LONDON (SHARECAST) - -Germany may soften its stance vis-a-vis Greece, some reports imply
-Credit Suisse says Spanish stress test a “generally credible exercise”
-Credit Suisse says larger top-down questions remain
-Stark: Conditionality on ECB bond buys harms its independence -Bbg
-Spanish 10 year bonds yields fell by 6bp to 5.88%
FTSE Mibtel 30: 2.83%
Ibex 35: 0.98%
Stoxx 600: 1.43%
The main European equity indices have finished the day with sharp advances, particularly in the case of France and Italy but less so in Spain. That following the release of a private audit –last Friday- that showed that Spain’s financial system needs less capital than some had feared, 59.3bn euros approximately.
Nevertheless, economists’ first reactions seem to have been decidedly mixed at best. In this regard, economists at Goldman Sachs are commenting that: “The MoU stated that “the main objective … is restoring [the banks’] market access”. In our view, this goal cannot be reached through bank recapitalizations. Bank funding is inextricably linked to that of the sovereign, and here the “bank problem” has ceased to be the “main problem”. This, at least, is confirmed by this test."
Meantime, and over at Nomura, analysts are of the following opinion: “In addition some of the criteria would seem less demanding than those used in the 2011 Irish bank stress test (which we believe is hard to justify). Using some of the criteria used in the Irish stress test, we estimate would see capital requirements for Spanish banks increase to circa €94bn.”
Thus, the risk exists that the tepid reaction from markets may be a harbinger of troubles still to come on this front. Having said that, some observers, such as Kathleen Brooks at Forex.com, believe that the market has taken the tests seriously because they have been carried out by an independent company. Also, she points out, "the [Spanish] finance minister said that Spain was “analysing” an ECB aid proposal. This isn’t a confirmation that it will make a request, but it leaves the door open for a formal request in the near-future, which would then (finally) activate the OMT programme."
On a similarly positive note, according to a report in WirtschaftsWoche Greece will receive 31bn euros in aid despite the fact that the Troika report will say that the country has not yet fulfilled all the conditions which had been set out for it.
An upside surprise in today’s ISM manufacturing report out of the United States also helped sentiment significantly.
The above helped stocks navigate their way past the mediocre Chinese manufacturing data out over the weekend and last night.
Worth pointing out as well perhaps, some traders are citing so-called technical factors as a reason behind today’s move higher in stocks.
Commerzbank to bid 'auf wiedersehen' to its dividend?
More specifically, Credit Agricole has confirmed on Monday that it is in exclusive talks to sell the whole of its Greek Emporiki unit to Alpha Bank.
Commerzbank on Saturday declined to comment on a magazine report that it planned to pay no dividend for its 2013 financial year, Reuters reports.
From a sector stand-point, and if one looks at the DJ Stoxx 600, the best performers were: Banks (2.17%), Chemicals (2.14%) and Insurance (2.11%).
Unemployment below forecasts, but at a record
Eurozone unemployment rose to 11.4% for the month of August (Consensus: 11.5%), ahead of the preliminary reading of 11.3% for July, which has now been revised up to 11.4%, marking a new Euro-era record.
The volume of German machinery orders dropped by 11% year-on-year in August, with an 18% fall in domestic orders according to data released by VDMA.
Markit’s Eurozone purchasing managers index for the month of September has come in 46.1 after a reading of 45.1 for the month before (Consensus: 46.0).
Italy’s unemployment rate remained at 10.7% in August (Consensus: 10.8%).
The single currency is now edging up slightly
The euro/dollar is now rising by 0.25% to the 1.2891 dollar mark.
Front month Brent crude futures are now down by 0.447 dollars, to the 111.87 dollar per barrel mark on the ICE.