The European Central Bank lifted its growth prediction for the eurozone region to between 1.4 and 1.8 percent for this year, and for between 0.5 and 2.3 percent for next year.
ECB President Jean-Claude Trichet said the eurozone recovery has been supported by global growth and reflected “temporary domestic factors”.
He added, however, that “uncertainty still prevails”.
“One the one hand, global trade may continue to perform more strongly than expected, thereby supporting euro area exports,” he said. “On the other hand, concerns remain relating to the emergence of renewed tensions in financial markets and to some uncertainty about growth prospects in other advanced economies.”
Source: BBC News
European Central Bank President Jean- Claude Trichet may allow Federal Reserve Chairman Ben S. Bernanke to avoid loosening monetary policy tomorrow by helping engineer a rebound in global financial markets.
Since June 7, when Europe’s equities were in a two-month slump, Trichet extended through September the ECB’s offer of unlimited cash to banks and pledged to keep buying government bonds. The Stoxx Europe 600 Index has risen 6.6 percent, and the euro has appreciated 11 percent against the dollar, wiping away the past three months’ losses. The Markit iTraxx Europe Index, which measures the cost of protecting investment-grade company bonds against default, fell to the lowest levels since May.
Markets have come back because of “easing concern about liquidity defaults in Europe and the removal of some uncertainty after the European bank stress tests,” said Lena Komileva, head of G-7 market economics at Tullett Prebon Plc, a broker for commercial and investment banks in London. “That reduces the pressure on the Fed to implement immediate action.”
Bloomberg
Consumer sentiment weakened in July as people become a little more negative about their current finances and the future of the labour market.
The KBC Ireland/ESRI index weakened to 66.2 last month, falling from 67.9 in June. However, the overall index still remains above the 50 mark that separates expansion from contraction. Last year, the index registered 49.5 in July, after a record low of 39.6 in the same month in 2008.
The index of current conditions slipped from 88.4 in June to 85.7 last month, while the expectations index also fell.
“The decline mainly reflects consumers becoming more concerned about their current household finances,” said the ESRI’s David Duffy.
“Consumers also have some concerns about the outlook. The expectations index weakened to 53.1 from 54.1 in June, on the back of a more negative view of the outlook by consumers for the economy and labour market over the next 12 months.”
The Irish Times
Saying that he has “no problem with austerity”, European Central Bank President Jean-Claude Trichet yesterday poured cold water on the euro’s mini rally. Despite the pledge to balance stimulus spending with deficit reduction made by the attending nation’s at the recent G8 / G20 summit meeting in Toronto, the markets clearly believe that a move towards belt-tightening in Europe, will slow the pace of recovery for the global economy.
Trichet’s comments had an immediate impact on the euro and brought to an end, the string of three consecutive days of gains. The euro fell 0.3 percent to $1.2532 by early afternoon trading in London; the yen and the Swiss franc also gained 0.3 and 0.2 percent respectively against the euro.
New York University economist Nouriel Roubini suggested that as stimulus spending slows, credit availability will tighten and will drag stock markets down even further. For this reason, government bonds in countries such as Canada, the U.S., and Germany could provide a safe harbor for investors looking to avoid the uncertainty of global equity markets during the second half of the year.
The euro gained on both the dollar and the pound today as traders set aside their worries over the debt levels facing several Euro Zone countries. European leaders – including
European Central Bank President Jean-Claude Trichet – began a series of meetings last week to deal with the debt problems and this has buoyed optimism that a solution to stave off a financial crisis can be found.
“Mr Trichet has not always attended these meetings and so the market is taking his late change in schedule as an indicator that the ECB may be looking to work with the EU on a solution to Greece’s debt problems,” said Joshua Raymond at City Index.
Source: BBC News
The euro fell to a seven-month low against the US dollar today as investors continue to fret over the fate of several highly-indebted countries within the Euro zone. These countries – lumped together under the dubious PIIGS moniker – include Portugal, Italy, Ireland, Greece, and Spain, and more and more it appears that the only possible outcome includes either bankruptcy or a state-sponsored bailout. Naturally, neither result is ideal, but one thing that is certain is that the longer the fate of the PIIGS serves as a distraction, the greater the negative implications for the entire euro zone.
Yesterday, the European Union announced that it would continue to work with Greece to help the struggling nation cut it’s out-of-control deficit. Naturally, this resulted in two very predictable actions; investors continued to avoid Greek securities, and Greek workers took to the streets to protest any cut in government spending.
Meanwhile, Spain and Portugal struggled to find buyers for their debt. Spain was forced to raise premiums on a sale of three-year notes while Portugal actually pulled back its auction for treasuries yesterday due to a lack of investor interest.
Earlier today, European Central Bank President Jean-Claude Trichet announced that the ECB would maintain interest rates at the current 1.0 percent mark. He also noted that he is “confident” that Greece will reduce its deficit to acceptable levels. Whether or not this vote of confidence will make a difference with investors remains to be seen but with so many other more stable countries in which to invest, it’s hard to imagine private money finding its way to the troubled PIIGS.
