European Market News

Greece has announced its economic plan to privatize 87 billion Euros of state assets, 50 billion of which is being planned for bailing out the country until 2015 by selling off loss-making or entirely non-liquid assets. For example, a non-operating airport not far from Athens is being planned to go up for sale. The Postal Savings Bank will also be offered up for privatization; the bank is the country’s biggest holder of sovereign bonds. Prime Minister Papandreou’s government now faces the task of implementing the entire plan. It seems people who are entirely unconcerned about how to pay back at least a portion of Greece’s debt on time are the same ones that created the plan and chose the assets to be privatized. Greece may become a milkmaid for Europe, much in the same way as Cuba was for the Soviet Union. Final estimates were given last night on the consumer price level in the Euro zone and the actual figures will...

All eyes will be on Athens tonight, as the Greek parliament is preparing to vote on the next round of austerity cuts and economic reforms. The result is expected to be close and traders are proceeding cautiously in today's trading. The euro has edged slightly higher against the U.S. dollar and the Japanese yen. At the moment, the euro is up 0.19% against the greenback at $1.4398 and 0.07% against the yen at $116.66. The European financial circles are gathering to try to help Greece resolve its crisis. Yesterday, the CEO of the largest Italian bank, Corrado Passera, said Europe's banks can work together with the EU and the IMF to work out the crisis in Greece. The move follows the announcement by the French banks that they are prepared to allow Greece to repay its debt in 30 years. There are two ways to interpret these messages. On the one hand, it could be viewed as a sign that the Europeans...

With less than 24 hours to go before members of the Greek Parliament vote on the Austerity Package, sealing the fate of Greece in the process, the euro is holding steady against the U.S. dollar. The next 48 hours could determine the overall sentiment in the global financial markets for weeks and possibly even months to come which makes it extremely important to know the approximate timing for the votes. The first and most important vote will be on the details of the Austerity Package. This is the one that will elicit the most significant reaction from investors. The Parliamentary session begins at 10am local time which is 8am London Time / 3am NY Time. The vote is expected to be done right in time for the NY open at 3pm Local time / 1pm London Time / 8am NY Time. Thursday’s vote is on the procedures for implementation. This could still stall the process but should be more of a...

The US Dollar is broadly higher to start the week as uncertainty in the Eurozone is sending risk assets lower.  This week, the Greek parliament will vote on the austerity agreement that was put in place last week, and this event risk could contribute to market volatility in the coming days.  There were some positive macro headlines in the Euro region, but until these votes are completed, markets will continue to look for reasons to sell the Euro currency. In the US, the Fed’s policy decisions that were discussed last week have added to the Dollar bullish bias.  But it must be remembered that all the Fed did was to signal an end to further stimulus – not to signal a potential raise in rates.  So far there has been no material suggestion that the US economy will perform well if we see the beginning of a new tightening cycle. Later this week, aside from the Greek parliament vote, we will see...

Greece Prime Minister George Papandreou pleaded for unity and strength with his constituents on Sunday, as European Union and IMF officials scrambled to avoid a catastrophic bankruptcy for the Mediterranean country. "The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks and the country's credibility," Papandreou told parliament. Papandreou has urged his country to adopt strict austerity measures in light of inadequate tax revenues and a burdensome sovereign debt obligation. Greece has failed to right its financies since receiving a $100 billion+ bailout package last year. According to a New York Times report, "At a meeting in Luxembourg on Sunday night, the 17 countries in the euro zone are likely to pledge the release of the next 12 billion euro or $16.8 billion installment of a $155 billion loan package that Athens received a year ago. Finance ministers will also grapple with the complex task of designing another package of financial assistance that would...

Data from the UK labor market was very disappointing, as the number of Britons claiming unemployment benefits rose more than expected, highlighting the concern that the UK recovery remains fragile, and that conditions in the labor market will likely get worse before they get better as austerity measures come down the pipe, and economic activity is curtailed as a result of elevated inflation.   From Bloomberg: “U.K. jobless claims surged more than economists expected in May and wage growth slowed, pointing to a continued squeeze on households as inflation accelerates. Jobless-benefit claims jumped 19,600 from April, when they rose a revised 16,900, the Office for National Statistics said today in London. The median forecast of 22 economists in a Bloomberg News survey was an increase of 6,500. Wage growth excluding bonuses slowed to 2 percent in the three months through April, the weakest since the quarter through August. Based on a separate International Labor Organization measure, unemployment fell by 88,000 in the three months through April,...

The euro made slim gains against the U.S. dollar on Monday, after the Socialist government of Portugal admitted election defeat. The Portuguese Socialists were soundly beaten by the center-right Social Democrats on Sunday. The elections were called after Prime Minister Jose Socrates failed to gather support for his fourth austerity package in less than a year. Portugal is having a very rough time trying to meet its deficit obligations from the EU/IMF bailout program. Some analysts might think that right-of-center government will be better in implementing difficult and painful social spending cuts, which might be necessary in order to get public spending back under control. The euro seems to be a bit stronger following the government change in Portugal. In Monday's early morning trading, the euro rose 0.024% against the U.S. dollar to trade at $1.4638. At the same time, the euro made bigger gains against the Japanese yen, rising 0.071% to ¥117.56. The euro also found some support in the increasing...

The Euro had a great week, recovering some of the losses it encountered during May. The upcoming week's highlight is the rate decision with the press conference of Trichet. Here's an outlook for 9 events awaiting us, and an updated technical analysis for EUR/USD. We've seen some risk averse moves in the past week: Bad US figures weakened EUR/USD, such as in the ADP release. But eventually, the hopes for Greece pushed the pair higher, as well as the broad weak picture for the US, seen in Non-Farm Payrolls. Sentix Investor Confidence: Monday, 8:30. This wide survey of 2800 analysts and investors disappointed in the past two months. After steadily rising for a long time, it dropped to 10.9 last month, and is now expected to slide once again below 10 points. PPI: Monday, 9:00. This second tier inflation indicator will be watched towards the rate decision. Producer prices are expected to have risen by 0.8% after 0.7% last month. Retail Sales: Tuesday,...

After a period of speculation over the probability for Finland’s new parliament to block Portugal’s aid package came to an end as the nation will back the bailout as far as Portugal agrees to the conditions of the bailout including asset sales. Finance Minister Jyrki Katainen told reporters yesterday that Portugal who needs the agreement of all the 17-euro members to acquire the bailout must also start seeking private investors to ensure that the funds will stay in the country before the bailout can be made. As for the parliament that was the matter of debate and speculation after the serge in euro-skeptic parties, an agreement has been made as well. Katainen who leads the parliament’s biggest party after the elections said “we have reached a common understanding” as he held talks with the Social Democrats the second-largest group since the vote. The initial understanding between parties comes as Katainen struggled to attain this consensus ahead of the EU meeting on May 16...

Even more problems for Greece – just couple of days after rumors of that country leaving the Euro began to circulate, one of the major rating agencies decided to downgrade Greek sovereign debt. Again. Just in March Standard & Poor’s lowered the rating to a “speculative” (junk) level and now assigned a “highly speculative” (super junk?) rating. This move came European politicians publicly commented that the current bailout might not be enough and additional funds will be needed. As always, the Greek finance ministry said the latest downgrade – especially so soon after the previous one – was “not justified”. Possibly, but according to the S&P, increasing the amount of the bailout package and extending maturities on the debt, amounts to a “selective default”. The agency claim that sooner of later private creditors will be forced to make similar accommodations, including lowered interest rates. That part of restructuring is believed to inflict massive losses on those who currently hold Greek debt. We shall...