When it comes to the global economy, it seems like the fun is just getting started: Regulators are now calling for extra capital to be imposed on the largest banks, Bank for International Settlements urge economic growth to slow down in order to curb inflation, central bankers are screaming for rate hike and Greek deputy prime minister warns that rebels may block new economic reforms.
“You can’t ask for more taxes in an already overtaxed country, in a market that has been sucked dry, with economic activity at zero and a huge recession.”
Yup! Just when you thought the Chinese was going to save the day, it turns out that it’s not that easy after all. No matter what the bureaucrats of Brussels asks for; the people of Greece may very well give them the middle finger. But that’s not all. The central bankers – who have declared the worst is over every other week for two years – has suddenly discovered that it’s probably not.
Here’s some of the headlines of the financial press at the moment:
- Economic growth must slow, warns BIS. Bank for International Settlements says that with scope for rapid growth closing, monetary policy should be quickly brought back to normal.
- Regulators agree extra bank capital protection. Extra capital charge of 1%-2.5% of risk-adjusted assets to be imposed on the largest banks in a bid to protect them
- Lloyds has largest exposure to risky loans. Bank of England data show loans representing more than a quarter of mortgage book are worth at least 90% of property value they are secured against.
- Greek rebel lawmakers may block austerity: deputy PM. Greece‘s deputy prime minister warned on Sunday that rebel lawmakers may block some reforms sought by international lenders, though parliament will probably back an overall austerity package this week to avert national bankruptcy.
- Greek debt restructure inevitable: PIMCO’s El-Erian. Greece’s sovereign debt restructuring is inevitable, PIMCO co-chief investment officer Mohamed El-Erian said on Sunday, warning the nation’s problems.
- BIS warns investors on slimmer bank returns. Investors in banks may need to scale back their profit expectations as new rules to curb risk-taking will likely halve pre-crisis returns.
- Biden warns GOP on debt ceiling talks. US Vice President Joe Biden said Saturday the Obama administration wouldn’t let middle class Americans “carry the whole burden” to break a deadlock over the national debt.
THE WALL STREET JOURNAL
- French Banks Seek Greek Debt Rollover. French banks have proposed a plan to reinvest half the proceeds from maturing Greek governments bonds ahead of a meeting of key players, in efforts to encourage private investors to contribute to a new bailout for Greece.
- Nokia, Siemens fail to secure investors. Nokia Corp and Siemens AG failed to secure a deal for investors for a controlling stake in their unprofitable joint venture.
- Complaints Against Rescue Fund: Germany’s Top Court May Attach Strings to Euro Bailout.
- Massive Protests in Madrid. Thousands of protesters are raging in the streets of Madrid after the government have imposed a temporary ban on all demonstrations.
Well, I have a feeling we might get a surprise or two, also, during the week.
When it comes to the economic data, European investors will look closely at the PMI surveys, that will indicate whether global soft-patch continued into June.
The week also sees a raft of data on inflation, the US housing market and consumer trends, plus business conditions in Japan.
A week in which market attention will remain firmly set on Greece starts with the publication of Italian wages data before attention shifts across the Atlantic to the US, where personal income and outlays numbers will be used to gauge the strength of the consumer sector.
Greece’s Parliament is scheduled to vote on its new package of austerity measures on Tuesday. The reforms are a requirement for the next tranche of the IMF/EU loans to be released in time for the funding of bonds in mid-July.
The day also features a number of key data releases, starting with Japanese retail sales numbers for May, Gfk consumer confidence in Germany, plus business confidence and producer price numbers for Italy.
In the UK, final gross domestic product (NYSEMKT:GDP) numbers for Q1 are released, as well as current account data. According to official estimates, the UK economy expanded at only a modest rate of 0.5% in the first quarter of 2011.
After cooling in May, German consumer price inflation is expected to quicken from an annual rate of 2.4% to 2.6%.
Weekly US Redbook store chain sales are published before the release of the S&P Case-Shiller home price index takes centre stage. The index of home prices in the nation’s largest cities fell below its April 2009 low towards the end of Q1, raising worries about a double-dip in house prices.
Preliminary industrial production numbers for Japan will be eagerly anticipated after trade data showed exports falling at a faster-than-expected rate.
French GDP data (final) for Q1 are released in advance of UK consumer credit, mortgage lending/applications and money supply numbers.
European Commission economic sentiment figures for June follow.
Weekly US mortgage applications data are released, as well as pending homes sales numbers, which plunged in April. However, there is evidence to suggest that temporary factors, such as bad weather, were behind the severity of the decline.
The Gfk consumer confidence survey for the UK is published ahead of the Markit/JMMA Manufacturing PMI™ for June. The PMI™ pointed to renewed output growth in May, as easing supply chain pressures enabled firms to restart production lines.
Euro zone inflation comes under the spotlight with producer price data for France and the preliminary estimate of consumer price inflation for the single currency area as a whole. After dipping unexpectedly in May, a further easing in the rate of inflation will make a rate hike later in the year less likely. German unemployment numbers are also published for June.
The usual US weekly jobless claims date are accompanied by the Chicago PMI, which will be watched closely due to its good track record with the ISM manufacturing index, published Friday.
The Markit Euro Zone Manufacturing PMI™ data follow last week’s flash estimate, which showed the region’s economic growth surge losing momentum at a worrying rate.
The publication of the Markit/CIPS UK Manufacturing PMI™ follows shortly after. May data signalled that manufacturing moved from rapid expansion to near-stagnation.
Italy publishes final GDP numbers for Q1 and jobs numbers before the unemployment rate for the euro zone is released.
The week ends in the US, where the University of Michigan consumer confidence index will shed light on consumer spending patterns. Construction spending numbers follow.
Friday starts with the release of unemployment, consumer price inflation and household spending numbers for Japan, plus the Bank of Japan’s quarterly survey of business conditions.
Now, hold on to your hats, and trade with attitude!