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Respite for the pound
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- Greece still a worry
- Trade figures today
Good morning. Britain's prime minister Gordon Brown eats nine bananas a day. That's one mystery solved but the House of Commons Public Accounts Committee is still struggling with another; why the banks are not lending as much as the government would like. So let's give them a clue. Northern Rock and HBOS did not go bust because their megabuck bonus-earners made the wrong bets in the derivatives casino. They were not in that business. Rather, they went bust because they lent money to companies and people who could not pay it back. As business models go it was not the best. Fortunately they have learnt from their mistakes and are now dealing only with borrowers capable of making the repayments.
International investors are displaying similar behaviour in their approach to sovereign borrowers. Near the top of their list of concerns is Greece. As they watch the European Commission waving a big stick and offering no carrot they wonder whether Greece might turn out to be the Lehman Brothers of Euroland, sacrificed at the altar of moral hazard. On the same list are Portugal, Spain, Italy, Ireland and, of course, Britain but for now it is Greece that hogs the limelight. It seems sometimes that no level of gloom can be too deep.
But that was not quite the flavour of the day on Monday. Whilst far from sparkling, equity markets were more or less steady and there was no rush into the safe-haven yen and US dollar. In fact there was no rush anywhere, for anything. Dollar/yen was almost static, as was sterling against the euro, the Swissy and the Australian dollar. Higher Swiss unemployment (4.5%) countered higher Swiss retail sales (up by 4.7% in the year to December). A fall in euro zone investor confidence from -3.7 to -8.2 mirrored a report from the States that speculators are more bearish about the euro than they have ever been.
An increase in Canadian housing starts was mildly interesting.
Figures released overnight revealed a two-point improvement in the RICS house price balance to +32% and a -7% year-on-year fall in retail sales according to the British Retail Consortium. Neither figure has done much to sterling; everybody knows house prices are on the way up and nobody went shopping during the January blizzards. The DCLG house price index follows, this morning, together with the UK balance of trade for December. Until now investors have not seemed unduly worried that the trade deficit is seeing no advantage from a weakened pound but surely at some point they will be forced to ask why nobody wants to buy our stuff.
From Europe come the data for German trade and consumer prices; from the States, wholesale inventories. If the agenda is anything to go by we are not in for a memorable day. |
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