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German concessions spurs a bounce in risky assets


The relief rally for risk assets, after news of German concessions at the EU Summit early Friday morning, lifted all classes of risky asset higher: the S&P500 index was down 3.9% in 1Q12, but is up 7.7%YTD. Last week, the S&P500 rose 1.7% to make for the best June performance since 1999. Italian and Spanish equities soared 6.6% and 5.7%, the biggest one-day jump in Italian equities in more than two years. EUR jumped 2% against USD and finished 0.7% higher on the week (note that, technically, 1.2740 is the key level of short-term resistance). The Spanish 10-year bond yield fell 60bp to 6.32%. For the first half of 2012, the Turkish equity market was the biggest gainer, with 22% with Germany leading the G7 at an 8.8% gain. India leads the BRICs with a rise of 12.8%. Meanwhile, MSCI Russia, which was up 5.2% on the day, continues to underperform MSCI EM by 3%YTD.

As we go to print, Asia is consolidating around Friday’s levels. Oil (dated Brent) has climbed above USD 96/bbl. EUR is hovering around the 1.263 reached on Friday. Gold is at USD 1,592/oz. 

Alexey Zabotkin, Sergey Galkin, Ilya Piterskiy,Anastasia Markina
VTB Capital analyst

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