Spanish banks a major concern
The markets remain focused on Spain where press reports suggest that the ECB have rejected a €19 billion Spanish plan to recapitalise troubled lender Bankia by indirectly tapping the ECB for cash. Markets are concerned about Spain’s ability to rescue its banking sector without international help at a time of elevated borrowing costs for Spain in the bond markets.
Meanwhile, the European Union publishes its annual economic and public finance report later today that may demand policy changes or threaten fines for poorly performing Euro zone states. The report is expected to spell out measures to balance growth with unpopular fiscal consolidation that will be particularly relevant for Spain and Italy.
According to the latest monthly Distributive Trades Survey from the Confederation of British Industry (CBI), 43% of retailers reported an increase in their volume of sales in May compared to the same period last year, while only 23% reported a fall. The resulting rounded balance of 21% was slightly above expectations of 19%.
Unsurprisingly the Euro is lower this morning although the single currency has managed to rally against the pound (a fraction) as sterling wilted on fears that the MPC could reinstitute Quantitative Easing as early as next month.