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Merkel Ally Says Germany Will Win Support for Bank Union Stance
The parliamentary finance-policy spokesman for Chancellor Angela Merkel’s bloc said he’s confident that Germany will persuade more European countries to join it in rejecting a single fund to wind down troubled banks.
Plans unveiled by the European Commission for a banking union in Europe are “not acceptable” in their present form as they’re incompatible with European law, Klaus-Peter Flosbach said in e-mailed comments responding to questions today.
“We advocate a network of national restructuring funds instead of a single European bank resolution fund,” he said. “I’am optimistic that other member states will join our view.”
Flosbach’s comments followed a report in today’s Die Welt newspaper that German Finance Minister Wolfgang Schaeuble is forging a blocking minority of European Union member states against a commission proposal that might hold taxpayers liable for the costs of winding down troubled banks.
Germany has won the support of the U.K., Finland, Estonia and possibly some other EU countries, Die Welt said, citing German government officials it didn’t name. The commission proposal needs the backing of 55 percent of member states representing 65 percent of the 28-nation EU’s population as well as the European Parliament.
Winning allies against the commission is one of three options identified by Schaeuble, which include a legal challenge and delaying progress toward banking union until a new commission takes over next year that’s more open to German objections, accroding to Die Welt.
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EUR/USD weekly outlook: July 29 - August 2
The euro was almost unchanged against the dollar in thin trade on Friday, hovering near six-week highs as investors turned their attention to upcoming policy statements by the Federal Reserve and the European Central Bank.
EUR/USD hit highs of 1.3296 on Friday, before settling at 1.3279, up 0.01% for the day and 0.91% higher for the week.
The pair is likely to find support at 1.3177, Wednesday's low and resistance at 1.3318, the high of June 11.
The greenback came under pressure as the release of mixed U.S. data on initial jobless claims and durable goods orders on Thursday fuelled fresh uncertainty over whether the Fed will start to scale back its bond buying program later this year.
The Labor Department said the number of individuals filing for initial jobless benefits last week increased by 7,000 to a seasonally adjusted 343,000, compared to expectations for an increase of 6,000 to 340,000.
Separately, the Commerce Department said orders for long lasting manufactured goods rose by a seasonally adjusted 4.2% in June, compared to expectations for an increase of 1.3%.
Durable goods for May were revised to a 5.2% gain from a previously reported 3.7% increase.
Core durable goods orders, which exclude volatile transportation items, were flat in June, compared to expectations for a 0.5% increase.
Meanwhile, the euro gained ground after data showed that the Ifo index of German business climate ticked up to 106.2 in July from 105.9 In June, slightly better than expectations for a reading of 106.1.
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A year on, Draghi's 'save the euro' pledge remains untested
A year after Mario Draghi vowed to do "whatever it takes" to save the euro, the European Central Bank president can claim to have staved off disaster - but he may have to back up his words with action before long.
Were euro zone turmoil to return, especially with Spain or Italy on the receiving end, Draghi and the ECB will have to prove that his promise - made on July 26 last year - has substance, something he and the ECB have not yet had to do.
This time last year, investors were piling up bets on the break-up of the 17-country currency bloc. Then, with 23 ad-libbed words, Draghi changed the course of the euro zone debt crisis.
"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough," he said on a warm summer day in London.
While that was enough to calm markets, it took another six weeks of frenzied backroom diplomacy and public sparring to flesh out a plan and announce that the ECB could buy unlimited amounts of bonds of countries that sign up for strict conditions through its Outright Monetary Transactions (OMT) program.
A year later, the ECB has yet to use the plan.
To markets, the OMT is like a nuclear deterrent - the mere threat of its use is enough to keep an uneasy peace. Draghi has declared it a master stroke. "It's really very hard not to state that OMT has been probably the most successful monetary policy measure undertaken in recent time," he said last month.
Investors agree.
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EUR/USD steady, near 5-week highs
The euro was steady against the U.S. dollar on Monday, hovering near five-week highs as markets eyed the release of U.S. data and as investors remained cautious ahead of upcoming policy statements by the Federal Reserve and the European Central Bank.
EUR/USD hit 1.3274 during late Asian trade, the session low; the pair subsequently consolidated at 1.3275, easing 0.04%.
The pair was likely to find support at 1.3177, the low of July 24 and resistance at 1.3359, the high of June 12 and an almost four-month high.
Markets were jittery after mixed U.S. economic reports last week fuelled further uncertainty over whether the Fed will soon begin to scale back its bond-buying program.
Meanwhile, the euro remained supported after data on Thursday showed that the Ifo index of German business climate ticked up to 106.2 in July from 105.9 In June, slightly better than expectations for a reading of 106.1.
A separate report showed that the euro zone composite purchasing managers’ index rose to 50.4 in the current month from 48.7 in June, sparking optimism that the bloc’s economy could emerge from a recession in the third quarter.
The euro was also steady against the pound with EUR/GBP dipping 0.03%, to hit 0.8629.
Later in the day, the U.S. was to produce industry data on pending home sales.
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European Earnings: Bad And Getting Worse, As Majority Of Companies Miss EPS
We have extensively covered the evolution of Q2 earnings in the US where so far nearly half or 240 of firms have reported (and 136 on deck this week): from the revenue recession (2nd consecutive decline), to the overreliance on financial firms as the sole driver of EPS upside, to the fact that the only reason banks are beating is to FAS115, the unaccounting of AFS swings and the suspension of MTM. In other words, no top-line growth and bottom-line upside solely due to financial balance sheet gimmicks. But what about, Europe where accounting magic is not nearly as advanced a science as it is in the US?
Not surprisingly, we find that of the 120 DJStoxx600 companies reporting so far, the revenue picture is about the same as in the US, with 58% of companies beating the topline and 42% missing, a carbon copy of the US' 58%/43%. But it is the EPS where the difference truly shines: while in the US some 73% of firms have "beat", in Europe this number is only 48%. The flipside, or misses? In the US it is 26%. In Europe: a majority of companies, or 51%. In brief, anyone expecting a quick and easy turnaround in Europe's corporate earnings picture will have to wait some more.
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EUR/USD pushes lower after positive U.S. data
The euro pushed lower against the U.S. dollar in thin trade on Monday, as the release of positive U.S. data lent support to the greenback ahead of the Federal Reserve's upcoming policy meeting.
EUR/USD hit 1.3274 during late Asian trade, the session low; the pair subsequently consolidated at 1.3275, easing 0.04%.
The pair was likely to find support at 1.3166, the low of July 25 and resistance at 1.3359, the high of June 12 and an almost four-month high.
Industry data showed tha U.S. pending home sales fell 0.4% in June, less than the expected 1% decline, after a 5.8% rise the previous month.
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IMF approves EUR 1.7 bn loan payout to Greece
The International Monetary Fund released 1.72 billion euros ($2.29 billion) in aid for Greece on Monday after completing a review of the country's performance under the international rescue program.
The latest disbursement means that Greece has received a total of roughly 8.24 billion euros ($10.94 billion) from the IMF under the bailout coordinated with the European Union and the European Central Bank in March 2012.
On Friday, the 18-nation eurozone gave the green light for the release of 4.0 billion euros in bailout funds for Greece after it had met program conditions.
Twice bailed-out Greece still faces a funding shortfall of some 3.8 billion euros late next year but its troika of international creditors are not overly concerned, a senior EU official said Friday, speaking on condition of anonymity.
"There is a program financing gap of about 3.8 billion to the end of 2014," the European Union source said, adding that in the eyes of the experts involved, this figure was "not enormous."
The Greek bailouts agreed by the EU, the European Central Bank and the International Monetary Fund are financed through mid-2014, the official said.
Greece was first bailed out for 110 billion euros in 2010 but when that failed, got a second rescue worth 130 billion euros plus a private sector debt write-off totaling more than 100 billion euros.
In exchange, Athens has had to implement draconian austerity measures, including drastic cuts to pensions and civil service payrolls while the economy has remained stuck in recession for some six years.
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Euro Jobless Rate Seen at Record Even as Recession Ends
Euro-region unemployment probably stayed at a record high in June even as the economy emerged from the longest recession since the single currency’s creation, economists said.
The jobless rate remained at 12.2 percent last month, according to the median of 36 forecasts in a Bloomberg News survey. That would match the result for May, which was the highest since records began. Eurostat, the European Union’s Luxembourg-based statistics office, will publish the data tomorrow at 11 a.m.
The 17-nation euro economy is showing signs of emerging from its recession and resuming growth after manufacturing output unexpectedly expanded in July for the first time in two years and German business confidence improved for a third month. Unemployment will still continue to rise in the coming quarters, according to a separate survey.
“There is scope for a further moderate increase in the unemployment rate, because unemployment lags behind growth by one to two quarters,” said Marco Valli, chief euro-zone economist at UniCredit Global Research in Milan. “Given the economy is already stabilizing and will resume modest growth in the third quarter, we may see some stabilization in unemployment toward the end of the year.”
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Eurozone Retail PMI improves to 21-month high in July
The eurozone retail sector neared stabilisation in July, Markit’s retail PMI® data showed. The value of retail sales fell for the twenty-first month running, but at the slowest rate over that period. Moreover, both Germany and France posted higher sales during the month, with the latter recording the first expansion since March 2012. The main negative finding from the latest survey was a sharper decline in Italian retail sales.
The Eurozone Retail PMI is a seasonally adjusted indicator of changes in the value of sales at retailers. Any figure greater than 50.0 signals growth compared with one month earlier.
Commenting on the data, Trevor Balchin, senior economist at Markit and author of the Eurozone Retail PMI, said:
“We may soon see an end to the current survey-record stretch of falling retail sales in the eurozone. Unless Italy’s decline moderates, an overall rise in sales looks likely to hinge on growth in France being sustained in the coming months, as strengthening growth in German retail sales has so far not been enough to wholly offset the ongoing collapse in Italian revenues. Throughout the survey history, German sales growth alone has never translated into an overall increase at the eurozone level.”
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Swedish Economic Growth Slows In Q2
The Swedish economy expanded at a notably slower pace in the second quarter, and the rate of growth missed economists' forecast, latest data showed Tuesday.
Gross domestic product (GDP) increased a working-day adjusted 0.6 percent in the second quarter from the same period a year earlier, significantly slower than the 1.7 percent growth recorded in the first quarter, Statistics Sweden said. Economists were looking for a more moderate slowdown to 1 percent.
Gross domestic product edged up 0.1 percent compared to the first quarter, when it stayed unchanged. Economists had forecast GDP to record a 0.1 percent sequential increase.
During the second quarter, Swedish exports decreased 3.2 percent and imports decreased 2.8 percent, on a working-day adjusted basis. Meanwhile, market production of goods and services increased by 0.4 percent, the agency said.
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