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July 2016

Credit fears sweep EU banking sector

Published: Friday 08 July 2016


  • Credit fears sweep EU banking sector
  • UK consumer confidence in fastest drop for 21 years
  • US employment data due later

So as Britain prepares to have its second Female Prime Minister, the markets were more interested in other matters. Fears over the potential failure of Germany's Bremer Landesbank have reignited the fears over what the UK's departure from the EU might do for the Eurozone which is still struggling to generate growth. Bremer Landesbank's problems stem from loans to the shipping industry and that is causing concerns for other banks with similar loans. In essence, if global trade slows – as it has – the shipping industry suffers from the lack of demand. This news came on the same day that fears were being expressed over the fate of Italian banks, with Monte dei Paschi di Siena being the top of the worry list.
 
If you need more worry to start your Friday, then the UK consumer confidence index will do the job. The Gfk survey saw its largest fall in 21 years this month. I guess that is to be expected when the future is un-chartable but it doesn't help the ailing Pound. The silver lining is that a drop in Sterling makes the UK more attractive to overseas investors and export clients. The darker cloud is what it does to Britain's inflation prospects.
 
The People's Bank of China has surreptitiously changed policy whilst everyone was looking at the UK and Europe and is now systematically weakening the Yuan to gain the same export advantage that the UK will enjoy from the weaker Pound.  This is a direct contradiction of a firm promise that Premier Li Keqiang gave in January. That has weakened Asian Markets and thrown another spanner in the works of the global economy.
 
Yesterday's only interesting market news was the concern expressed in the ECB meeting minutes over the impact that Britain's exit will have on the European Union. They stated firm commitment to be ready to act if that was necessary to stabilise the Eurozone economies.  All Central banks has offered similar mantras in the past fortnight since the votes were counted. How can that only be two weeks ago? I feel like I have aged by years.
 
Today's big news is the US employment report and America is expected to have added roughly 180,000 new jobs in June. The broader issues of global economic nervousness will perhaps overshadow that but any improvements on this 180k figure will further strengthen the already mighty USD.
 
Canada will also publish employment figures today and there is a feeling the unemployment rate will have risen to 7.0% of the workforce and that isn't good for the Canadian Dollar. This all happens at 13.30GMT.
 
And then we are into the weekend; the Wimbledon Finals, the France v Portugal Euro 2016 final and the last NATO meeting that David Cameron and Barak Obama will attend. My little barbeque seems so trivial by comparison. I will enjoy it though. I hope yours is a good one.
 

After Sunday service

 
A young man waits outside the church for the Vicar after Sunday service. As soon as the Vicar comes out, he runs up to him.
 
"Hello Michael," says the Vicar. "What can I do for you?"
 
"Well you know how you talked about people coming from dust and returning to dust," says Michael.
 
The Vicar says, "Yes. I am glad you were listening. What is your question?"
 
"No question," says Michael, "but can you come over to our house and look under my bed please because I think someone is either coming or going."
 

Today's Major Economic Releases 

 
Market BST Data/Event Previous Expected
GBP 09:30 UK: Goods trade balance -10.5b -10.2b
CAD 13:30 Canada: Employment change 13.8k 5.5k
CAD 13:30 Canada: Unemployment rate 6.9% 7.0%
USD 13:30 US: Average hourly earnings m/m 0.2% 0.2%
USD 13:30 US: Non-farm employment change 38k  175k
USD 13:30 US: Unemployment rate 4.7% 4.8%

FX Research by David Johnson

Daily Currency Analysis with Zeta Webber

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