The broad markets have opened with slight declines. Asian bourses traded lower to start the day and pressure appears to be surrounding the so-called risk assets. The EUR has traded weaker against the USD this morning and Gold has followed suit.
Leading headlines this morning are the ‘new’ rumblings that developed between Germany’s Angela Merkel and France’s Francoise Hollande during a weekend economic summit which proposed to cement the ECB’s oversight of certain aspects of European banking. The disagreement between Germany and France should have surprised few since the two countries have banged heads over key issues for sometime. The possibility of a long-term stalemate between the two is unlikely on the surface because neither country is particularly keen on taking the blame for any future failures of the EUR.
It should be pointed out that the argument between Germany and France over timetable and points about the future control the ECB will be given regarding management of European banking, even if an agreement is stumbled upon, will be unlikely to prove enough to help the financial crisis at the end of the day ( read decade). The key ingredients within the entire dilemma will continue to be how each member nation in the E.U. manages its money. For instance it has been reported that a new 250 million EUR gap has been found in the Greek budget. (What is a quarter of a trillion EUR between friends?) It is also unlikely that Spain and Italy are going to step forward and ask for further ‘welfare’ unless their bond yields start to worsen again, this because neither country wants the stigma of standing in the ‘bread line’, nor do they want too many intrusions into their day-to-day affairs on managing their own countries. So while Germany frets about giving too much power away to the ECB, it will still come down to the ability of the nations that are in trouble financially to achieve real growth and balance their budgets long-term. And frankly the long-term continues to look quite challenging.
The German Ifo Business Climate reading turned in an outcome of 101.4 in the past hour, which missed its estimate of 102.6 and is actually below last month’s result of 102.3 and continues a bad trend. There will be little else in the way of significant data today from Europe or the States. The fall in German business confidence will not be viewed as a good road sign. Tomorrow the U.S. will follow-up with the CB Consumer Confidence marks and its results could stir investors. Later this week the States will publish Core Durable Good Orders figures. In short the data from Europe and the U.S. continues to show lackluster prospects for growth. And thus the ECB and Fed’s attempts at building confidence for their respective spheres of influence will have to be maintained with evermore official statements from the two institutions and investors no doubt will have their patience tested yet again.
This is the last week of trading for September. As the 4th quarter of the business year begins in October many eyes will turn to consumer confidence and their spending habits heading into the holiday season. There is also a little shadow called the U.S. Presidential Election lurking in early November. Investors who have been fretting may find themselves in a room that grows more crowded in the coming weeks.