The European Commission, the ECB and the IMF released a statement on Friday stating they would pay the next instalment of the 110bn Euro bailout and are ready to extend the programme. The plan still needs to be formally signed off by the euro zone finance ministers, but there is a general sense that Greece has pulled from the brink, at least for now!
For the first time, holders of Greek debt will have to bear some of the burden. Bond holders will be asked to roll over some of the debt that is due to mature - with the offer of a higher interest rate to try and win over the cynics. Essentially, it is like being owed money by someone and them saying I can’t give you the money back when I originally said, but I will give you it back at a later date and for your trouble I give your more interest.
The benefit for Greece is that it won’t need to pay off the debt due to mature in the near future - providing them with some breathing space. Greece in turn will accelerate its sale of 50 billion Euros worth of state owned assets and make significant cuts to public sector employment. This will help ease concern across Europe, particularly in Germany and Finland who believe they are subsidising a country that has lived out with its means for too long.
Talking of countries that have been living out with their means, the UK has a really quite day in terms of data releases with only new car registration figures out today. Although not a major economic release it will provide another indication into the health or otherwise of UK consumer spending.
In overnight markets the pound was trading at 1.1225 against the Euro with the single currency gaining support on the Greek bailout announcement. Against the dollar, the pound was at 1.6418 with the greenback remaining weak after a raft of disappointing economic announcements. The US nonfarm payrolls came in significantly below expectations, with the economic signs looking ominous in the US it does not bode well for the world economy.
Keep an eye out for the EU Producer’s Price Index (PPI) released this morning. This measures changes in the selling price of goods and services of Euro-zone producers and if higher than expected it would signal inflationary pressures. With the ECB keen to stamp out inflation it would increase the likelihood of a near term increase in euro zone interest rate and most like provide support for the Euro.
Posted in Daily Market News on May 30 2014
Today we start on a brighter note than yesterday with the UK construction sector offering some welcome respite from the recent barrage of gloomy data. The construction PMI released yesterday came in at 54, signalling a pick in the expansion rate from the previous month’s 53.3, where anything above 50...VIEW FULL ARTICLE
Posted in Daily Market News on Jun 3 2011 by alex