Greek Deadlock Continues, UK Deficit Widens

Arthi Gupta
21 Nov, 2012
New York City

The European indexes edged lower after the euro area finance ministers postponed the release of bailout fund to next Monday. German leading economic index climbed in September and UK public sector net borrowing rose in October.

[R]1:40 PM Frankfurt – The European indexes edged lower after the euro area finance ministers postponed the release of bailout fund to next Monday. German leading economic index climbed in September and UK public sector net borrowing rose in October.[/R]

The European indexes declined after no consensus was reached on disbursing the next tranche of aid worth €31.5 billion to Greece.

The meeting of euro zone finance ministers, the International Monetary Fund and European Central Bank in Brussels yesterday was inconclusive and the decision was postponed to the next meeting scheduled on November 26 to release the next tranche of bailout funds to Greece.

Several German lawmakers who attended the closed-door meeting held by German finance minister Wolfgang Schaeuble said Greece may have unsustainable debt load and additional two years may not be enough. Not all lenders are convinced that Greece should be given additional time.

In addition, investors are not clear how Greece will fund its 14 billion euro of debt repayment between now and the end of 2014.

Greece is expected to run out of cash at the end of this month.

The Bank of England policymakers through a split vote retained the quantitative easing program at £375 billion as well as voted unanimously to keep the interest rate at 0.5%, according to the minutes of the meeting held on November 7 and 8.

In Paris trading, the CAC-40 Index rose 4.52 or 0.1% to 3,466.57 and in Frankfurt the DAX Index edged higher 4.76 or 0.1% to 7,177.45.

The yields on Spain’s benchmark fell seven basis points to 5.71%. Italian 10-year yields rose three basis points to 4.88%.

German Bond Auction

Germany raised €3.25 billion from an auction of 10-year government bonds at an average yield of 1.4% compared to at an average yield of 1.56% at the last auction of similar-maturity debt on October 24. The bid-to-cover ratio rose to 1.5 from 1.38 in the last sale.

German Leading Index Climbs

A leading economic indicator for Germany increased slightly in September, its first gain since February of this year, the Conference Board said in a report today.

The LEI for Germany increased 0.1% on a monthly basis to 102.6 in September. Positive contributions from stock prices and the yield spread more than offset the negative contributions of new orders for investment goods industries and consumer confidence.

The coincident economic index, a measure of current economic activity, decreased 0.2% in September.

Swiss M3 Money Supply Growth Eases

Switzerland''s M3 money supply eased 8.6% annually in October compared to the 8.8% increase in September, the latest data from the Swiss National Bank showed today.

M2 money supply increased 9.5% annually in October compared to the 9.8% gain in September. Narrow money supply or M1 rose 10.6% in October over the past year.

UK Deficit Widens

The UK public sector net borrowing increased to £8.6 billion in October compared to the net borrowing of £5.9 billion a year ago, according to data published by the Office for National Statistics today.

Public sector current budget deficit widened to £6.7 billion in October compared to the deficit of £4.4 billion in October 2011.

Public sector net debt was £1,068.8 billion at the end of October, equivalent to 67.9% of gross domestic product.