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MENAFN - ecPulse - 18/11/2012

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Alike last week, the main attention in the market would remain on the eurogroup finance ministers meeting in Brussels, yet this time there will be more focus because another failure to reach a deal that guarantees the disbursement of Greeces next installment would probably add to concerns in markets.

Last week, eurogroup finance ministers failed to reach an agreement to launch the next tranche worth 31.5 billion euros amid frictions between the finance ministers and the IMF.

The eurogroup suggested giving Greece two extra years to 2022 to lower its debt to the target of 120% of Gross Domestic Product after hailing the efforts done by the Greek government, but Christine Lagarde, the IMF chief, expressed her rejection to granting Greece additional two years stating that “in our view, the appropriate timetable is 120% by 2020,” “we clearly have different views,” leaving the IMFs position unsettled.   

Greek banks managed to roll over debt last week to cover the 5 billion euros maturing on Nov. 16 to avoid default; the unsettling of the matter is causing tensions in markets as it raises skeptics regarding the inability of European officials to contain the three-year old debt crisis.

Furthermore, the attention will be on the euro zones PMI manufacturing and services data for November, especially after last weeks report which showed the 17-nation region is in technical recession after it dropped for two consecutive quarters.

Manufacturing will remain in contraction recording 45.5 from 45.4 in October while services is set to show a contraction of 46.0, unchanged from a month earlier, where the same gauges in Germany are also predicted to show a contraction.

The final GDP reading for Germany, which will include details with the release, most notably exports and imports, is set to confirm the euro areas biggest economy recorded an ease in expansion to 0.2% in the third quarter from 0.3% in the second quarter.  

Still, the debt crisis is weighing on growth prospects and damping confidence; a German report is predicted to show that business confidence fell to 99.5 in November from 100 in October.

The ECB lowered its growth forecasts for the euro zone as the bank now foresees a contraction of 0.5% this year, which higher than the 0.3% contraction anticipated three months ago, while lowered growth forecasts for 2013 to 0.3% from prior estimates of 0.6%.

The ECB said economic activity in the euro area is expected to remain weak, especially in the second half of 2012 as all indicators to refer to this, while in 2013 growth momentum is likely to remain anemic since the risks surrounding the economic outlook for the euro area remain on the downside.

Also, some attention will be on debt sale from Spain which already raised all its financing needs for 2012 after selling 4.76 billion euros of bonds on Nov. 8 at an auction which witnessed strong demand and decline in borrowing costs.  

The debt yields are showing decline in the euro areas troubled nations since the announcement of the ECB of its readiness to buy bonds from highly indebted nations through its new bond-buying program announced in September.

In the U.K., after the BOE decided earlier this month to leave both interest rate and APF quantity unchanged, minutes of the meeting, which is expected to show a split among the nine-panel members, will be under scrutiny.

Minutes of Octobers decision showed there may be a split among the nine-panel member this month as “some members felt that there was considerable scope for asset purchases to provide further stimulus,” whilst “other members, while acknowledging that asset purchases had the scope to lower long-term yields further, questioned the magnitude of the impact that lower long-term yields on corporate debt and equity would have on the broader economy.”

Other important report from the U.K. is expected to show that public sector net borrowing excluding interventions recorded a narrowing deficit of 6.0 billion pounds in October, compared to the prior deficit of 12.8 billion pounds.  


 






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