Sunday, December 15, 2013

On the menu: selected highlights for the week

Monday: EU - PMIs for December
  • PMIs for Germany and France should show modest expansion
  • Contrast between both should remain stark, with FR still below 50 on both measures and Germany around 53 and 55 in manufacturing and services respectively
Wednesday: EU - Finance Ministers meet...
  • ... to finalize the much awaited Single Resolution Mechanism
  • Objectives: define the rules to address the failure of a European bank
    • Who decides to shut down a bank?
    • Who will pay for its bailout?
    • Which banks are to be ruled by this new system?
  • The proposed draft is full of compromises to accommodate a reluctant Germany
  • It is a complex system that would require the participation of numerous EU bodies and deal with a lot of voting before any resolution is carried out
  • Not the kind of tools you need when a bank blows up during a week-end, but still better than nothing for future crises
Wednesday: US - FOMC meeting
  • Members could be influenced by the recent series of positive political and economic news
    • US mini-fiscal deal last week lifted some political risks and reduces the probability of another debt-ceiling crisis
    • Stronger ISM, good payroll numbers, unemployment rate at 7%, Q3 GDP revised upwards indicate that the US economy could have reached escape velocity
  • Many observers think that tapering could be announced now or between the lines for January
  • "US Monetary normalization should not cause general asset price deflation as it should come with better growth" - JP Morgan
  • Could it be a trigger to stop the market consolidation of the past two weeks? Wait and see. The markets could well remain directionless until year end.