Investors no longer so sure about Greece

A team at Newcastle University, having nothing better to do, investigated which sounds are most unpleasant to the human ear.  They put volunteers in an MRI scanner and made them listen to nasty things while their brainwaves were recorded.  Of the five most hideous auditory nightmares, three were made by metal on glass and two by nails and chalk on a blackboard.  To the researchers' astonishment, Agadoo and Candle in the Wind didn't even make it into the top ten. 

Had any Greeks been part of the study they would have winced most at any of the dozen synonyms for austerity, especially if spoken with a German accent.  They were out on the streets of Athens in force yesterday to make their displeasure clear to the visiting German chancellor.  Rising to her task, Angela Merkel patronised them as best she could, saying "I have come as a friend to listen and be informed" and "I want to say you are making progress".  The 300,000 irate Hellenics outside were having none of it and the world's investors were reconsidering their earlier idea that the chancellor's mission was one of conciliation and benevolence. 

Whether or not Germany will eventually support Prime Minister Samaras's plea for a relaxation of the austerity timetable, the message in Athens yesterday was very clearly to keep up the good work; "A lot has been done, much remains to be done".  With European Central Bank President Mario Draghi simultaneously saying pretty much the same thing to the European parliament in Brussels, investors were inevitably left with the idea that the hard-line stance will continue, increasing the risk that popular resistance in Athens and Madrid could prejudice efforts to keep the single currency intact. 

That thought cost the euro nearly a cent and a half against the US dollar and the best part of a cent against the pound.  It fell by one and a quarter yen.  Sterling also made headway against the Swiss franc, the New Zealand dollar and the Scandinavian crowns but lost a little ground to the yen and the Aussie. The South African rand put in a brave performance, strengthening by 1.5% after reports that striking truck drivers were going back to work. 

UK production and trade figures on Tuesday morning fell short of even modest expectations. August's trade deficit was wider than forecast and manufacturing production fell by -1.1%, nearly twice as much as predicted. Broader industrial production fell by -0.5%, a result similar to Germany's for the same month. Other figures released in the last 24 hours included a slight slowdown for Canadian housing starts and a slight improvement in Australian consumer confidence. 

There are no ecostats from Britain or pan-Euroland today. France, Italy and Greece report on industrial production and the United States reveals the change in wholesale inventories during August.  This evening the Federal Reserve publishes its Beige Book survey of economic activity across the United States. The day's most important figures come out overnight, in the Australian employment report.