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Yesterday saw the Spanish IBEX hit its lowest level in nine years as fears of a run on Spanish banks saw Bankia shares slide sharply along with the rest of the European banking sector. Last night's decision by ratings agency Moody's to downgrade sixteen Spanish banks by 1-2 notches with a negative outlook, including Santander UK, isn't likely to engender further confidence.
Last night’s FOMC minutes haven’t really provided any clearer indication of whether the Fed stands ready to react at its June meeting when “operation twist” is due to roll-off.
The latest Q1 GDP data from Spain is expected to confirm that the country has slipped into a double dip recession, with expectations of a contraction of 0.4% in the first quarter.
Yesterday’s confirmation that Spain had become the latest European country to slip into recession was not greeted particularly positively by investors with most European markets finishing down on the day, capping off a negative month for equities in Europe.
Comments by ratings agency Fitch that it didn’t expect to cut France’s credit rating this year saw markets push higher, however this was tempered by comments about the likelihood of an Italian downgrade by the end of the month. The agency stated that “the future of the euro will be decided at the gates of Rome” suggesting that any further action on ratings could well be determined by the end of January.
Throughout most of fourth quarter UK PMI data has always seemed to flatter to deceive when it comes to the UK manufacturing and industrial production data which has been less than convincing. This morning’s release of November data is not expected to be any different with expectations fairly low on both the monthly and the annualised measures.
Fed Chairman Ben Bernanke yesterday gave his best impression yet of a poker player, playing his cards close to his chest, as he reiterated his comments at Jackson Hole at a speech last night to an audience in Minnesota.
Yesterday’s decision by the German constitutional court to ratify the legality of the recent bailouts of peripheral European countries, along with the passing of the Italian austerity budget in a confidence vote in the senate, may well have staved off an imminent crisis, but it certainly hasn’t resolved it.
Today’s deliberations in the German constitutional court on the legality of the bailouts in Europe has the potential to be fairly high stakes stuff given that a vote against would throw Europe into further chaos.
The deteriorating fiscal situation in Europe continues to spook investors, with continued political discord amongst EU leaders making the likelihood of a quick solution pretty nigh on impossible. Angela Merkel’s hammering at the weekend in her home regional elections is likely to only be the start of a turbulent month for the German chancellor. Tomorrow’s ruling in the German constitutional court tomorrow on the legality of the bailouts, could well present further problems, as will another regional election on the 18th September.