We covered how the austerity measures are beginning to bite hard in Greece during our tale of two cities forex market commentary of last week. The youth unemployment problem is dire, adoption and care agencies are at breaking point as desperate families are giving up their children for adoption but these charities (having had their funding cut) are struggling to cope.
Civil servants are being laid off in huge numbers, the country’s doctors are only treating emergencies and basics such as school books are in short supply. But the industrial military complex status quo apparently has to be maintained at all cost. Will ordinary Greeks delight in learning that a significant proportion of the bail out cash, that will cost so much to pay back, is being spent on honouring military hardware purchase contracts?
The shopping list is impressive and having committed to buy this hardware over the past two years, as the Greek economy headed into a death spiral tailspin, the newly installed technocratic govt. in Greece have no intention of ‘stiffing’ the arms suppliers; USA Apache helicopters, French frigates, German submarines are all on the list.
The final cost is proving difficult to establish, however, tens of billions would be a conservative estimate. That’s quite a sizeable chunk of each circa €80 bl tranche of IMF/ECB/Troika funding. Who’d have thought that, during all that tense and hard fought negotiation in the final six months of 2011, part of the remit of the political elite was to ensure that enough bailout cash was secured in order to ensure that the military suppliers continued to be enriched.
French banks are likely to be in the spotlight after an internal memo obtained by Reuters on Monday showed that Societe Generale is forecasting a “significant” drop in 2012 investment-bank revenue compared with 2011, weighed by higher funding costs and efforts to slash its balance sheet. As a consequence we can expect the thorny subject of specific French banking credit downgrades to rear its head once again over the coming days and weeks which inevitably leads to the question of a French downgrade from AAA, a subject that’s disappeared from mainstream discussion as the Merkozy show hits road once again.
The Shanghai Composite Index closed at its biggest three-day gain in a year, amid speculation that policy makers may act to spur growth in the world’s second-largest economy. Commodities rose, while the euro was little changed versus the dollar before European leaders continue their meeting to discuss the debt crisis.
The MSCI All-Country World Index rose 0.6 percent at 9 a.m. in London. The Stoxx Europe 600 Index climbed 0.9 percent and Standard & Poor’s 500 Index futures increased 0.6 percent. The Shanghai Composite Index jumped 2.7 percent, bringing the rise to 6.4 percent. The euro bought $1.2762. Oil climbed 1.3 percent to $102.59 a barrel and gold and copper also rose.
Market snapshot at 9:30 am GMT (UK time)
Asian and Pacific Markets
The Nikkei closed up 0.38%, the Hang Seng closed up 0.73% and the CSI closed up 3.33%. The ASX 200 closed up 1.14%. The Shanghai Composite Index rose to the biggest three-day gain in a year due to speculation that Chinese policy makers may act to spur growth in the world’s second-largest economy after disappointing import figures.
European bourse indices have risen sharply in the first part of the morning session. The STOXX 50 is up 1. 26%, the UK FTSE is up 0.89%, the CAC is up 1.30%, the DAX is up 1. 24% and the MIB is up 2.10%. ICE Brent crude is up $0.83 a barrel at $113.31 and Comex gold is up $16 an ounce at $1624.1. The SPX equity index future is currently priced up 0.78%.
Sterling declined versus most of its 16 major counterparts after the British Chamber of Commerce said more Bank of England stimulus may not be enough to revive U.K. economic growth. The pound fell 0.5 percent to A$1.5021 at 8:30 a.m. London time after sliding to $1.4994, the lowest level since Sept. 8. The U.K. currency was little changed at 82.58 pence per euro, and traded unchanged at $1.5458.
Economic calendar data releases that could affect sentiment in the afternoon session
Tuesday 10 January
15:00 US – Wholesale Inventories November
Wholesale sales and inventories data does not usually have a dramatic or immediate effect on the bond or stock market, but data at this level, as opposed to at the consumer level, does offer an insight into the economy and can offer a foretaste of future consumer trends and comparing changes in the Inventories/Sales Ratio can provide useful indications of changes in the economy.
For example, a dropping Inventories/Sales Ratio caused by, say, unexpectedly high sales figures, suggests that manufacturers will have to increase production levels at some point if product shortages are to be avoided. Conversely, an increasing Inventories/Sales Ratio points toward a requirement for a slow down in production in order to help ship out unplanned build-ups of inventory
A Bloomberg survey of economists gave a median forecast for an increase of +0.50%, weaker than the previous figure of +1.60%.