Blog post

Update: financial market developments

Following on from our previous blogs, we take another look at the intra-day developments in financial markets after yesterday’s European Council meeti

Publishing date
07 July 2015
Thomas Walsh

Following on from our previous blogs, we take another look at the intra-day developments in financial markets after yesterday’s European Council meeting to discuss the urgent situation in Greece. While the general picture remains broadly the same as before, developments in the Portuguese 10-year yield are worth watching.

Figure 1: Intra-day developments in sovereign yields (%)

Source: Datastream ThomsonReuters


Spain, Italy and Portugal all had initial increases in yields following the the news that Greece would go to the polls (29/06). Yields have been more or less stable with some variance since then, however Portugal is beginning to diverge from the other two in the periphery group, starting some time yesterday or the day before. This could be a sign markets are slightly more nervous about the possibility of contagion from a Grexit scenario in Portugal than in Spain or Italy, however, these developments are still very mild in their historial context.

Germany and France have seen their yields fall over the last couple of days, undoing the slight up-tick we saw at the end of last week.

Source: Datastream ThomsonReuters


If we look at the Periphery spreads (against Germany) we can see that all have experienced increases around the referendum announcement and outcome. Portugal has continued to drift upwards while Spain and Italy are relatively more rooted at the higher level.

Source: Datastream ThomsonReuters


The stock markets appear to be a lot more downbeat than the bond markets. The national indicies of Germany, France and Spain are all continuing to slide lower. At theEuro area level, the STOXX 50 index exhibits a similar decline.

Figure 2: Stock Market Movements

Source: Datastream ThomsonReuters


Volatility (VSTOXX) remains above previous levels, albeit relatively stable around this new higher level.

Source: Datastream ThomsonReuters


Figure 3: The Euro-Dollar Exchange rate (USD per EUR)

Source: Datastream ThomsonReuters


The Euro has made up for some of the lost ground this morning, however this comes after several consecutive days of losses.





About the authors

  • Thomas Walsh

    Thomas Walsh, a British citizen, worked as a Research Assistant at Bruegel in the area of macroeconomics from August 2014 to August 2015.

    He holds a Master’s degree in Economics from the Barcelona Graduate School of Economics with a thesis entitled “The Credit Channel of Monetary Policy at the Zero Lower Bound: A FAVAR Approach”.

    He also holds a Bachelor’s degree in Economics and Econometrics from the University of Bristol.

    Previously, Thomas worked at the European Central Bank as a Trainee in the Statistics Development and Coordination division, working primarily with the ECB’s SME access to finance survey, SAFE.

    He has also held positions as Research Assistant at the Social and Public Health Sciences Unit, University of Glasgow and as Intern at the Centre for Market and Public Organisation, University of Bristol.

    His research interests cover macroeconomics and finance, particularly monetary policy transmission and central bank decision making. Thomas speaks English, conversational Spanish, and basic German.

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