As the debt crisis has been causing a number of worries to investors, their eyes have been on the borrowing costs. Lower borrowing costs are always welcome and considered a sign of improvement.
Earlier this week, Italy and Spain had successful bond auctions. Also, the borrowing costs in both the United Kingdom and the Eurozone were unchanged. These offers provide some relief to investors and economists who are hoping for a new recovery.
Investors across the continent barely traded before the news. They were awaiting the outcome of the bond auction, which would set the stage for trading the rest of the day. Many European stocks rose significantly on the good news. However, stocks in the UK were held back a little bit. Despite the relief over the good news from other EU member nations, they were concerned by a report from Tesco.
Tesco reported that its profit dropped significantly. The report comes 10 months after the company changed CEOs. After reporting at least a 5% growth in profit every year since 1994, many analysts are starting to fear that the company may be losing its touch.
Nevertheless, the overall economic outlook for stocks in the UK and Europe was a little more optimistic after the news of the successful auctions.
Stocks weren’t the only commodity to celebrate. The euro also increased significantly over the news. After Italy and Spain reported the results of their auctions, they euro strengthened against the U.S. dollar. The euro had hit a 16 month low the day before.
The news may be welcomed by the financial industry, but other professionals are looking for hope that there will be more long-term solutions. Borrowing costs are dependent on investor confidence. If investors are particularly concerned that the problems are escilating again, then they may demand higher borrowing costs in the future.
The data had positive implications for traders in the United States as well. In fact, the European debt problem clearly weighs more on investors minds than many factors weighing in their own economy. As the market opened, American investors largely ignored several negative reports including lower retail sales and rising unemployment claims.
Investors continue to rank borrowing costs of EU member nations as they try to make progress on the debt problems they are facing.
