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MENAFN - ecPulse - 11/11/2012

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Greece to remain the market headache this week despite its Parliamentary approval last week to austerity measures needed to unleash the next installment worth 31.5 billion euros to prevent the country from bankruptcy when 5 billion euros of bills mature on Nov. 16.  

Investors attentions have shifted once again to Greece after remaining for a while with Spains bailout issue that seems to be postponed to the beginning of next year, according to Spanish PM Marian Rajoys announcements, when the Eurogroup finance ministers meet to discuss whether Greece is in compliance with its bailout agreement.  

However, a European official revealed last week there will be no signing on Greeces next tranche when the ministers meet in Brussels on Nov. 12, yet he clarified that the result will not cause an “accidental default” for Greece.

By the same token, German Finance Minister Wolfgang Schaeuble said “at the moment, I don’t see how we can take the decision already next week.”

In fact, the delay in unlocking the disbursement, which was frozen since June, is a byproduct of the frictions between the Greek coalition government and its creditors, main donors and troika. 

Moreover, eyes will focus on fundamentals from the euro area after last weeks dovish comments from the ECB President Mario Draghi and the European Commissions dire economic forecasts.

Euro area GDP advanced reading for the third quarter will show a drop of 0.1% in the third quarter, following a contraction of 0.2% in the three months through June, according to median forecasts, to signal the 17-nnation region is in technical recession and may continue shrinking in the coming quarters as the debt crisis continue to weigh on growth prospects.

"As regards second half, available indicators continue to signal weak activity,” Draghi added after he said growth momentum to stay weak in 2013.

His remarks actually confirmed the European Commissions bleak forecasts which said the 17-nation region will face a contraction of 0.4% this year and an anemic growth rate of 0.1% in 2013, from Mays projection of 1.0%, citing the elevation of the debt crisis in some euro area nations such as Spain in the first half of the year and as the distress in some weak members has started to weigh on other members.

In Germany, the preliminary GDP reading will show an ease in expansion to 0.1% in the third quarter from 0.3% in the second quarter. France will remain on hold at 0.0% growth in the third quarter, Spain to confirm a contraction of 0.3%, while Italy will record a contraction of 0.5%.

In the U.K. , the start will be with inflation as CPI for the year ended October which is estimated to rebound to 2.3% from the prior of 2.2%, the slowest in nearly three years, to halt its way to target.

Inflation is predicted to stall its deceleration despite that oil prices fell in October to touch a low of 84.68 a barrel after opening the month at 97.37 to resume its drop for a second straight month.  

While the BOE has forecasted in its Augusts quarterly inflation report that inflation would go below the 2% target by the end of 2013, it may raise its forecasts in this weeks awaited inflation report.  

Other important data includes retail sales will probably show a drop of 0.1% in October from Septembers 0.6% advance, according to the reading with auto fuel.

The data will probably be affected by both inflation and unemployment which gave a boost to the reading in September

Unemployment for the quarter ended September is estimated to linger at 7.9%, while Jobless claims for October will fall 5.0 thousands from the prior 4.0 thousands drop. 

Last week, the BOE opted to leave both interest rate and APF quantity on hold, probably waiting for the FLS program, announced three months ago, to reap its fruits on the economy and till assessing the effect of the latest 50 billion-pound program which was announced in July and ended last week.   

It seems that policy makers decided to delay adding to stimulus till the release of the latest growth and inflation forecasts in the banks quarterly inflation report this week.

The report is expected to be carefully watched and to have an effect on the pounds movements versus majors as it will give an indication about the economy in the last quarter and next year after the robust 1.0% growth achieved in the third quarter, especially as expectations are in favor of seeing a slowdown once again in the fourth quarter since the third quarter reading benefited largely from the positive effect of the Olympic Games that was hosted by London from July 27 to August 12. 

The European Commission in its autumn forecasts lowered growth forecasts for the U.K. to 0.3% this year from 0.5% projected in May and 0.9% in 2013 from previous forecasts of 1.7%.

“The outlook for the remainder of 2012 remains bleak,” the commission said. “It is increasingly unlikely that net trade will give a positive contribution to growth this year and it will remain subdued next year,” the report said.   

King has to answer questions after delivering an opening statement at the press conference held when the bank will publish its quarterly.

Perhaps the most important raised questions would be why the bank has stopped stimulating the economy although signs of recovery are not affirmed yet amid suspicious the non-standard measures are not effective anymore and started to reignite inflationary pressures.    


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