Ecofin offers Spain €30bn for banks

Publication date: 10 July 2012
Author: Mark Deans, Moneycorp

Anyone who doubts that Premier League football players are a breed apart should check out the newspaper reports about the trial of Chelsea captain John Terry. It isn’t just that these blokes are paid inordinate amounts of money, they even have a different language. Where most people fill the gap between the first and last letter of a word with other letters, f*********s f*** half of them with s***s.

With footballers mainly absent from Monday’s television screens on account of their annual two-week holiday, yesterday’s star ought to have been the Deputy Governor of the Bank of England. Paul Tucker was taking his turn in front of parliament’s Treasury Select Committee, at his own request, to clear up misunderstandings about the Bank’s role in the Libor affair. Alas, stardom remained out of Mr Tucker’s grasp. Like the investment banking CEO who appeared there last week, the chap now in charge of financial stability at the Bank only cottoned on very recently to the idea that Libor rates were seriously out of whack during the global financial crisis.

The committee hearing made for an anticlimactic end to a humdrum day in the FX market. The Sentix index of Euroland investor confidence deteriorated by half a point to -29.6, its lowest reading in three years. Greek inflation was almost unchanged at 1.3%. New Zealand business confidence turned negative, falling from +13 to -4. The RICS UK housing price balance remained negative at -22%, indicating that a majority of estate agents sees house prices falling. China’s trade surplus widened in June as exports grew more rapidly than imports. Australian business confidence was almost unchanged at -3. Japanese consumer confidence came in at 40.4, having remained close to that level since the beginning of the year.

Investors found little to inspire them among that tedious inventory. As a consequence sterling is unchanged on the day, as near as makes no difference, against the US dollar, the euro, the franc and the rand. It is marginally firmer against the Australian, Canadian and New Zealand dollars and slightly down against the yen.

The eurozone finance ministers’ meeting came up with little new. They agreed to allow Spain an extra 12 months to achieve its deficit reduction target and to expedite the injection of €30bn of bailout money into Spanish banks. Investors were unimpressed. They chased Spanish government bond prices lower, taking the ten-year yield back above 7%. At 7.03 it is 85 basis points higher than a month ago and 138 basis points above its level in July last year.

By the look of the ecostat agenda, today could be as dull as Monday. This morning Britain publishes the data for May’s trade deficit as well as manufacturing and industrial production. After lunch come Canadian housing starts and the NIESR’s estimate of second quarter UK gross domestic product. Tonight brings Australian consumer confidence and the figures for mortgage lending. There is very little there to get currencies moving.