LONDON (Dow Jones)--Consumers in the euro zone΄s three largest economies are looking fragile at best as the region΄s debt crisis continues, according to data released Tuesday. Confidence among French and German consumers improved slightly in the latest surveys despite underlying concerns. But Italian consumer confidence hit its lowest level in more than three years. In Germany, the forward-looking consumer climate index for November ticked up to 5.3 from 5.2 in October, beating economists΄ forecasts for a 5.1 reading. German consumers feel shielded from the debt crisis as long as the labor market remains strong, market research group GfK said. But consumers in the euro-zone΄s largest economy are increasingly worried about the economic outlook. The economic expectations sub-component of the index fell in October to a 26-month low, dropping to -6.2 points from 4.8 points in September. "Ongoing discussions relating to the government debt crisis and the threat of Greek insolvency, which will also put pressure on banks, continue to unsettle Germans," GfK said. French consumer sentiment for October, meanwhile, improved unexpectedly, but national statistics agency Insee said consumer confidence remains well below its long-term average. The French sentiment index rose to 82 in October from 80 in September. Economists polled by Dow Jones News wires had expected a reading of 79. Barclays Capital European economist Francois Cabau attributed the increase to the survey΄s monthly volatility and said there is "only limited scope" for marked improvement by the end of the year. In Italy, consumer confidence fell in October to its lowest level in more than three years as fiscal austerity and a domestic political impasse weighed on household sentiment. The consumer confidence index declined to 92.9 in October from 94.2 in September, national statistics institute Istat said. Istat΄s figure reflects a dramatic revision of its data series, which is now benchmarked to the year 2005. Consumer confidence in September was previously reported as 98.0. Economists surveyed by Dow Jones News wires expected Italian consumer confidence to fall by only half a point. The new October figure represents, in the revised data series, an almost 10-point drop from June, when Italian sovereign debt yields began to climb dramatically and credit rating companies began to raise vocal concerns about the country΄s political stability.
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Saturday, October 29, 2011
LONDON (Dow Jones)--Consumers in the euro zone΄s three largest economies are looking fragile at best as the region΄s debt crisis continues, according to data released Tuesday. Confidence among French and German consumers improved slightly in the latest surveys despite underlying concerns. But Italian consumer confidence hit its lowest level in more than three years. In Germany, the forward-looking consumer climate index for November ticked up to 5.3 from 5.2 in October, beating economists΄ forecasts for a 5.1 reading. German consumers feel shielded from the debt crisis as long as the labor market remains strong, market research group GfK said. But consumers in the euro-zone΄s largest economy are increasingly worried about the economic outlook. The economic expectations sub-component of the index fell in October to a 26-month low, dropping to -6.2 points from 4.8 points in September. "Ongoing discussions relating to the government debt crisis and the threat of Greek insolvency, which will also put pressure on banks, continue to unsettle Germans," GfK said. French consumer sentiment for October, meanwhile, improved unexpectedly, but national statistics agency Insee said consumer confidence remains well below its long-term average. The French sentiment index rose to 82 in October from 80 in September. Economists polled by Dow Jones News wires had expected a reading of 79. Barclays Capital European economist Francois Cabau attributed the increase to the survey΄s monthly volatility and said there is "only limited scope" for marked improvement by the end of the year. In Italy, consumer confidence fell in October to its lowest level in more than three years as fiscal austerity and a domestic political impasse weighed on household sentiment. The consumer confidence index declined to 92.9 in October from 94.2 in September, national statistics institute Istat said. Istat΄s figure reflects a dramatic revision of its data series, which is now benchmarked to the year 2005. Consumer confidence in September was previously reported as 98.0. Economists surveyed by Dow Jones News wires expected Italian consumer confidence to fall by only half a point. The new October figure represents, in the revised data series, an almost 10-point drop from June, when Italian sovereign debt yields began to climb dramatically and credit rating companies began to raise vocal concerns about the country΄s political stability.
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As someone who works in financial services, I follow the markets – in the West, across Asia and the entire world – closer than most. Since the Bear Stearns collapse in March 2008, through the demise of Lehman Brothers and its ghastly aftermath, much of my professional life has been dominated by the angry flashing of those little lights on a Bloomberg screen.
In recent years, the violent gyrations on financial markets have been deeply discomforting, causing angst among market professionals, like me – but that is the least significant aspect. For those little lights represent, of course, the ebbs and flows of cash which, in turn, determines the fate of real businesses. It is at the sharp end of employment and livelihoods, dispossessed homes and broken families that the human impact of financial turbulence is most keenly felt.
So, yes, I want such turbulence, which will never be fully-eradicated, nor should it be in a free-market system, to now lessen to more manageable levels. Yet the responses of our politicians to recent financial troubles – hiding behind complexity and kicking the can down the road – have not only failed to temper the volatility, but have actually made it much worse.
Last week's eurozone "agreement", for all the related fanfare, was a case in point. Far from making the situation clearer, allowing investors to make considered assessments, this latest announcement made Western Europe's grotesque debt crisis even more acute, sowing further infectious spores of confusion.
The deal itself, unveiled dramatically in the early hours of Thursday, was met with the now obligatory "relief rally". The FTSE All-World equity index soared 4.1pc, helped by signs of renewed US economic growth. European bank shares spiked no less than 12pc on Thursday, as traders recognised, for all the official obfuscation, the latest dollop of government largesse
US stock markets were holding steady on Friday even as critics began to unpick the announcements that followed Thursday's breakthrough talks on the European debt crisis.
The Dow Jones index closed up 22.56 points, or 0.18%, and is on track for its largest monthly gain since 1999. In London the FTSE 100 closed for the week, down just over 10 points on the day at 5702.24 but well above the 5000 mark it stood at a month ago.
The relative calm in the markets came even as credit rating agency Fitch said Greek debt would remain "junk" even after the European agreement to half what it owes the banks and a sale of Italian government bonds showed investors were still wary about the European crisis.
The Italians sold €8bn of debt this morning - the first eurozone bond auction EU leaders summit and the country's 10-year borrowing costs topped 6%, the highest rate since Italy joined the euro.
The sale will put further pressure on Silvio Berlusconi's precarious governmental alliance. Italian finance minister Guilio Tremonti is already under pressure to bring down borrowing costs. Italy has been downgraded by the three main credit rating companies during the past month and has to repay €298bn of debt next year, more than any other euro member.
In a note to investors Fitch too poured cold water on the European crisis talks. The rating agency broadly welcomed the EU plan to asks private creditors to take 50% "haircuts" on their holdings of the country's bonds. But the agency said: "Greece would still have a large amount of debt outstanding, its growth prospects are weak and its willingness to implement structural reforms may dissipate."
The latest Euro news came as Klaus Regling, the head of euro-bailout fund the European financial stability facility (EFSF) met with Zhu Guangyao, a Chinese vice-finance minister, in Beijing Friday. European leaders, led by France's Nicholas Sarkozy, are trying to persuade the Chinese to invest more money in the EFSF
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