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Posts tagged ‘ECB’

Leftist German Protesters Clash with Police.


FRANKFURT, Germany  — German police used pepper spray and batons against thousands of anti-capitalist demonstrators from the Blockupy movement on Saturday during a second day of protests in Frankfurt against Europe’s austerity policies.

Planned rallies in struggling euro zone members Spain and Portugal drew fewer people than expected, but in Germany‘s financial capital around 7,000 protesters marched with signs reading “Make love, not war” and “IMF – get out of Greece”.

The protest was initially peaceful but small groups of masked protesters then hurled stones and smoke bombs at the police who responded with force.

Several protesters and police officers were hurt before the action died down later in the evening. Police at the scene said several arrests had been made, but could not say how many.

A first day of protests on Friday in Frankfurt succeeded in paralyzing some of the city’s financial institutions, cutting off access to the ECB’s iconic tower office building and Deutsche Bank’s headquarters.

Police angered marchers on Saturday by halting them before they could pass close to the ECB building after protesters let off firecrackers.

In a statement, Blockupy accused the police of wanting to “escalate” tensions and of blocking a legitimate protest.

“This is scandalous,” spokeswoman Ani Diesselmann said. “The (original) route was approved by several legal institutions.”

Police said officers had been repeatedly attacked by the small group of demonstrators, making it necessary for them to use force and pepper spray.

Protests against the “troika” of international lenders that has bailed out struggling euro zone states — the International Monetary Fund, the European Central Bank (ECB) and the European Union – were planned in several countries on Saturday.

Reuters witnesses said several thousand Spaniards gathered at the peak of Saturday’s protest in central Madrid, but this was fewer than similar events had attracted in the recent past.

One thousand or fewer took to the streets in Lisbon, while only a few dozen rallied in austerity-weary Athens, where attendance at protests has dwindled in the absence of much noticeable impact on policy.

A march in the southern French city of Toulouse attracted 3,000 people, according to police.

Former leftist presidential candidate Jean-Pierre Melenchon told French television the protests across Europe proved people had a “a European consciousness, a political consciousness.”

Europe’s Blockupy movement was formed after the Occupy Wall Street movement in 2011. They blame the budget cuts and labor market reforms supported by the ECB, the IMF and European financial and political leaders for driving the continent into a recession that has left more than a quarter of Greeks and Spaniards out of work and millions of Europe’s poor worse off.

“This is a good opportunity (to protest). Youth unemployment is so important right now,” said Antonia Proka, 25, a Greek who now lives in the Netherlands.

“I have lots of German friends who don’t find jobs so the problems are the same, we are on the same side,” she said.

While more than half of Spaniards and Greeks under the age of 25 are unemployed, only 8 percent of Germans and Austrians from the same age group are out of work.

Governments struggling with large debt burdens have cut spending and raised taxes, deepening recession across the euro zone, while many families are deep in debt or have lost their homes after property bubbles burst.

Germany’s own economy has been fairly resilient to the crisis and many in Europe’s struggling southern states blame Chancellor Angela Merkel for enforcing the painful policies in exchange for EU funds which largely come from Germany.

As well as the ECB, on Friday the Blockupy demonstrators targeted several large commercial banks, stores and Frankfurt airport.

© 2013 Thomson/Reuters. All rights reserved.
Source: NEWSmax.com

Growth in Sight for Eurozone Economy, but No Big Upturn, Reuters Poll Finds.


Growth will return to the eurozone‘s recession-mired economy in the second half of this year, but economists see no chance it will recover strongly until at least 2015, a Reuters poll showed on Tuesday.

The eurozone has been stuck in recession since the end of 2011 and data on Wednesday is expected to show the economy shrank again between January and March, by 0.1 percent.

However, the latest poll of 65 economists, taken this week, suggested that should be the end of its declining streak.

The economy is expected to stagnate in the current quarter, before eking out 0.2 percent growth for the next few quarters thereafter.

But with austerity and rising unemployment still taking its toll across the continent, few foresaw any prospect of growth picking up much before 2015 – especially with such deep divisions running between the eurozone’s constituent countries.

“Prospects for the euro area are bleak,” said Tatiana Fic, senior research fellow at Britain’s National Institute of Economic and Social Research.

“Growth divergences persist among euro area members. Further contractions in 2013 are projected for Greece, Italy, Portugal and Spain, while modest positive growth rates are projected for Austria, Belgium, Ireland and Germany.”

Although business surveys suggested German companies fared badly last month, data on Tuesday showed investor morale in Europe’s largest economy pointed to a timid recovery, which would help lift the wider eurozone.

However, austerity and tight credit conditions elsewhere will remain a drag.

“This is particularly true of the southern periphery eurozone countries, and we expected extended contraction in both Italy and Spain to weigh down appreciably on overall eurozone GDP in 2013,” said Howard Archer, chief UK and European economist at IHS Global Insight.

For those reasons, speculation has persisted about what else the European Central Bank might do to spur growth after it cut its main rate to a new record low 0.5 percent this month.

Some policymakers have talked openly of cutting the deposit rate below its current level of zero percent, which would mean charging banks to hold money overnight at the ECB – in theory persuading them to lend it instead.

Still, a majority of economists and traders polled in the past week think such a move is unlikely.

Whatever action the ECB decides to take, high inflation will not prove to be an obstacle. Inflation should remain comfortably below the ECB’s target ceiling of close to 2 percent until at least 2015, the poll showed.

Only five out of 40 economists thought inflation would exceed 2 percent in any quarter until the end of next year.

© 2013 Thomson/Reuters. All rights reserved.
Source: NEWSmax.com

German experts question legality of ECB bank supervision plans.


BERLIN (Reuters) – Legal experts charged with advising German lawmakers have raised questions over the legality of plans for the European Central Bank to take over banking supervision powers next year, Der Spiegel reported.

The German weekly cited an analysis by the civil servants who work for the Bundestag Lower House of parliament as stating that European treaties suggest there is “no sufficiently sound legal basis” for the ECB’s new role as banking overseer.

A move by European political leaders to centralize bank oversight under the ECB is the cornerstone of a planned banking union designed to strengthen the bloc’s lenders against future financial crises.

But there has long been concern in Germany about a potential conflict of interest between the ECB’s role as both supervisor and guardian of monetary policy.

The analysis was not yet available on the parliamentary website and the parliament was unavailable for comment.

European Union treaties state the ECB’s remit is to ensure a stable currency and only in exceptional circumstances should it take over banking supervision duties, Der Spiegel wrote.

But the EU’s plans suggested a “general transfer” of banking supervision duties to the ECB, which was “not covered by this warrant”, the magazine continued, quoting the analysis.

A survey conducted by TNS-Emnid for the weekly Focus magazine showed 26 percent of Germans would consider backing a party that wanted to take Germany out of the euro and as many as four in 10 Germans in the 40-49 age bracket would do so.

(Reporting By Sarah Marsh and Matthias Sobolewski; editing by Keiron Henderson)

Source: YAHOO NEWS.

Reuters

Why Italy’s Election Has Caused Global Markets to Crater.


Provided by Business Insider’s Joe Weisenthal

Last night’s election in Italy is resulting in remarkable market gyrations all around the world.

  • US stocks had their worst day since November.
  • The VIX (a measure of volatility and fear) had an enormous surge.
  • The Italian stock market is down nearly 5% today.
  • The euro is cratering.
  • The Japanese stock market lost over 2% night.

So why does an election in Italy have this kind of huge impact?

“Italy is a massive economy; Greece is nothing compared to Italy,” says professor William Black of the University of Missouri at Kansas City of Europe’s third largest economy in the accompanying video with The Daily Ticker’s Henry Blodget. “Austerity in the middle of a recession is a terrible policy.”

To understand that, you need to understand the essence of the Euro crisis, and how it’s been addressed by Eurozone leaders over the last year.

In a nutshell the Eurozone crisis started in late 2009, when investors in the bonds of peripheral countries (Greece, Spain, Italy, etc.) started to wonder whether those governments were “good for it” so to speak. The brutal recession combined with the massive banking bailouts required in some countries to seriously stretch their national balance sheets. And since no individual Eurozone country has their own printing press, there’s actually the chance that they could run out of cash and default.

The initial attempt to address the crisis was via austerity and limited bailouts. But they didn’t work. Austerity only aggravated the economies, further expanding the deficits. And the bailouts weren’t enough to address the core problem.

The crisis only began to get “solved” in late 2011 when the one entity with unlimited money, theEuropean Central Bank, began flexing its muscle. First it backstopped European banks. Then in mid-2012, ECB chief Mario Draghi offered a deal. The ECB would purchase the debt of any country, provided said country agreed to various structural reforms (reforming labor, reducing spending, reducing pensions, etc.).

Just as in the US, there’s a big thirst among elites for structural reforms to reduce long-term deficits.

This promise made by Draghi — which was called the OMT program — was incredibly powerful. Just the knowledge that the ECB stood ready to buy the debt of struggling countries has dramatically reduced the borrowing costs of all the peripheral nations. Italy has seen a HUGE reduction in its borrowing costs.

Here’s a 1-year chart of the yield on the Italian 10-year bond.

That peak last July occurred right when Mario Draghi first hinted at his new program. Ever since then, national borrowing costs have been dropping nicely, even though the ECB hasn’t actually purchased a dime of Italian debt using the program.

So the essence of the new European stability comes down to this promise.

The ECB says it will buy government’s debt, provided that said government engages in various reforms that the ECB wants to see.

There’s only one catch. Voters hate austerity. And voters hate when their own politicians are taking their cues from an institution like the European Central Bank, rather than domestic needs.

And that’s the phenomenon that came home to roost last night.

The political parties seen as continuing along the existing ECB-preferred path did badly. The rebellion voters (Silvio Berlusconi and populist Beppe Grillo) did much better than expected.

And this has the potential to undermine all of the progress made in Europe over the past several months. As Morgan Stanley explained in a research note this morning:

In order to activate the OMT, political authorities will have to apply and accept additional conditionality. This is what Italy’s electorate appears to have rejected.

(By “conditionality” they mean, the quid-pro-quo whereby the ECB bailout comes with austerity conditions.)

Italy is Europe’s single largest debt market. Its debt to GDP is a staggering 120%. Banks around Europe are loaded to the gills with Italian debt. Suddenly, the debt backstop that everyone thought was there (the OMT program) may not be usable, because the voters just gave a huge rejection of pro-austerity politicians.

So now banks around the world are tanking because of their exposure to Italian debt, or because of their exposure to other financial institutions that are exposed to Italian debt. Or maybe they’re exposed to Irish, Spanish, French, and Portuguese debt, where politicians might be looking at what just happened in Italy, and thinking: If pro-austerity politicians can get shellacked like that, then maybe we need to rethink and renegotiate our current programs.

And when you have financials taking a beating like this, pretty much everything goes down everywhere.

Evn in Japan, things took a beating since there was a huge flight-to-safety bid for the Japanese Yen, and since so much of the Nikkei rally lately has been associated with a weakening yen, a strengthening yen caused stocks to crumble.

As for what happens now? We’ll learn more in the next few days.

The word everyone is tossing about is “ungovernable” which is a dramatic way of saying that no coalition can be formed (because no allied parties got enough seats), thus requiring new elections in a matter of weeks or months. At a minimum, this period of uncertainty will cause any further reform/austerity progress to come to a screeching halt.

It is possible that a government could be formed (perhaps even an alliance between the leftist Pier Luigi Bersani and Silvio Berlusconi) and that things will settle down.

But the key idea is that voters just went dead against the core deal in Europe, which is an ECB backstop in exchange for austerity. Strike at that, and you create the conditions for a new wave of the European crisis that extends beyond Italian borders.

SEE ALSO: Why European voters just staged its first rebellion >

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-0.02 (-0.08%)Source: YAHOO NEWS.By The Business Insider | Daily Ticker

Euro zone inflation nears ECB goal, record joblessness.


  • People make their shopping at a supermarket in Lisbon August 30, 2011. REUTERS/Jose Manuel Ribeiro

    View PhotoReuters/Reuters – People make their shopping at a supermarket in Lisbon August 30, 2011. REUTERS/Jose Manuel Ribeiro

BRUSSELS (Reuters) – Euro zone inflation fell to a two-year low in January as companies cut prices at a time of record joblessness, potentially giving the European Central Bank more scope to lower interest rates later this year.

Inflation in the 17 countries using the euro fell to 2 percent in January compared to a year ago, the EU’s statistics office Eurostat said on Friday, its lowest level since November 2010 and well down from a 3 percent peak in September 2011.

That puts the annual rate of increase in the cost of living just shy of the ECB’s target of close to, but below 2 percent.

With Eurostat figures also showing euro zone unemployment at a record 11.7 percent of the working population in December, the ECB appears to have room to lower rates again to stimulate an economythat has slipped into its second recession since 2009.

“Inflation is non-existent,” said Thomas Costerg, an economist at Standard Chartered in London. “Now with German inflation decelerating, that will fuel debate about how the ECB will ease policy,” he said, forecasting a cut in the ECB’s main refinancing rate in the second quarter.

For the past year, inflation has been driven by oil prices and tax increases, but stripping out those factors, annual consumer price rises are around 1 percent, reflecting the weakness of the economy.

The ECB’s governing council kept rates at 0.75 percent at its January meeting and will discuss rate policy again on February 7. The decision to keep policy on hold was unanimous last month, but economists are still divided over the ECB’s future moves.

Thirty-eight out of 73 analysts polled in January by Reuters said the ECB will remain on hold in the first quarter. None expected a rate cut next week.

A stronger euro, which rose to a 14-month peak on Friday, could also dampen the export-led economic recovery and potentially support the case for a rate cut.

“You have to wonder whether this will lead to a reaction from the ECB next week,” said Nick Kounis, a senior economist at ABN AMRO in Amsterdam.

An third consecutive improvement in euro zone business morale in January and better factory output suggest the bloc has passed the worst of its recession, however, meaning further ECB stimulus in the form of lower borrowing costs may not be needed.

The ECB’s task is also complicated by a divide between wealthier, northern countries which are showing signs of emerging from the euro zone’s three-year-old debt crisis, and countries such as Spain and Italy that are in deep recession.

Stark differences between euro zone countries’ ability to borrow also raises questions about the value of a rate cut. ECB President Mario Draghi said late last year that monetary policy is already “very accommodative.”

GROWING JOB QUEUES

The divergence in fortunes of euro zone economies is evident not just in their ability to fund themselves, but in the rates of joblessness seen across the bloc of 330 million people.

Highlighting the human cost of a debt crisis that began in 2009 in Greece and spread to the euro zone’s biggest economies, some 18.7 million people were out of work in December, an unemployment rate of 11.7 percent. That figure has risen from below 8 percent in early 2008, just before the full effects of the global financial crisis were fully felt, and is well above 11.3 percent forecast by the European Commission for end-2012.

Unemployment held steady at just 5.3 percent in Germany, the euro zone’s biggest economy, however but rose again in Portugal and Cyprus, to 16.5 percent and 14.7 percent respectively.

Greece holds the record in both the euro zone and the wider European Union for worklessness, with a rate of 26.8 percent in October, the latest figure available. The unemployment rate in Spain fell slightly to 26.1 percent in December.

Even as the economy appears to have hit bottom, the number of those out of work is expected to rise in coming months, employment expectations in the latest Commission survey suggest.

“We would still expect the jobless rate to breach 12 percent later this year,” said Martin van Vliet, an economist at ING.

(Editing by Rex Merrifield and Catherine Evans)

Source: YAHOO NEWS.

By Robin Emmott | Reuters

ECB to hold fire as euro zone economy shows glimmers of hope.


  • An illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) in the late evening in Frankfurt January 8, 2013. REUTERS/Kai Pfaffenbach

    Enlarge PhotoReuters/Reuters – An illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) in the late evening in Frankfurt January 8, 2013. REUTERS/Kai Pfaffenbach

FRANKFURT (Reuters) – The European Central Bank is expected to keep interest rates at a record low of 0.75 percent on Thursday, refraining from a cut as the euro zone economy shows some signs of stabilising and inflation still tops its target.

The 17-country euro zone is in recession, but recent data points to some stabilisation, and ECB President Mario Draghi could strike a slightly more positive tone in the news conference that follows the rate decision.

“Rates are definitely on hold. Nothing has been spectacular enough in recent data to force the ECB to any action,” Deutsche Bank economist Gilles Moec said.

“There is a recession, but no further deterioration. Lending is weak, but also not deteriorating further, so the ECB is not compelled to act.”

The 23-man Governing Council will find some comfort from improving business morale as well as a survey of purchasing managers, which gave tentative signs that the worst of the downturn may have passed.

“Since the December meeting key figures have generally surprised on the upside,” Nordea analyst Anders Svendsen said in a note to investors.

While the ECB had, in Draghi’s words, “a wide discussion” on reducing rates last month, the grounds for such a move have not grown and Executive Board members have argued against a cut.

Yves Mersch said last month he did not see the logic of a debate about the ECB cutting its main rate and Peter Praet said there was little room to cut.

Another cut of the refinancing rate would raise the question of whether the ECB would also lower its deposit rate – currently at zero – by the same amount, which would push it into negative territory, essentially charging a fee, for the first time.

Even though Draghi has said the bank was “operationally ready” for such a step, it has grown increasingly wary of the idea over the past couple of months, a source with knowledge of the ECB’s thinking said.

Negative deposit rates could deal a hefty blow to money market funds, which have already seen cash outflows since the ECB cut the deposit rate to zero in July. The rate is a peg for short-dated money market rates and at zero it is already almost impossible for funds to generate a return for their investors.

Executive Board member Joerg Asmussen said last month he would be “very reluctant” about the ECB cutting the deposit rate any further, adding that “our (monetary) policy is very accommodative”.

INFLATION STUBBORN

ECB staff projections published last month saw inflation at about 1.4 percent in 2014, which would usually justify another interest rate cut.

The central bank also sees inflation falling below 2 percent this year with underlying price pressures remaining moderate.

But inflation has eased more slowly than the ECB initially expected and as long as it misses the target – it has been above 2 percent for more than 2 years – a cut could be difficult to justify.

Furthermore, in the euro zone’s largest economy, Germany, prices rose faster in December than in the previous month.

In addition to gauging whether the ECB is entertaining another cut or not, Draghi will be pressed on what other options the ECB has, especially to improve lacklustre bank lending.

ECB data showed last week that bank lending to the private sector fell at an annual rate of 0.8 percent in November.

At his December news conference, Draghi attributed the drop mainly to demand factors, but added that in a number of countries, credit supply is restricted.

A move by global regulators to give banks more time and flexibility to build up cash reserves is expected to do little to support a recovery in Europe, where recession-hit firms and households have scant appetite for more debt.

“One thing the ECB needs to engineer is recovery in lending,” Rabobank economist Elwin de Groot said.

(Reporting by Sakari Suoninen. Editing by Jeremy Gaunt.)

Source: YAHOO NEWS.

By Sakari Suoninen and Eva Kuehnen | Reuters

Italy can confront market tension without ECB aid: central bank.


MILAN (Reuters) – Italy can confront current financial market tension without asking for the activation of the European Central Bank‘s bond-buying scheme, Bank of Italy Governor Ignazio Visco told daily La Stampa on Sunday.

While a deep recession and political uncertainty will weigh on the country in coming months, the central banker said he believes Italy has overcome the worst phase of the debt crisis.

The ECB’s Outright Monetary Transactions (OMT), or bond-buying scheme, is a tool created to face deep financial difficulties, said Visco in the interview.

“Italy suffered from such deep problems at the end of last year but it reacted and was able not only to maintain market access, but also to reduce tensions,” Visco said.

Rome‘s 10-year borrowing costs soared to a euro lifetime high of nearly 8 percent in November 2011. At that time the country was under strong pressure to ask for international aid, but a new technocrat government headed by Mario Monti was able to reassure markets through an austerity program.

Italian government reforms and the build up of effective euro zone financial backstops – theEuropean Stability Mechanism and the ECB’s OMT – helped Rome reduce market pressure to bearable levels, according to the central banker.

“Now the situation is characterized by lower tension, while the (ECB’s bond-buying scheme) was created to face really acute situations in which borrowing costs are pushed well above what is justified by a country’s economic fundamentals,” Visco said.

Italy’s debt costs have fallen sharply compared with the peak of the crisis, Visco said. Some analysts suggested last week Rome should ask for the ECB’s support after Monti’s recent decision to leave office early rattled financial markets.

(Reporting by Francesca Landini; Editing by Mark Potter)

Source: YAHOO NEWS.

Reuters

Germany casts doubt on EU bank supervision deadline.


BERLIN (Reuters) – Talks on creating a pan-European bank supervisor under the umbrella of the European Central Bank have failed to make sufficient progress on key points, a German official said on Thursday, casting doubt on a year-end deadline.

The official, who requested anonymity, said Germany was ready to accept that the country’s large regional “Landesbanken” should fall under the new supervisor, but there were differences on other important elements which would make for tough negotiations in the coming weeks.

“There was a very intense exchange at the Ecofin a week ago. Thereafter, new proposals were put on the table,” the official said. “I would like to say that on three central issues we have not made sufficient progress. Therefore we face some very intense talks going forward.”

The official said these three areas included: the number of banks that the ECB would supervise; governance, including the role of non-euro countries; and the legal framework for a European bank supervisor.

“The change that we are undertaking is in our view so fundamental that we have said from the very beginning that quality must come before speed,” the official said.

European finance ministers will discuss common banking supervision again at a meeting on December 4. If they fail to reach an agreement then, the self-imposed goal of establishing a framework for the supervisor by year-end would be in doubt.

The official made clear that Germany wanted the ECB to focus on systemically relevant institutions, but said this would include big Landesbanken.

“From our point of view it’s totally clear that the big Landesbanken, because of their size alone, should fall under ECB supervision,” the official said.

He also made clear that it was important to bind non-euro zone countries into the decision-making process, despite the fact that they are not represented on the ECB board.

“We need a strict separation between supervision and monetary policy, and an equal participation for non-euro zone countries as far as decisions on banking supervision go,” the official said.

(Reporting by Noah Barkin and Gernot Heller)

Source: YAHOO NEWS.

Reuters

Euro zone inertia puts focus on China data drop.


LONDON (Reuters) – Impatience at the slow pace of euro zone crisis action is bubbling over, with the European Central Bank‘s pledge to save the single currency yet to be backed up by action.

Any hopes that a European Union leaders’ summit in the coming week will break the logjam are likely to be forlorn, leaving the focus firmly on a slew of data from China and the onset of the U.S. company earnings season.

The ECB’s promise to buy the bonds of struggling euro zone countries has been left hanging by Spain’s hesitation over seeking outside help.

If investor frustration translates into upward pressure on Italian and Spanish borrowing costs, that could be the tipping point that pushes Madrid to ask the euro rescue fund for assistance. But so far,ECB chief Mario Draghi has been taken on trust; Spanish bond yields have only nudged up.

“Lower yields have diminished the pressure to act in the short-term. But we suspect that after regional (Spanish) elections on October 21 and the EU summit, Madrid will probably have to clarify its position once and for all,” said Juergen Michels, euro zone economist at Citi.

The International Monetary Fund’s annual meeting in Tokyo displayed barely concealed irritation. The Fund said the bloc remained under threat from “a downward spiral of capital flight, breakup fears and economic decline” and called for rapid action to deepen financial and fiscal union.

EU paymaster Germany pushed back and the Brussels summit looks too early for dramatic action.

The EU/IMF/ECB troika of inspectors continues to pore over Greece’s parlous balance sheet and will not report back until next month and Spanish regional elections next weekend offer a powerful reason for Prime Minister Mariano Rajoy to defer any request for aid for a while longer.

Although government officials insist the elections are not a factor, neither is there much sense of urgency.

“We will end up there, with ECB action, but the ECB is still designing the instrument in more accurate terms,” a source close to the Spanish government told Reuters. “The markets understand that we have the fire extinguisher. We’ll see how it evolves in the coming weeks.”

IN CHINA’S HANDS

While the world is fixated on Europe, its near-term economic fate rests just as heavily on the scale and speed of China’s slowdown. Reports on inflation, industry output, retail sales and a crucial third quarter GDP reading in the coming week will give plenty of grist to that mill.

The consensus forecast in a Reuters poll is for year-on-year Chinese growth to slow slightly to 7.4 percent in Q3 — undercutting the slowest growth rate in three years in the second quarter. But there may be better times ahead.

“We expect China’s GDP growth to surprise the consensus by rebounding to 8.8 percent year-on-year in Q4 2012, led by increasingly aggressive fiscal stimulus,” said Rob Subbaraman, chief economist for Asia at Nomura in Hong Kong.

“While headline data remain negative, our list of forward-looking data signaling that China’s economy is bottoming out, is lengthening.”

News early on Saturday may support that view as data showed China’s exports grew at roughly twice the rate expected in September while imports returned to the path of expansion, suggesting government moves to underpin growth are working and additional policy action may not be needed.

In contrast to the euro zone, the U.S. economy has shown signs of life with the unemployment rate dropping to its lowest level since President Barack Obama took power and consumer sentiment hitting a five-year high on Friday.

However, the U.S. company earnings season which gets into full swing in the coming week, is expected to make mixed reading if a clutch of recent profit warnings are anything to go by and the extent of China’s slowdown will have profound implications for U.S. exports.

Citigroup <c.n id=”yui_3_5_1_22_1350283243211_345″>, Goldman Sachs <gs.n id=”yui_3_5_1_22_1350283243211_344″>, Bank of America <bac.n id=”yui_3_5_1_22_1350283243211_343″>, General Electric <ge.n id=”yui_3_5_1_22_1350283243211_342″>, Honeywell <hon.n id=”yui_3_5_1_22_1350283243211_341″>, Google <goog.o id=”yui_3_5_1_22_1350283243211_340″>, Microsoft <msft.o id=”yui_3_5_1_22_1350283243211_339″>, Intel <intc.o id=”yui_3_5_1_22_1350283243211_338″>, IBM <ibm.n id=”yui_3_5_1_22_1350283243211_337″>, Coca-Cola <cce.n id=”yui_3_5_1_22_1350283243211_336″>and McDonald’s <mcd.n>are just some of a raft of U.S. majors reporting.

“We are getting some quite interesting signals from consumer sentiment and employment data … that there has been some quite significant improvement in the economy,” said David Sloan, economist at 4Cast in New York. “We are still getting mixed signals, but there is enough to make people sit up and take notice.”

Also due is the second televised debate between President Barack Obama and his challenger, Mitt Romney, who came out on top in the first round and has pulled up in the opinion polls since. The strength of economic revival could well prove crucial on election day.

(Editing by Keiron Henderson)

Source: YAHOO NEWS.

By Mike Peacock | Reuters

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