Cracks appear. The euphoria following the ECB's stimulus proposals announced on 2 August has waned and is slowly being replaced by concerns regarding the timing of and detail behind the signalled stimulus. Helping confirm those concerns last night was news that a fresh lawsuit against the ESM bailout fund was filed in the German constitutional court, potentially delaying the use of the fund and in turn, ECB action. Also hurting sentiment was an increase in London Clearing House margins on Spanish and Italian bonds, plus a Handelsblatt report that Germany will veto EFSF payments to Greece if the country doesn't comply with its fiscal obligations. The S&P500 fell 0.7% on the above but recovered in NY to be -0.2% currently. Commodities were weaker, the CRB index down -0.9% and copper -1.2% but Brent oil up 0.6%. US 10yr treasury yields were confined to a sideways 1.62%-1.67% range.
The US dollar index (DXY) is little changed. EUR initially rose from 1.2275 to 1.2373 but sagged in NY to 1.2325. USD/JPY continued to consolidate between 78.16 and 78.37. AUD followed the equities slump from 1.0574 to 1.0497 and settled in NY to 1.0520. NZD fell from 0.8128 to 0.8077 before settling to 0.8090. AUD/NZD was directionless between 1.2995 and 1.3015.
Economic wrap
Greek GDP contracts at -6.2% yr annual pace in Q2. While still painting a devastatingly weak picture, the pace of meltdown of the Greek economy was not quite as steep as the few economists who try to forecast the data expected; Q2 saw the economy shrink at the second slowest annual pace in nearly two years. But with the Statistics office short staffed and no longer publishing seasonally adjusted data, the precise numbers are not the issue, it's that the economy has not posted material economic growth since 2007. Austerity fiscal measures and the uncertainties about euro membership, the ongoing bailout, the banks and politics show no real sign of diminished crushing pressure on the economy and the Greek people.
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