The focus was on the Eurozone again with both Slovakian
ratification on EFSF and 6th tranche of funding for Greece
delayed. Financial markets were pressured initially because of
the news but then improved as investors were confident that both
will issues will be resolved. In the commodity sector, the
front-month contract for WTI crude oil fluctuated between 83.97
and 86.64, before ending the day at 85.81, up +0.47%, while the
equivalent Brent crude contract plunged to as low as 107.45 in
European session before rebounding to 111.24 and settling at
110.73, up +1.63%. Gold eased a tad as the US dollar changed
little. The benchmark Comex contract slipped -0.59% during the
day.
While the consensus view is that Slovakia will eventually
ratify the new EFSF bill, probably in a second vote, the approval
is no guaranteed. The country failed to pass the plan with 55
lawmakers voting for the measure, 9 against it and 60 abstaining.
The expanded EFSF plan will increase the size of the facility
from 440B euro to 780B euro and Slovakia will be required to
contribute roughly 10B euro in debt guarantees. It's reported
that the junior ruling coalition Freedom and Solidarity party,
one of the four parties in the coalition, has refused to
participate in the vote, making the final result hardly a
majority. Slovakia is the only country in the 17-nation Eurozone
that has not yet ratified the beefed-up plan agreed in July. The
issue has generated questions about the formation of the bloc as
it seemed to have given too much power to small and new members
in affecting the European financial stability framework.
In Greece, the EU/ECB/IMF troika once again delayed the 6th
installment of the bailout funding worth of 8B euro. The
statement released after the review said that the next tranche of
8B euro will become available, 'most likely, in early November',
once the 5th reviewed is concluded. The troika stressed that 'the
success of the program continues to depend on mobilizing adequate
financing from private sector involvement (
PSI
) and the official sector'. Another matter of concern was the
haircut issue after Luxembourg's Jean-Claude Juncker was quoted
of having said that more than 60% of Greece's debt may need to be
restructured. Yet, the Eurogroup Chairman later clarified that he
meant that haircuts could exceed the 21% already agreed in
July.
On the macro front, the UK's claimant count probably increased
to 24K in September from 20.3K a month ago while the Claimant
count rate rose to 5.0% from 4.95. The ILO unemployment might
have climbed to 8.0% in the 3 months to August, up from 7.9% in
July. The FOMC minutes will be released in the US session.