European Fundamentals

As a week begins that could be pivotal to the future of the Eurozone as it has come to be seen, the market will be dominated by the usual suspects.

We have seen the Euro fall from its highs already this morning with concern over the possibility of a bailout request from Spain, the ability of Greece to convince the Troika that they are deserving of further bailout funds and the prospects for growth in the region as a whole.

With the EU summit at the end of the week there are sure to be plenty of comments from Eurozone Officials about what cane expected from the meeting.

Unless there are positive, workable conclusions, next week could be very difficult for the Euro.

However, it is this week that concerns us right now.

Growth in the Eurozone has taken a back seat to austerity in the headlines for some time now but there needs to be focus now as Germany is the only one of the four largest economies that is growing. Of the next three France is slipping backwards and we do not need to dwell on Italy and Spain.

There is little data to be released today in Europe that will have a major effect but tomorrows ZEW survey in Germany will be closely watched. The market expects an improvement over September but that is not easy to imagine. Economic sentiment has most likely weakened somewhat but there is a possibility that current conditions are viewed a little more favourably.

The Spanish Economy Minister has said over the weekend that Spain is easily able to fund itself until the end of 2012 and is hopeful of conditions improving into 2013.

Spain is issuing 12 & 18 month bills tomorrow so it will be crucial to see how the markets react. Yields have been moving higher again over the past week although the ten year closed at 5.625 on Friday the lowest since April.

The prospect of whether Spain asks for a bailout will contain the fate of the Euro in the short term. It is perverse to say that if Spain believe they can “weather the storm” it is likely to cause a fall in the Euro, whereas a bailout request would lead to a strengthening.

That defies logic, but then who ever said these markets are logical?

The meeting this week is entitled “An Extraordinary Economic Summit”. I wonder what adjective will be used to describe the subsequent meeting as there is sure to be one.

I am sure most people reading this will have as good an idea (if not better) idea of the technical levels but depending upon your timeframe 1.2880/1.2860 & 1.2800 are supports with resistance at 1.2960/1.2980 & 1.3000.

Hardly earth-shattering but at least it proves I look at charts!