Spain will face further inquisition from investors this week
amid speculation the country will finally ask for a bail-out.
The European Central Bank is holding a rates meeting on
Thursday, and while no action is expected, governor Mario
Draghi will still front a press conference afterwards, so
there may be some commentary for markets to latch on to as
the week ends.
Craigs Investment Partners broker Peter McIntyre said there
was nothing else significant on the agenda from Europe this
week, although markets would digest the Spanish banking
stress test that came out over the last couple of days.
"The outcome of the tests was that the banks need €60 billion
($NZ93 billion) of capital, which is less than the €100
billion that the rest of Europe had agreed upon to
recapitalise the Spanish banking sector."
However, there were still plenty of cynics who saw €60
billion quickly turning into a bigger number, he said.
The housing market continued to fall, growth expectations in
Spain still looked too high and questions remained over
whether the stress tests were stressful enough.
"Still, it's another hurdle that we've passed before the
inevitable Spanish bail-out, so markets seem to be net
positive on this news," Mr McIntyre said.
Other central banks in the spotlight this week were the
Reserve Bank of Australia, the ECB and the Bank of England,
all due to announce their policy rates.
ASB economist Christine Leung expected the ECB to announce a
0.25% cut to its official interest rate, taking the refinance
rate down to a record 0.5%.
European data continued to be soft and a stabilisation in
economic activity is not expected until next year.
The Bank of England was not expected to announce additional
stimulus measures, but it was expected to retain an easing
bias in light of continued challenging economic conditions,
Reports from Australian economists were mixed yesterday on
whether the Reserve Bank there would cut its rates today from
the current 3.5%.
Most of the market is pricing in a 0.25% cut today and a
further 0.25% cut in November, but some have the next cut of
0.5% coming in November and the cash rate staying unchanged
Australian inflation stayed low in September, giving the
central bank scope to cut its interest rate again. Underlying
inflation, which excludes volatile monthly price movements,
remained flat in September.