Intraday Market Thoughts

French Banks Downgraded, UK Jobs Preview

by Kyle Morrison
Sep 14, 2011 9:05

UK unemployment expected to fall slightly while sterling weakens on QE speculation, French bank downgrades finally arrive, Swiss producer prices, Euro zone industrial production, Japanese Industrial Production. UK Jobless due Next

The pound hasn’t had a particularly good couple of days even falling back against the single currency as speculation increases that the Bank of England could be forced to restart its asset purchase program. Despite further increases in prices it would appear that the Bank has given up all pretence of targeting the inflation rate with calls increasing by the day for the Bank to stimulate the economy in the face of stalling growth.

Further calls from Adam Posen along with calls from business leaders appear to be building some momentum and today’s unemployment data could well add to these calls.

Expectations for August are for a rise in claims of 35k, down slightly from 37.1k, while the ILO unemployment rate is expected to stay at 7.9%. Average earnings are expected to increase slightly to 2.7%.

Mervyn King is also expected to be speaking this morning around 7:30am and he could well add to the recent sterling weakness.

In Europe ratings agency Moody’s finally pulled the trigger on the long awaited downgrades to French banks, downgrading Societe Generale and Credit Agricole, with Moody’s saying that it believes Soc Gen can absorb losses on Greek debt, however it leaves Credit Agricole on review for a further downgrade due to the current persistent fragility in bank financing markets. Surely it can only be a matter of time before BNP Paribas follows in their wake as the bank announces a restructuring plan to increase capital.

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In Switzerland producer prices for August are expected to reinforce the Swiss National Bank’s recent decision to institute a peg with expectations that they will come in negative at -1.1%, year on year, nearly double from July’s -0.6%.

In Europe the release of Eurozone industrial production data for July will give clues as to how well Q3 has started for the latest quarter, with expectations of a bounce back from Junes sharp 0.8% fall, with expectations of a rise of 1.5%, which in turn would push the year on year figure up from 2.6% to 4.6%.

In Japan industrial production for July was revised down slightly from 0.6% to 0.4% highlighting the continued difficulties the Japanese economy is having in recovering from the earthquake earlier this year.


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