Monday was a calm and unruffled affair as traders continued to try to make sense of the EU bank stress tests, untroubled as they were by any significant data. I perhaps overstate the sense of ‘understanding’ of the stress tests because practically the only things we are all agreed on is that they were far too lenient and that they told us almost nothing of the real state of the EU banks. Reuters have carried out their own tests using the same parameters as the EU tests but including all the sovereign debt owned by these banks, no matter how they have labelled that debt in their accounts. Their results show that not 7 but 23 banks would fail the test, including virtually all the Greek banks and some very high profile ones in Spain, Italy and elsewhere.
If the Reuters test had been applied to the EU figures, then we have to feel that the Euro would be a lot weaker now. Perhaps as more traders see those results today, we will see some of that Euro weakness develop. Meanwhile German Gfk consumer confidence was up on the previous month and that kind of counteracted any negative thoughts on the Euro for now.
In other news, the US new homes data showed an impressive month on month rise in June but that was largely due to the fact that May’s data was downgraded significantly, flattering the later month. In other words, it was not a good report and added further weight to the argument that the US economy is struggling. This afternoon’s consumer confidence index will hopefully add clarity to some of that data.
UK data was notably absent yesterday so the Pound wandered lonely as a cloud in directionless fashion; likewise the Australasian currencies and the Canadian Dollar. We do get an interest rate decision from the Reserve Bank of New Zealand tomorrow. Most analysts are convinced the RBNZ will hike their base rate by 25 basis points and that has helped the NZ Dollar to maintain a degree of strength but that may unwind if investors start to slip into safe havens elsewhere, as they are wont to do in times of nervousness, especially when that nervousness is derived from US economic data.
But all of that is mere window dressing to the main event; the fact is that in two years time London will be in the midst of Olympics fever. The construction of the stadia looks well advanced, the hysteria is gently building and the cost has been ......largely swept under the carpet actually. But when the taxpayers of London and losers on the lottery are subsidising the costs, why worry eh!
But that is in the future, if we look at this day in history, 27th July was the day when the Bank of England received its charter in 1694. The Old Lady of Threadneedle Street is really very old indeed and Bugs Bunny is getting on a bit as well. Today is the 70th anniversary of his screen debut. When you get to 70, you probable do say “What’s up Doc” a lot. At which point it would wrong not to end with ...
Athe athe athe that’s all folks.