German-French Accord to Recapitalize European Banks
October 10, 2011
French President Sarkozy and German Chancellor Merkel on Sunday announced an agreement to ensure sufficient capitalization of European banks.
Although few details of the accord were released, markets reflect new appetite for risk. The dollar fell 2.1% against the Swissie, 1.7% relative to the Aussie dollar, 1.6% against the euro, 1.4% versus the kiwi, 1.1% relative to the loonie, 0.8% against sterling, 0.4% against the yuan and 0.3% versus the yen.
Japanese markets were closed for Sports Day, and Canada will be shut for Thanksgiving Day. The United States observes only a partial holiday for Columbus Day. Share prices, for example, will trade today.
Stocks advanced 2.2% in Pakistan, 1.5% in Thailand, 2.0% in India, 1.1% in Singapore, 0.9% in Australia, 0.7% in Indonesia, and 0.4% in South Korea, but share prices fell by 0.9% in China and were unchanged in Hong Kong. The Paris Cac (0.9%), British Ftse (0.8%) and German Dax (0.5%) have risen thus far today.
Ten-year German bund and British gilt yields firmed by four and three basis points.
Gold and oil prices climbed overnight by 1.9% and 1.6% to $1660.60 per ounce and $84.34 per barrel.
Other European news has been mixed.
- Fitch late Friday downgraded its ratings for both Spain and Italy, leaving each outlook at negative.
- The Sentix index of investor sentiment toward the euro area fell in October by 3.18 points to minus 18.55, lowest since July 2009.
- The Bank of France projects French GDP only grew 0.1% last quarter.
- Greek industrial production in August was 11.7% lower than a year earlier. Such had dropped 2.8% between July 2010 and July 2011.
- German real factory turnover slid 0.4% on month in August and posted a 12-month increase of 8.3%, down from 10.7% on year in July.
- But also, German seasonally adjusted exports advanced 3.5% in August, lifting the trade surplus to EUR 13.8 billion from July’s EUR 10.6 billion.
- Germany’s unadjusted current account surplus in August of EUR 7.0 billion was 23% wider than a year earlier.
- French industrial production unexpectedly rose 0.5% in August after a 1.8% jump in July. Output in June-August climbed by 1.0%.
- French manufacturing output climbed 0.7% on month and 4.2% on year in August.
- The Bank of France industrial business sentiment index remained steady at a reading of 97 in September, and the services index fell just a point.
- Industrial capacity usage in France returned to 79.3 in September from 78.8% in August.
- Italian industrial production rose 4.3% in August and was 4.6% greater than a year earlier.
- Martin Weale of the Bank of England made dovish remarks hinting of more quantitative stimulus beyond last week’s decision.
In other news, Turkish industrial production fell 2.6% in August, cutting its 12-month increase to 3.8% from 6.9% in July.
Swedish industrial production fell 3.1% in August, producing a 12-month gain of 5.6% after an on-year rise of 7.7% in July and 6.4% in June.
Norwegian PPI inflation accelerated to 15.3% in September from 12.8% in August. Norway’s CPI increased 0.9% on month and 1.6% on year in September. Danish consumer price inflation edged down a tenth to 2.5% in September. Czech consumer prices edged 0.2% lower in September and were 1.8% higher than a year ago.
Denmark’s trade surplus widened 10.3% on month to DKR 6.4 billion in August. Hungary’s trade surplus increased 38.6% to EUR 492 million, and Romania’s trade deficit of EUR 851 million in August was 33.8% larger than in July. Czech unemployment slid to 8.0% in September from 8.2% in August.
No significant U.S. or Canadian data are being released today. ECB President Trichet has a public speaking engagement. Mexican trade figures arrive later. The Columbus and Thanksgiving Day holidays in the U.S. and Canada should temper trading volume once Europe closes for the day.
Copyright 2011, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: German current account, Merkel, Sarkozy
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