Athens government seeks two-month extension. University of Athens ‘suspends operations. Germany’s firms more confident as recovery continues. UK mortgage approvals hit highest since Dec 2009. Long slog expected over German coalition…
Italian PM Enrico Letta is discussing the future of Telecom Italia, after Spain’s Telefonica announced plans to take a much larger stake in its parent company (up to 70%).
Fab Goria tweets the key points:
And here’s more details of the University of Athens’ decision to suspend operations, because (it says) public sector job cuts have made it impossible to continue: University of Athens, NTUA Suspend Operations
Greek government pleads for more time over public sector layoffs
Over in Greece our correspondent Helena Smith reports that the government has appealed for more time to press on with the troika’s most controversial of demands yet: public sector dismissals.
Inspectors from the EU, ECB and IMF have yet to respond, on a day in which Greek public workers protested again.
And in another worrying development, the University of Athens has suspended all its operations, saying it cannot keep functioning with so many staff laid off.
Barely two days after negotiations with visiting troika representatives began, prime minister Antonis Samaras’ coalition government has upped the ante asking for yet more time to implement reforms.
At a meeting with mission heads from the EU, ECB and IMF, the administrative reform minister Kyriakos Mitsotakis appealed for a two-month extension to the deadline Athens presently has to transfer some 12,500 civil servants into a so–called mobility scheme where employees would see their salaries drastically reduced before being moved, if lucky, to another government department.
Insiders at the ministry described the atmosphere of the talks “as very positive” – in sharp contrast to the environment outside where thousands of demonstrators gathered to issue howls of protests.
To underline that point about a positive atmosphere the meeting was even cut short, apparently by a good 40 minutes. But a source close to the troika was not so confident.
They [auditors] made it clear that they would come back with an answer Friday.
Yes, Greece has made progress but there is a feeling that what we are seeing is yet more stalling of the inevitable with the government once again biding time.
After a mad dash scramble the ministry managed to complete the first phase of the scheme – identifying 12,500 civil servants who could be transferred to the programme by the end of the month. Most are from the education sector and have included teachers, administrative staff and school guards.
But the effects of the crude fiscal logic that has often guided those decisions has not been without consequence.
Earlier today the University of Athens repeated that with layoffs making its “educational, research and administrative operation … objectively impossible” it regretted to inform the public that it was “forced to suspend all of its operations.”
“There is a possibility that the next six months could be lost but the bigger issue is not to lose the university altogether,” its rector Theodosis Pelegrinis said. The academic insisted the dismissals had been handled “in an excessive manner” without foresight or any proper review.
Describing the job losses as “incomprehensible” the university’s senate said the cuts would lead with mathematical precision to “undermining higher education and the young generation of Greece, the only real hope for overcoming the social and economic crisis in the years to come.”
Syriza, the radical left main opposition party that has spurred on protests, announced that its leader Alexis Tsipras would hold talks with school teachers tomorrow.
A bad day for cruise firm Carnival, which has been keelhauled to the bottom of the FTSE 100.
Carnival shares fell by 5.6% today, after it warned that bookings are sharply lower this year.
As my colleague Nick Fletcher explains, Carnival spooked the markets by reporting a 30% fall in third quarter earnings after problems with a number of its ships. Most famously, Costa Concordia, which was finally refloated last week after crashing in early 2012.
Bookings for the rest of 2013 and the first half of 2014 are down on the previous year, the company admitted.
It admitted it could take three years for the Costa brand to recover its reputation, following the Concordia disaster in Italy and another setback involving Costa’s Triumph vessel which stranded passengers for five days. Mechanical problems have dogged some of its other vessels.
Video: Top banker under fire over Libor answers
The Libor scandal has taken another twist this afternoon.
The Wall Street Journal is reporting that Alex Wilmot-Sitwell, a former top UBS executive, is under fire over the testimony he gave to Parliament in January, regarding attempts by traders to fix the rate at which banks would lend to each other.
Wilmot-Sitwell told MPs on the Treasury Committee that he didn’t recall Tom Hayes, one of the traders at the heart of the scandal. But the WSJ’s David Enrich has discovered that Wilmot-Sitwell was included on various emails which discussed Hayes — who was charged over the Libor affair in June.
Mark Garnier MP, a member of the Treasury Committee, says Wilmot-Sitwell has “questions to answer”.
And here’s the WSJ’s story: Ex-UBS Executive Under Fire Over Libor Testimony
Greece threatened with demotion, again
FTSE Group, the stock market index company, has again threatened to expel Greece from its list of Developed Markets, and rank it as an Advanced Emerging market.
In its Annual Country Classification Review, published this afternoon, FTSE said it was leaving Greece on its Watch List, for yet another year. Greece was first placed on Watch for a possible downgrade in 2006.
- Argentina: Possible demotion from Frontier
- China ‘A’ Share: Possible inclusion as Secondary Emerging
- Greece: Possible demotion from Developed to Advanced Emerging
- Kazakhstan: Possible inclusion as Frontier
- Kuwait: Possible inclusion as Secondary Emerging
- Mongolia: Possible inclusion as Frontier
- Morocco: Possible demotion from Secondary Emerging to Frontier
- Poland: Possible promotion from Advanced Emerging to Developed
- Qatar: Possible promotion from Frontier to Secondary Emerging
- Taiwan: Possible promotion from Advanced Emerging to Developed
Morocco and Qatar are new entries, while Ukraine has been booted off the list. It had been lined up for “possible promotion to Frontier market status”, but FTSE is now worried about:
…continuing delays in market developments and no timelines as to when the market developments regarding regulatory oversight, capital controls, treatment of minority shareholders and settlement will be implemented.
If you’ve not seen it already, do check out this article on Comment Is Free today about Greece’s neo nazi Golden Dawn party, and the investigation into links between the party and the Greek police.
Here’s a flavour:
For a period, Greece’s experience of general strikes, occupations and social movement protests came close to insurrection. This is as near to what Gramsci called a crisis of authority as one can get. The political control of the state has been breaking down. It is this breakdown of authority – which reactionaries blame on immigration, foreign control and communist agitation – that fuels Golden Dawn’s support.
The situation is toxic. Austerity has not run its course, any more than the recession, or the social misery engendered by it. The only recourse of the left is to render Golden Dawn useless by incapacitating it, obstructing its activities and shutting it down as an effective street-fighting fascist organisation.
More here (where regular reader Kizbot had been putting the world to rights in the comments):
A weak start on Wall Street, with the Dow Jones index dropping 55 points in early trading to 15345, –.35%.
Once again (again) traders are fretting over the question of when the Federal Reserve will start tapering its QE programme.
There are some big risers, though — particularly in the tech sector. Facebook are up 4% to a new lifetime high after an upgrade from Citi and predictions of a new access deal in China, while Yahoo’s up 3% to a six-year high.
No rush for the Bank’s probing Paul Tucker
Bank of England deputy governor Paul Tucker has joined the chorus of policymakers and it would appear he is singing from the same hymn sheet on forward guidance, reports my colleague Katie Allen.
She’s swiftly digested Tucker’s lunchtime speech (see 1.57pm for the snaps), and explains that Tucker’s speech matches other pronouncements from BoE policymakers this week, all defending the Bank’s new approach.
Fellow Monetary Policy Committee (MPC) member David Miles said earlier today that he believed the Bank’s promise to keep interest rates low until the recovery is well entrenched could help nurture the nascent upturn.
On Monday, their colleague Ben Broadbent defended tying policy to the unemployment rate.
Tucker’s view is that forward guidance can be particularly useful during a period when the recovery is beginning to take hold. And he wants people to know the MPC is in no rush to take away its economic crutches.
According to the text of his speech to the Association for Financial Markets in Europe (AFME), he said:
Saying more about the committee’s approach to policy in this way might be particularly valuable during a period when signs of recovery have become more apparent. These are conditions in which it would be very easy for the financial markets, businesses and households to jump to the mistaken conclusion that monetary stimulus will soon begin to be withdrawn. Given the slack in the economy, the Committee is not in a rush.
On the question of the Bank’s credibility when it comes to keeping inflation in check, Tucker draws a contrast with the pre-independence era. He argues that it was precisely that credibility of the independent BoE’s commitment to keeping inflation in check that “enabled us to provide such exceptional monetary support to help the recovery.”
It is unimaginable that, prior to Bank independence in 1997, any government would have been able to hold the policy rate at effectively zero and make a further monetary injection of £375bn without inflationary expectations – and government financing costs – spiralling out of control.
Still, he does concede that just having a 2% inflation target – that keen UK data watchers will know has been missed for 45 successive months now – is not a license to endless money printing.
Credibility is not to be taken for granted. Even we cannot provide stimulus without limit, without a wary eye to inflation expectations.
And there is a further note of caution on that long-standing puzzle for the Bank, productivity:
Let’s be clear: we do not understand why productivity has been so weak. And that means that we are highly uncertain about the amount of slack in the economy currently and prospectively; uncertain about the extent of the consequent downward pressure on domestically-generated inflation; and, thus, uncertain about the path of output and employment consistent with non-inflationary growth.
And where does all that leave policymaking?
Tucker sums it up: “Provide stimulus; pause to see whether inflation expectations remain anchored; if, but only if, they are and more stimulus is needed, provide it etc. A ‘probing’ approach.”
Another resignation in Germany… this time at the Pirate Party, where leader Bernd Schlömer has reportedly told party members that he won’t run again.
Not a surprise, given the Pirates captured just 2.2% of votes.
Paul Tucker, the Bank of England’s outgoing deputy governor with responsibility for financial stability, is giving a speech on monetary policy in London.
We’ll have full details shortly. In the meantime, here’s the newswire snaps:
24-Sep-2013 13:45 – BANK OF ENGLAND’S TUCKER SAYS BOE DOES NOT UNDERSTAND WHY UK PRODUCTIVITY SO WEAK, TAKING “PROBING” APPROACH TO POLICY
24-Sep-201313:45 – BOE’S TUCKER – MPC APPROACH HAS BEEN TO PROVIDE STIMULUS; PAUSE TO SEE IF INFLATION EXPECTATIONS STAY ANCHORED; IF, THEY ARE AND MORE STIMULUS IS NEEDED, THEY PROVIDE IT
24-Sep-2013 13:45 – BOE’S TUCKER – IF RECOVERY DOES GAIN TRACTION, MPC WILL NEED TO AVOID MISPERCEPTIONS ABOUT LIKELY COURSE OF POLICY
24-Sep-2013 13:45 – BOE’S TUCKER – BY ADOPTING A PROBING APPROACH MPC CAN PROVIDE BROADLY THE RIGHT DEGREE OF STIMULUS WITHOUT DILUTING COMMITMENT TO PRICE STABILITY
24-Sep-2013 13:45 – BOE’S TUCKER – FORWARD GUIDANCE DOES NOT COMMIT MPC TO KEEPING POLICY LOOSE BEYOND THE POINT THAT WOULD BE PRUDENT
24-Sep-2013 13:45 – BOE’S TUCKER – AS DATA COMES IN, BOE UNEMPLOYMENT FORECASTS MORE LIKELY TO CHANGE THAN FORWARD GUIDANCE
Speaking of Germany, finance minister Wolfgang Schäuble has warned that Angela Merkel’s next government (once formed) will not change its approach to Europe’s economic problems.
Schäuble told the “Leipziger Volkszeitung” newspaper that Merkel will continue to push for rigorous budgetary discipline across the eurozone.
Appeals for countries to be allowed to relax their deficit targets and borrow more to stimulate growth will not be granted, insisted Schäuble, adding:
I’m also in favor of more growth and more jobs
But I believe that only through budget consolidation and accompanying structural reforms can you get there.
At this stage, though, it’s not clear whether Schäuble will remain as finance minister in the next administration. It all depends on the coalition talks….
The fallout from Germany’s election continues. Jürgen Trittin, co-leader of the Green Party, has announced that he won’t run for the leadership again.
Trittin added that he and co-leader Katrin Göring-Eckardt would continue to hold “exploratory talks” with Angela Merkel’s Christian Democrats.
From Athens, our correspondent Helena Smith reports that today’s protests were “quite raucous”.
Photos from the scene show the usual array of anti-Troika slogans, calling for an end to Greece’s austerity programme.
As expected, today’s 48-hour strike has hit many public services. Associated Press flags up, though, that some local services kept running. Here’s AP’s early take:
Greek civil servants walked off the job Tuesday at the start of a 48-hour public sector strike, the second in as many weeks, to protest job cuts required for the country to continue receiving international rescue loans.
State school, tax office and hospital workers joined the strike, while ambulances services were to run with a reduced staff. Journalists joined in with a three-hour work stoppage, pulling any non-strike related news of the air.
But participation appeared low, with many services remaining open in central Athens, including post offices and some schools and tax offices.
Thousands of people marched peacefully, chanting anti-austerity slogans through the center of the capital and in the country’s second-largest city of Thessaloniki in the north.
Back in the markets, the Italian stock markets is the best performer this morning.
Here’s the lunchtime prices:
David Madden, market analyst at IG, says traders are still pondering when the Federal Reserve might start to taper its bond-purchase scheme, and fretting about Germany.
He also flags up the comments from ECB senior policymakers today, and yesterday, about the possibility of another round of cheap loans for euro-area banks (see 11.07am for details)
The Federal Reserve is trying to keep investors in the dark as to what its next move will be. The decision to keep the bond-buying programme unchanged at $85 billion per month pushed equities higher, but speculation is mounting about what the next meeting will bring. As always, the Fed members are divided: James Bullard is hinting at tapering, while William Dudley isn’t convinced the US economy is strong enough yet.
Just as the Fed is looking to ease up on its stimulus package, the ECB stated it is on standby to pump cash into the banking system if required. Traders are becoming too dependent on stimulus packages, but they can provide a boost to equities in the short term.
Mineral extractors have lost the most ground today, due to softer commodity prices. Meanwhile, European equity traders are sitting on their hands while Angela Merkel puts together a new coalition government.
Back in Greece, one demonstrator is carrying a flag with a German slogan on it — clearly looking for an overseas audience (see below – it’s the blue banner in the background) .
It reads “Nein zu Spardiktaten und Nationalismus” or “no to austerity diktats and nationalism”
Here’s the full details of the OECD’s warning about the eurozone, from Reuters:
The European common currency area remains “a considerable source of risk” even though the systemic risk from its debt crisis is scaling back, the Organisation for Economic Cooperation and Development’s chief economist said on Tuesday.
The OECD’s Pier Carlo Padoan told a conference in Lisbon positive economic growth in the euro zone should return only in 2014, expecting growth to be still negative this year despite a recovery in many countries, including Portugal.
He said that while pursuing structural fiscal consolidation in 2014, euro zone countries should allow automatic stabilisers to work and focus on fighting high unemployment rates.
OECD chief: global economy is slowly recovering
Some quotes from the OECD’s chief economist, Pier Carlo Padoan, just flashed up on the Reuters screen.
He’s warning that the eurozone economy is still poses significant risks to the global economy, but also sees signs of recovery:.
11:15 – OECD CHIEF ECONOMIST SAYS GLOBAL ECONOMY SLOWLY EXITING RECESSION, BUT FAR FROM SUSTAINABLE GROWTH
11:16 – OECD CHIEF ECONOMIST SAYS EURO AREA “STILL REMAINS CONSIDERABLE SOURCE OF RISK” 24-Sep-2013
11:20 – OECD CHIEF ECONOMIST SEES EURO AREA ENTERING POSITIVE GROWTH IN 2014, 2013 STILL SEEN NEGATIVE
11:22 – OECD CHIEF ECONOMIST SAYS GROWTH IS COMING BACK FOR MANY COUNTRIES INCLUDING PORTUGAL
Greek photojournalist Nikolas Georgiou is tweeting some photos from today’s protests. Here’s a couple:
The European Central Bank could help the eurozone banking sector with a third injection of ultra-cheap loans, ECB governing council member Ewald Nowotny said this morning.
Speaking in Venice, Nowotny (who’s also the head of Austria’s central bank) said it was too early to consider stopping the ECB’s ‘non-standard’ stimulus measures.
Asked about the prospects of another Long Term Refinancing Operation (in which the ECB would offer huge quantities of low-priced loans to banks), Nowotny replied:
It is certainly important to show all that we have in the way of instruments, which are flexible.
The ECB offered almost a trillion euros to eurozone banks in two LTROs, at the end of 2011 and in early 2012. Yesterday, ECB president Mario Draghi told MEPs that a third LTRO was a possibility, if conditions required it.
Greek public sector workers have marched towards the country’s parliament in Athens, at the start the 48-hour strike that began this morning. Syntagma metro station has been temporarily closed.
The public sector ADEDY union has declared, as it’s said so many times before, that the protest is an attempt to push the government to change course.
We call on the workers … the self-employed, the unemployed, the pensioners, the youth and everyone affected by these policies to give their resounding presence.
But the Greek government is more worried about the Troika’s visit this week. There are murmurs from Athens that the debt inspectors are pushing for progress on privatisations, where Greece is already facing a €1bn shortfall this year.
During a meeting at TAIPED’s headquarters, the mission chiefs of the European Central Bank, the European Commission and the International Monetary Fund called for more action so that this year’s revenue shortfall, amounting to 1 billion euros, can be covered in 2014.
At the troika’s focus were the privatizations of ports, water and sewage companies, and Hellenic Post. According to plans drawn up in January, these sell-off projects should have started in the second quarter of the year, while the aim now is for them to get started in the last quarter, given that the third will be over in a week’s time.
Another reason for optimism about this morning’s IFO survey — it’s the best reading of German business confidence since April 2012.
Here’s AP’s take:
A closely watched index of German business optimism rose for the fifth month in a row in September, reflecting the improved prospects for Europe’s largest economy.
The IFO institute’s index edged up to 107.7 points from 107.6 in August. Market analysts had expected it to rise slightly more, to 108.0
The index is based on a survey of 7,000 companies about how they think the situation is now, and how they see things going in the coming months. It’s a leading indicator, meaning it suggests where the economy is going in the months ahead.
Germany’s economy expanded 0.7% in the second quarter, helping the 17-country euro currency union return to growth after six quarters of shrinking output.
Reminder — there’s analyst reaction here.
UK mortgage approvals at highest since December 2009
Just in: UK mortgage approvals have hit their highest level since December 2009, in another sign of a revival (some would say a boom) in Britain’s housing market.
A total of 38,228 loans were approved in August, up from 37,428 in July. That’s nearly a 26% jump on a year ago, according to the British Bankers Association.
Last week, chancellor George Osborne insisted that Britain isn’t gripped by a housing boom. But clearly the market has been revived by signs of economic recovery, and by Osborne’s Help To Buy scheme.
Prices are particularly rampant in the UK capital. As the FT’s Alphaville site points out, the average house price increase over the last 12 months (£38,729) is bigger than the average net income of a London household (£38,688).
Those income figures include people who can’t afford to get on the housing ladder, of course:
IFO: What the experts say
Here’s that reaction to the news that Germany’s IFO business conditions index rose this month, if only marginally (see last post).
Analysts broadly agree that Germany is on the road to recovery, particularly as firms are more optimistic about future prospects.
However, there’s also a little bit of concern that the current conditions index fell (from 112 to 111.4), showing that firms are finding life a little harder.
I’ve taken the quotes off the Reuters terminal:
Thomas Gitzel, VP Bank:
“The somewhat worse conditions index reading is offset by the improved expectations index. Everything is pointing to a faster pace of growth for Germany in the coming months. But what is especially pleasing is that the improved indicators in Germany are based on a more positive international climate. These include improved prospects for the stricken euro zone countries, the recovery in the U.S. economy and the brightening situation in China.”"This leads us to conclude that the current upward movement can be seen sustainable.”
Ralf Umlauf, Helaba:
This is good news. The German economy is gaining speed and growth in the third quarter should again be robust. It’s a little disappointing that the rise in the business climate is only due to higher expectations. The European Cental Bank is likely to feel confirmed in its wait-and-see stance. On the political side, it’s now important to form a government able to act in order to prevent potential strain on the mood from a cliffhanger.
Christine Volk, KfW
German growth is on course for recovery, with business expectations brightening. Europe, as Germany’s most important export market, is beginning to stabilise after a very long lean period and Germany is benefiting from that. Growth in 2014 could even reach 2 percent.
We are less optimistic about Europe. There is a lack of growth stimulus and the debt sustainability of some countries is still in doubt. Here there is potential for disappointment.
Ben May, Capital Economics
The further rise in German Ifo business sentiment confirms that the economy is recovering, but we continue to expect growth to be reasonably sluggish. The rise in the headline business climate indicator was a touch smaller than the consensus forecast, but it left the index at its highest level since April 2012.
German business climate improves, but misses forecasts
German firms have reported that the business climate improved slightly in September, but they’re not as upbeat about the situation today as economists had expected.
That’s the top line from the monthly IFO survey, which was released a few minutes ago.
The IFO German Business Climate index came in at 107.7 in September – up from 107.6 in August, but lower than the 108.2 which the City had expected.
The Current Conditions index missed expectations, at 111.4 versus a consensus of 112.5. That’s also a fall compared with August’s reading of 112.0.
And IFO’s Future Expectations index came in at 104.2, just above the 104.0 that was pencilled in.
So, a mixed picture in Europe’s largest economy.
A year ago, the IFO business climate index was just 101.4 — so today’s 107.7 does show how the situation’s improved now Germany has left recession. But the fact firms aren’t as confident about current conditions as expected may show that growth this quarter will be a little weaker than hoped (although still quite robust)
Reaction to follow….
The most interesting corporate story this morning involves Spain’s Telefonica and Telecom Italia, whose shares jumped 4% in early trading.
Last night, Telefonica announced that it would raise its stake in Telecom Italia’s parent company, Telco, to 66%, and then eventually to 70%. It’s a complicated deal (see here) , but the upshot is that Telefonica will have a rather tighter grip on its Italian rival.
And as mrwicket flags up in the comments, the Italian press see it as a Spanish takeover:
European stock markets have inched higher this morning, as traders await developments in Germany, or more clarity over when the Federal Reserve will start to slow its money-printing stimulus.
- FTSE 100: up 12 points at 6569, +0.2%
- German DAX: up 27 points at 8663, +0.3%
- French CAC: up 18 points at 4190, +0.4%
- Spanish IBEX: up 13 points at 9122, +0.14%
- Italian FTSE MIB: up 48 points at 17962, +0.25%
Today’s public sector walkout in Greece is the second 48-hour strike in as many weeks.
It’s expected to hit schools and hospitals, and is timed to coincide with the Troika’s visit to Athens. As before, the unions are protesting about the government’s ‘mobility scheme’, part of the drive to cut thousands of public sector jobs.
The private sector GSEE union has called a four hour stoppage, from 11am local time (9am BST) – so it’ll be joining a protest rally in Athens.
While workers march through the streets, officials from the IMF, ECB and EU will be taking a close look at Greece’s budget for 2014. Greece’s Kathimerini newspaper reckons the Troika don’t share the Athens government’s optimism:
High-ranking Finance Ministry sources said that while the representatives of the European Commission, European Central Bank and International Monetary Fund agree that Greece will produce a primary surplus at the end of the year, they think it will be minimal. The troika is also skeptical about Greek projections for a primary surplus of 1.5 percent of GDP at the end of next year.
It is thought that one of the reasons Greece’s lenders are downplaying the possibility of Athens producing a sizable surplus is that they are alarmed by the debate in Greece about how this amount will be allocated and whether social spending could be increased.
With regard to the 2014 budget, the troika still has doubts about the effectiveness, in terms of revenue raising, of the unified property tax. Next year will be the first time the levy, which combines several property taxes into one, is applied.
Jürgen Baetz, AP’s man in Brussels, agrees that an alliance between Angela Merkel and the Greens looks increasingly unlikely.
Merkel’s coalition struggle
Looking at the German newspapers, Der Speigel has an interesting article about how Angela Merkel will find it difficult to reach a deal with the Green party, the only plausible alternative to a Grand Coalition with the Social Democrats.
It explains that some of Merkel’s advisors would prefer a Black-Green alliance, rather than a Black-Red deal with the SPD. But Horst Seehofer, party chief, is strongly opposed to a deal [Here's Spiegel's piece (in German)].
Seehofer told reporters last night that:
I have not heard anyone today calling on me to talk to the Greens.
Which leaves the SPD. But they remain nervous of another alliance with Merkel, having been burned by their first partnership eight years ago. That led to them posting their worst election results since the second world war in 2009.
Having seen history repeat itself last weekend when the Free Democrats were given the order of the boot from the Bundestag, the SPD may not want to risk it again.
The SPD, the second-place finishers in the Sept. 22 vote, may be reluctant to try again, picking up what its chairman suggested yesterday was a poisoned chalice.
The SPD won’t stand in line or make an application after Merkel ruined her current coalition partner,” Sigmar Gabriel told reporters yesterday in Berlin.
Caution over German coalition talks
Good morning, and welcome to our rolling coverage of the financial markets, the world economy, the eurozone and the business world.
Uncertainty abounds today, as Europe hunkers down to await progress on Germany’s coalition talks and Greece continues to told talks with its lenders in an atmosphere of tension and strife.
Ongoing confusion over the US Federal Reserve’s plans to slow its bond-buying stimulus programme (maybe next month? Maybe not until 2014?) are also casting a shadow over Europe, just when we’d hoped for some real clarity and progress.
As Michael Hewson of CMC Markets puts it:
If investors had been hoping that the latest Fed meeting and the result of the German elections would help bring much needed clarity to the uncertainty that has bedevilled markets for weeks now, the events of the last few days have soon dispelled that notion with the result that the current state of affairs is becoming quickly like the proverbial itch that you just can’t scratch.
This has inevitably meant that investors have become much less inclined to take on risk and has seen them start to once again err on the side of caution, pulling stocks down from recent all-time highs.
As we covered yesterday, the German coalition talks are going to be a long grind. Angela Merkel reached out to the Social Democrats yesterday, but their leadership group aren’t expected to meet until Friday.
This process could take several weeks, as the SPD is sure to drive as hard a bargain as it can in return for supporting Merkel’s CDU party
We’ll be watching for any developments in Germany through the day.
We’ll get another insight into the state of the German economy this morning, with the release of the monthly IFO survey. Due at 9am BST, it will show how confident businesses are about current conditions, and future prospects.
While in Greece, public sector unions have called another anti-austerity strike for today — with the usual protests in the streets of Athens.
There’s also a platoon of central bank officials holding speeches today — including no fewer than five members of the European Central Bank’s governing council. That’s Ewald Nowotny, Yves Mersch, Jorg Asmussen, Vitor Constancio and Benoit Coeure.
Two members of the Fed’s governing council are also due to speak later today – Sandra Pianalto and Ester George.
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