Samaras, Merkel and Hollande meet today
- No breakthrough expected
- First revision to UK Q2 GDP
An elderly parishioner at the Sanctuario de Misericordia in Borja, Spain, took it upon herself to restore a 19th century fresco in her church. Armed with nothing more than a shovel and a couple of gallons of B&Q emulsion Cecilia Giménez set to her task with a will. After months of painstaking effort she had transformed a classical depiction of Christ with a crown of thorns into something vaguely resembling an out-of-focus brown panda. The church authorities are now asking for a bailout to repair the damage.
Down the road in Madrid the national authorities are pondering a similar question. The word on the street is that Mariano Rajoy is involved in discussions about applying formally for a bailout, which appears to be a condition of European Central Bank support for Spain's government bonds. Complicating the negotiations is the prime minister's recent decision to spend half a billion euros on extending the payment of benefits to the long-term unemployed: it does not fit comfortably with the EU's notion of cost-cutting.
The news coincides with stories about corporate capital flight from the eurozone. The Washington Post reports today that AIG and IAG, among others, have both been moving money out of the euro in general and Spain in particular. Spain's central bank revealed earlier this week that the country's commercial banks had borrowed a record €376bn from the ECB in July to replenish a shrinking deposit base.
Investors were largely unmoved by these stories on Thursday. The euro edged higher on most fronts and held steady against the yen. It will have been helped by August's provisional purchasing managers' index readings from Euroland which were almost unchanged from the previous month. Investors seem to be holding their fire until it becomes clearer what is going to happen in Greece and Spain and the ECB puts some meat on the bones of Sig. Draghi's rescue plan.
Sterling put in a nondescript performance, drifting higher against the commodity dollars and down against the safe-haven yen and US dollar. The pound is slightly lower against the euro and the franc, undermined by another miserable mortgage approvals figure from the BBA and an unexpected fall in the CBI's retail sales measure.
There are just two sets of data on today's agenda; the first revision to second quarter UK gross domestic product and US durable goods orders. The first stab at UK GDP came up with a -0.7% quarterly contraction in the economy. Analysts think that will look more like -0.5% after today's revision. As for US durable goods the guess is for a monthly increase of between 1.5% and 2.5% but the number is utterly unpredictable.
Today the Greek Prime Minister Antonis Samaras meets with Angela Merkel in Berlin then with François Hollande in Paris. The German and French leaders met yesterday to swap notes, following which they encouraged Greece to "continue on its path to reform". It didn't sound as though they were minded to offer any new concessions, at least until the "troika" presents the result of its latest audit next month.
That probably means no significant statement on the subject today and a quiet run into the long weekend. Have a good one.