x Abu Dhabi, UAEMonday 24 July 2017

Euro-wary investors turn focus to US

Euro Zone: Investors already smarting from a slumping third quarter will look east across the Atlantic, hoping the US does not hurt markets further.

Fears of a debt default by Greece dragged global markets lower. The euro too lost ground against the dollar ending at $1.33. Reuters
Fears of a debt default by Greece dragged global markets lower. The euro too lost ground against the dollar ending at $1.33. Reuters

As the euro licks its wounds after slumping in the third quarter, investors will be nervously looking across the Atlantic hoping the US does not bruise markets further when it releases key economic data.

After fears of a euro-zone collapse dragged global markets to fresh lows on Friday, investors will be searching for respite in US jobs figures, manufacturing data and the first set of third-quarter earnings numbers, which are all due this week from the world's biggest economy.

The US Institute for Supply Management is to announce manufacturing figures tomorrow, and the US government's report on September employment is due on Friday.

Back in Europe, fears continue unabated that Greece will default on its debts and that contagion will spread. The euro finished down 7.7 per cent at $1.33 on Friday, from $1.45 on June 30.

Italy's stock exchange suffered the worst three months of any EU exchange, losing 27 per cent of its value in the quarter, while the French and German bourses lost 24 per cent in the period.

The FTSE 100 finished down 14 per cent and the Dow Jones Industrial Average closed the quarter down 12 per cent.

The National has spent the past five days travelling through the debt-laden euro zone for a close-up view of the picture, which has become increasingly ugly as austerity measures affect low-income earners in Greece and Italy.

Consumer confidence differs greatly between Germany, the continent's economic juggernaut, and Italy and Greece, which both seem increasingly fragile economically.

"The real risk for Italy and Europe comes from the lack of [forecast] economic growth," Chiara Menenti, a fixed-income strategist at Italy's biggest bank, Intesa Sanpaolo, told The National this week. "The principal plan should be to reduce the debt-to-GDP ratio in Italy quickly."

Despite the vote last week by German politicians to beef up the continent's bailout pot, the European Financial Stability Facility, markets remain spooked at the possibility of a Greek default.

"On the face of it, developments last week might have suggested that policymakers are inching closer to resolving the euro-zone crisis," said Roger Bootle and Jonathan Loynes of Capital Economics in a research note. "Steps that have been taken or proposed so far have caused growing tension, not just between euro-zone governments but also within them, meaning that some form of euro-zone collapse seems more and more likely."

In Athens, striking protesters took to the streets on Thursday, preventing bureaucrats from entering the ministry of finance and Hellenic statistical authority, delaying the issuance of budgetary numbers for next year, Greek media reported.

The figures are vital in negotiations between Evangelos Venizelos, the Greek finance minister, and officials from the IMF, EU and the European Commissionto decide whether Greece will be granted the next tranche of bailout money it needs.

"The people will continue to strike because what the government is doing is illegal," said Alexiou Georgios, 36, a taxi driver on strike in Athens on Thursday.

rjones@thenational.ae