Chillin' out till it needs to be funded
Chancellor Osborne is ofcourse fighting Michel Barnier, the Frenchman overseeing the EU Commission on Financial Services where the French and the Germans more or less coopted Cocos and other Capital tools to make life easier for European banks in the new 600 page agreement. The new bank rules do allow National Swiss and English governments leeway to add upto 5% as contingent surcharge without going back to the commission but it was equally obvious that Osborne felt marginalised in the EU scheme for Financial Services and is looking for a bigger out than waiting for ECB approval for new Capital rules. Th econtingent surcharge or otherwise is based on calculation of extra buffers for 3% of bank assets (RWA – risk weighted) or 5% of national exposures.
Equally forlorn was Mario Draghi, while keeping rates steady at 1% underlining his avowed addition of a Growth compact for the 15 member EU. Irrespective of their international visibility and influence, both Osborne and Draghi would currently have to wait till French and Greek elections of this Sunday and the Irish referendum later in the month to compare notes on political alignment within the Fiscal union and look for a reasonable growth equation that solves the austerity pushdown hurting EU more than even Germany expected in late 2011. Of course German unemployment is still under 7% and sooner than later we could even start defending EU’s 11% unemployment rate just to get on with things.
Nevertheless jobless clams were back near the 350k mark from a 392k in last week to 365k this week and chain stores across March and April were stable enough in sales growth. That means Obama is free to go out on a whirlwind tour to beat Romneyisms before they become threatening Red shoots for the campaign and Hillary Clinton and Tim Geithner would probably not make any political detour at the still on dialogue in China as more concessions to US financial Services underline China’s approach to its growth slowdown too. I doubt if any export or currency related concessions will get more than a mention either, but any such announcement could mean great traction for both economies. Meanwhile Services data was especially tepid, rather like the Indian PMI earlier at 54.8 looks good but is a continuing reaffirmation of a slower growth. The ISM Services number also ticked down from 56.3 in March to 53.5 for April with new orders, jobs added and business activity at their lowest in six months. Earlier manufacturing data growth also showed weakness in Exports, a sure sign of motivation become a tepid cup of tea left on the table for too long! Challenger job cuts planned increase to 40k was mostly Education sector employees suffering from spending cuts