Intraday Market Thoughts

Euro Tests $1.33 as Greece Concerns Weigh, Appetite Damaged

by Kyle Morrison
Oct 3, 2011 8:01

Ecofin meeting and Greece. German and Euro zone manufacturing PMIs set to show weakness, UK Manufacturing PMI set to slide further, Japanese Tankan survey set to show improvement, US manufacturing ISM. Ashraf will be on AlArabiya at 8:30 GMT (12:30 Dubai Time). Premium Insights due later in the day.

As we head in to the final quarter of 2011, Greece remains the factor that has financial markets most concerned, on reports that the country looks set to miss its 2011 and 2012 budget targets by quite some way. The new targets agreed on July 21st were for a 7.6% deficit to GDP, and this looks likely it will actually be 8.5% of GDP, while 2012 will miss by less.

Todays Ecofin meeting is likely to be a fractious affair given Slovakias resistance to the increase in the EFSF powers, while finance ministers will be hoping that the latest troika report doesnt bring bad news.

The final September manufacturing PMI numbers for Germany and the Euro zone for September are expected to be confirmed today with confirmation that Europes largest economy stagnated with a reading of 50, while the broader euro zone economy is expected to be confirmed at a 48.4 contraction. These figures increase concerns over Germanys ability to be able to even consider increasing its contingent liabilities with respect to the rest of Europe as pressure increases for it to make more money available to help save the euro.

In the UK a key week for the pound kicks off with the latest manufacturing PMI data for September with this particular gauge the only UK PMI measure in contraction territory the previous month. In August the measure came in at 49, and in September number is expected to contract further to 48.5. Another weak number is likely too increase the calls for further asset purchases ahead of this weeks Bank of England rate setting meeting. A number of recent public statements from policymakers have indicated they may be persuaded to back calls for further stimulus.

This mornings latest Japanese Tankan survey for Q3 continues to show a slow pick up in the after effects of Q1s earthquake with the large manufacturers index improving from the previous -9 reading, coming in at 2, as industrial activity and output continues to recover slowly. The manufacturers outlook for Q3 also showed a slight improvement rising from 2 to 4.


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