Ben Bernanke did not hint at additional easing, but instead reaffirmed his commitment to act if economic conditions worsen. Mr. Bernanke commented on the stagnation of the labor market, calling it a "grave concern" which bears monitoring. While Bernanke wasn't expected to roll out a new round of quantitative easing at this venue, the discussion of the costs of nontraditional policies may temper expectations for additional easing in the absence of greater economic deterioration. As a result, the S&P 500 finished higher by 0.5%.

Shares of major financials were broadly higher early in the session. However, most names slipped off their highs after it became clear that additional quantitative easing is not imminent. Goldman Sachs (GS 105.72, +1.00) and American Express (AXP 58.30, +1.13) ended higher by 1.0% and 2.0%, respectively. Meanwhile, European financials saw even bigger advances as plans to create a Spanish "bad bank" surfaced. Banco Bilbao Vizcaya Argentaria (BBVA 7.53, +0.36) gained 5.0%, while Deutsche Bank (DB 35.45, +1.59) and Credit Suisse (CS 19.25, +0.68) advanced 4.7% and 3.7%, respectively.

Energy stocks outperformed the broader market with the S&P energy sector firmer by 0.9% as the fear of hurricane-related disruptions dissipates. Anadarko Petroleum (APC 69.27, +1.01), and EOG Resources (EOG 108.30, 2.41) added roughly 1.7%. Elsewhere in the sector, China Ming Yang Wind Power Group (MY 1.21, +0.06) jumped 5.2% after forming a joint venture to develop additional wind and solar power technology with Huaneng Renewables. On the downside, Arch Coal (ACI 6.11, -0.07) slipped 1.1% after announcing the company's Senior Vice President of Marketing, David Warnecke, will retire in May 2014.

Utility stocks underperformed the broader market as most names in the SPDR Utilities Select Sector ETF (XLU 36.35, -0.04) traded lower. PG&E (PCG 43.41, -0.15), Exelon (EXC 36.47, -0.12), and Southern Company (SO 45.33, -0.05) were all down near 0.3%. Meanwhile, U.S. listings of Brazilian utility companies were under heavy pressure as Centrais (EBR 6.50, -0.45), Companhia Paranaense de Energia (ELP 17.79, -0.71), and Cia Energetica de Minas Gerais (CIG 17.00, -0.84) slumping between 4.5% and 6.5%.

Facebook (FB 18.06, -1.03) fell 5.4% after Stifel Nicolaus said that despite attractive valuation, it may still be too early to invest in the company as insider selling continues. Today's selling has pushed the stock down to $18.06, which is the lowest price since the initial public offering in May. Zynga (ZNGA 2.80, -0.09) and Groupon (GRPN 4.15, -0.04), two companies which have recently held their initial public offerings, slid 3.1% and 1.0%, respectively. Zynga traded $0.15 above its all-time low, while Groupon marked fresh lows.

The volatility index, or VIX, shed 1.5%, to 17.56. Two weeks ago, the volatility measure marked a 5-year low at 13.45, and has been on a steady rise since. This week alone, the VIX has risen by 8.5%.

Today's economic data was mixed. The August Chicago PMI of 53.0 surprised to the downside as economists had generally expected a reading of 53.8 to follow the prior month's 53.7. Elsewhere, the University of Michigan's final Consumer Sentiment Survey for August rose to 74.3 from the 73.6 that was posted in the preliminary Survey. Separately, July Factory Orders showed an increase of 2.8%, which was better than the Briefing.com consensus of a 2.0% increase.