– Euro unmoved by Brussels summit
– Little stimulus promised by today’s data
Good morning. Another burst of cold weather has the media warning that blocked roads and airports bring with them a billion-pound a day cost to the economy. Insurance companies are doing their best to fight back, though. While Canadian insurers are considering a rebate for drivers who fit winter tyres, their British counterparts are leaning the other way. They are increasing, by up to 20%, the premium for drivers who fit winter tyres instead of sliding around on summer slicks. The AA says that some firms have even refused to insure cars running on winter tyres. A public inquiry into this ridiculous situation has had to be postponed because of the weather.
The snow was not deep enough to prevent EU leaders dispersing on Friday after their two-day meeting. It was just as well, because they had no reason to hang around in Brussels. By all accounts, the real meat of the discussion had taken place in advance and the gathering amounted to little more than a pre-Christmas dinner party. The highlight of the event turned out to be the decision to display Twitter messages from the Great European Public on two big plasma screens in the main hall of the conference venue. As soon as Italian Twitterers heard of it they flooded it with anti-Berlusconi messages, accusing the Italian prime minister of everything from gangsterism to paedophilia. After two hours of uninterrupted vitriol the organisers turned it off, lest poor Mr Berlusconi be embarrassed.
At a practical level, the main outcome of the meeting was what Luxembourg prime minister Jean-Claude Juncker described as “a light, small treaty change that allows member states to create a permanent crisis mechanism”. Given that the German delegation had revealed just such a decision on Wednesday, investors found it difficult to become excited about the breakthrough, especially after Mr Juncker told an interviewer that “Everyone knows that what was decided won’t keep through January and more decisions have to be taken”. Whilst there was no major attack on the euro investors were more inclined to walk away than queue up to buy it. Over a period of about four hours in the middle of Friday the euro fell against everything before consolidating at lower levels. Compared with Friday’s starting point it opens in London this morning more than a cent down on the US dollar and half a cents lower against the pound.
Sterling might have done better had it not been for a stark reminder that the British economy’s fortunes are closely aligned with those of Euroland. State-owned LloydsTSBHBOS announced it was setting aside an extra £4.3 billion in provisions for its Irish loan portfolio. That news, together with the earlier deterioration in consumer confidence, held sterling back on the day. It was steady against the Canadian dollar and the rand but only against the euro and the Swiss franc was it able to move ahead. With the euro out of favour it was left to the US dollar and the Japanese yen to make the running, a task they achieved with little difficulty or fanfare.
At the beginning of this four-and-a-half-day week the agenda is far from packed. Germany has announced a small acceleration in producer prices, from 4.3% to 4.4%. Euroland’s current account balance this morning is largely irrelevant to the euro in the current climate: this afternoon’s provisional consumer confidence might make a difference, even though it is an official European Commission statistic. The only other figure due out during the London session is Canadian wholesale sales. Tonight brings another UK consumer confidence measure, this one from Gfk, and the minutes of the last Reserve Bank of Australia policy meeting.
History suggests that this week and next will be quiet ones in financial markets. That does not mean zero movement; it means illiquidity and occasional inexplicable currency spikes and troughs. Bear in mind that although there is no official early closing on Christmas Eve, the Bank of England traditionally lets it be known around midday that bank dealing rooms are free to shut up shop. Remember too that a missed payment on Friday means four days of overdraft charges. Don’t leave things to the last minute.
