Europe - Economic Data & News 01 (May 08 - Oct 08)

[millionairemind]

Jobless rate falls in Germany
ReutersPublished: August 28, 2008

NUREMBERG: The German jobless rate fell to a 16-year low in August, according to a report published Thursday, showing that the labor market is still holding up in the face of mounting concerns about an economic slowdown.

But analysts cautioned that there would be tougher times ahead in the labor market.

Unemployment fell by 40,000 on the month, adjusted for seasonal swings, outpacing the consensus forecast for a drop of 10,000, data from the Federal Labor Office showed.

"So far the labor market has been unmoved by the weakening in economic momentum," the Labor Office's deputy chief, Heinrich Alt, said. "The labor market's basic positive trend is continuing."

It was the 30th straight monthly drop in unemployment.

The fall took the adjusted jobless rate to 7.6 percent, its lowest since May 1992, according to Bundesbank data.

However, following a contraction in German gross domestic product in the second quarter and a sharp downturn in business sentiment, economists said it was only a matter of time before the situation on the labor market began to deteriorate.

The headline unadjusted jobless total fell to 3.196 million in August, in line with the adjusted total of 3.200 million.

Still, a number of big German companies have recently announced plans to cut back staffing levels.

"By the winter at the latest, the labor market is set to react to the weaker economic situation," said Eckart Tuchtfeld, an analyst at Commerzbank. "We will not go below 3 million unemployed."

For example, the industrial conglomerate Siemens has announced plans to cut 17,000 jobs worldwide, while the utility E.ON has said it will cut 1,800 sales positions, closing two-thirds of its service centers in Germany.

The Labor Office said it believed the German jobless total would continue to decline this year and next on average.

[LenaHuat]

US Vulture Funds Head to Europe and I suppose that would hve oredi included WB;
http://www.spiegel.de/international/business/0,1518,575142,00.html

[millionairemind]

European Economic Confidence Drops, Inflation Eases (Update2)
By Fergal O'Brien

Aug. 29 (Bloomberg) -- Europeans' confidence fell more than forecast this month as the economy teetered on the brink of a recession.

An index of executive and consumer sentiment in the economic outlook dropped to 88.8 from 89.5 in July, the European Commission in Brussels said today. That is below the 89.3 median estimate of 26 economists surveyed by Bloomberg News. Inflation unexpectedly eased in August and a measure of consumer-price expectations declined.

The reports signal the slump in economic growth is extending through the third quarter and a 20 percent drop in oil prices from a record $147.27 a barrel last month is easing inflation pressures. Consumer-price increases are still above the European Central Bank's limit, prompting policy makers including Axel Weber to indicate they are in no hurry to cut interest rates even as expansion slows.

``The euro-zone economic situation is deteriorating markedly,'' said Carsten Brzeski, an economist at ING Group in Brussels. ``Therefore, it is somewhat striking that some central bankers still consider interest rates to be accommodative.''

Inflation eased to 3.8 percent from 4 percent, according to a separate report today. Economists had forecast that inflation would remain unchanged at a 16-year high. National data this week showed inflation in Germany, Europe's largest economy, Spain and Belgium eased this month.

Less Chance

European companies and consumers see less chance of prices rising, the commission data indicate. A measure of companies' selling-price expectations fell to 17 in August from 20 in July. Consumers' outlook for prices dropped to 22 from 30, falling below its average reading for the past 18 years.

The euro pared gains after the reports and was up 0.2 percent to $1.4737 against the dollar at 12:40 p.m. in London, having been as high as $1.4767 earlier. The yield on the German 1-year bund fell 4 basis points to 4.13 percent today. It's down 22 basis points since the start of the month.

The ECB, which aims to keep inflation just below 2 percent, raised its key interest rate to 4.25 percent on July 3, a seven- year high. While the central bank left the rate on hold this month, ECB Executive Board member Lorenzo Bini Smaghi said in a Bloomberg Television interview broadcast today that inflation is ``too high'' and must be brought below the bank's ceiling.

The ECB's Weber this week said the central bank may need to raise borrowing costs once the economic outlook ``brightens'' toward the end of the year.

`Too High'

``Inflation has started to slow, but remains too high for the ECB to soften its rhetoric,'' said Marco Valli, chief Italian economist at Unicredit MIB in Milan. He said the ECB may begin cutting rates from the middle of 2009.

The 15-nation euro-area economy shrank in the second quarter while the region's manufacturing and service industries contracted in August. L'Oreal SA, the world's largest cosmetics maker, today reported the slowest profit growth in three years. Bertelsmann AG, Europe's largest media company, yesterday cut its 2008 profit forecast after advertisers slashed marketing budgets.

Confidence among euro-area manufacturers fell more than economists forecast to minus 10 this month from minus 8 in July, while sentiment among retailers also declined, according to today's report from the commission. Consumer confidence rose 1 point from July's minus 20, staying close to a 5 1/2-year low. Spanish retail sales fell for an eighth month in July, while in the U.K., consumer confidence stayed near a record low in August, GfK NOP said today.

In the euro area, unemployment remained at 7.3 percent in July, another report showed.

Most investors have pared bets on the ECB raising rates again as the economic outlook worsens, Eonia forward contracts show. The May contract yielded 4.15 percent today, down from 4.44 percent a month ago.

[kennynah]

i dare say that direct inflation caused by pure crude oil price hiked in the last 7 months, do not impact Eurozone as much as US economy. this is bcos during the same period, Eur/Usd was on a bull run to about 1.6 and this euro strength has mitigated the inflationary pressure felt in eurozone as compared to the americans.

but now that the eur/usd has started to weaken to ~1.46 now, their euro stength advantage is slipping away... so, if euro starts to weaken more against the USD and CL continues to rush up...

this is where the real big time Inflation will hit eurozone for the 1st time...

hence, if we want US equities to recover...CL MUST stay low...and not at UD150pbl region... perhaps best to stabilize well below this 120 level

[millionairemind]

Consumers are struggling on both ends of the Alantic..

Coffee Republic goes cold as customers cut back on luxury lattes
By Rupert Neate
Last Updated: 9:05pm BST 29/08/2008

Coffee shop profits are tumbling as hard-pressed customers turn their backs on £3 lattes.

Elizabeth Atwood now only buys a coffee out on Fridays

As Coffee Republic finance director James Muirhead, unveiled the chain's 12th consecutive year of losses despite a quadrupling of outlets, he said: "It would be naive not to expect a slowdown and belt tightening in the current economic climate."

The results come less than a month after US giant Starbucks reported its first quarterly loss in more than 15 years. The market leader lost $6.7m in the three months to the end of June, against a $158m profit a year earlier.

Coffee Republic's branch on London's trendy Kings Road was deserted during lunch time yesterday, and a store assistant admitted: "We are often very quiet, apart from the morning rush".

Full story
http://www.telegraph.co.uk/money/main.j ... fee130.xml

[millionairemind]

Economy at 60-year low, says Darling. And it will get worseChancellor says Labour failing to communicate with voters

http://www.guardian.co.uk/politics/2008 ... airdarling

Britain is facing "arguably the worst" economic downturn in 60 years which will be "more profound and long-lasting" than people had expected, Alistair Darling, the chancellor, tells the Guardian today.

In the government's gravest assessment of the economy, which follows a warning from a Bank of England policymaker that 2 million people could be out of work by Christmas, Darling admits he had no idea how serious the credit crunch would become.

His blunt remarks lay bare the unease in the highest ranks of the cabinet that the downturn is making it all but impossible for Gordon Brown to recover momentum after a series of setbacks.

His language is much starker than the tone adopted by the prime minister, who aims to revive his premiership this autumn by explaining how he will help struggling families through the downturn.

The chancellor, who says that Labour faces its toughest challenge in a generation, admits that Brown and the cabinet are partly to blame for Labour's woes because they have "patently" failed to explain the party's central mission to the country, leaving voters "pissed off".

In a candid interview in today's Guardian Weekend magazine, Darling warns that the economic times faced by Britain and the rest of the world "are arguably the worst they've been in 60 years". To deepen the sense of gloom, he adds: "And I think it's going to be more profound and long-lasting than people thought."

The economic backdrop presents Labour with its toughest challenge since the 1980s. "We've got our work cut out. This coming 12 months will be the most difficult 12 months the Labour party has had in a generation," he says. But Labour has been lacklustre. "We've got to rediscover that zeal which won three elections, and that is a huge problem for us at the moment. People are pissed off with us.

"We really have to make our minds up; are we ready to try and persuade this country to support us for another term? Because the next 12 months are critical. It's still there to play for."

Darling was given a personal taste of the austere climate when ticked off by a waiter for ordering a second bottle of wine during a meal with his wife, Maggie, and another couple. "The waiter came over and said 'too much wine' in a loud voice. So we stuck to one bottle for the entire meal."

Darling admits that he was recently challenged at a petrol station by a motorist struggling with the rising cost of petrol. "I was at a filling station recently and a chap said: 'I know it's to do with oil prices - but what are you going to do about it?' People think, well surely you can do something, you are responsible - so of course it reflects on me."

But he has some words of comfort for Brown when he predicts there will be no leadership challenge against the prime minister. He also reveals that Brown has no plans to carry out an imminent cabinet reshuffle as he delivers a defiant put-down to critics who have said that he could be replaced as chancellor.

"You can't be chopping and changing people that often," he says. "I mean, undoubtedly before the end of the parliament he will want to do a reshuffle, but I'm not expecting one imminently. I do not think there will be a reshuffle."

Darling does not name names, but says some people want his job and have been trying to undermine him. Many in the Treasury believe that Ed Balls, the schools secretary, has been less than supportive. "There's lots of people who'd like to do my job. And no doubt," he adds, half under his breath, "actively trying to do it."

The chancellor's remarks about the economy - in an interview conducted over two days at his family croft on the Isle of Lewis - highlight the nerves at the top of the government after the loss of Labour's 25th safest seat in Britain in the Glasgow East byelection in July. The Tories are comfortably ahead in polls as leaders return on Monday after the holiday.

Darling, who speaks about how the prime minister is one of his oldest friends in politics, admits Brown has struggled to connect with voters. Asked whether Brown can communicate Labour's mission, he says: "Yes, I do think he can."

Asked why Brown has not done so, Darling falters as he says: "Er, well. Well, it's always difficult, you know ... But Gordon in September, up to party conference, has got the opportunity to do that. And he will do that. It's absolutely imperative."

Darling even describes himself as "not a great politician". Saying how he usually avoids personal interviews and photographs, he says maybe "that's why I'm not a great politician. You know, I'm not very good at looking at pictures and subjecting them to the equivalent of textual analysis".

Today's interview was designed to show the chancellor in a more personal light after a year in which he faced criticism over Northern Rock and the loss of discs with details of half the population. He says nothing of tensions with No 10 after he was reportedly rebuffed by Brown when he pointed out the dangers of abolishing the 10p tax rate.

His press adviser tells Darling, whose relations with Downing Street have been tense over the past year, to speak his mind in the interview. "Now Alistair," the adviser tells the chancellor as Decca Aitkenhead begins the interview. "Tell her everything. Make sure you tell her everything."

[kennynah]

Germany's Commerzbank to Acquire rival Dresdner Bank for EUR9.8 Bln - Update
9/1/2008 12:50 AM ET

(RTTNews) - Sunday, Frankfurt, Germany-based Commerzbank AG (CRZBY.PK: News ) announced that it would acquire Allianz SE's (AZ: News ) Dresdner Bank AG for EUR 9.8 billion in a cash and stock deal. The transaction, which would occur in two steps, is expected to close by the end of 2009. The Supervisory Boards of Commerzbank and Allianz have approved the agreement

The deal entitles Allianz to receive about EUR 8.8 billion for the sale of 100% of Dresdner Bank and about EUR 975 million into a trust solution for specific ABS assets of Dresdner Bank. The agreement provides for payment of EUR 1.6 billion in cash and the balance in shares, including parts of Commerzbank's asset management sold to Allianz for EUR 700 million.

[millionairemind]

Trichet will be the man who goes down in history as the only central banker who created a recession..

ECB May Keep Rates at 7-Year High as Recession Looms (Update1)

By Gabi Thesing

Sept. 1 (Bloomberg) -- The European Central Bank will probably keep interest rates at a seven-year high this week, and may even threaten to raise them, at the risk of prolonging the economic slump.

All but one of 47 economists surveyed by Bloomberg News predict the Frankfurt-based central bank will leave the benchmark rate at 4.25 percent on Sept. 4 and only five expect a cut this year, even after the region's economy contracted in the second quarter.

``Rates at this level are certainly not helping the economy and there is a risk of a recession, but the ECB wants to address the problem of inflation first,'' said Stephane Deo, chief European Economist at UBS AG in London. ``Only when inflation returns to more comfortable levels will it consider easing policy.''

Policy makers Axel Weber and Lucas Papademos said last week the ECB remains focused on inflation risks and may need to lift rates again if they intensify. Executive Board members Lorenzo Bini Smaghi and Juergen Stark also stepped up their inflation- fighting rhetoric, just days before they meet to decide on rates.

``The comments were a wake-up call to the markets, which had gotten ahead of themselves in light of dire economic data,'' said Ulrich Katz, a Munich-based portfolio manager at Pacific Investment Management Co. which has over $800 billion under management. Investors ``assumed the ECB would soften its inflation-fighting stance. Well, it clearly hasn't.''

Rate-Cut Bets

Some investors started betting on a rate cut by early next year after ECB President Jean-Claude Trichet said on Aug. 7 that economic growth would be ``particularly weak'' through the third quarter. Last week, a rate reduction was fully priced in by May, Eonia swap contracts showed. The yield jumped back up to 4.13 percent after Weber and Papademos spoke.

``The discussion about declining rates in Europe is premature,'' Weber said in an interview published Aug. 27. ``I don't expect inflation to come down necessarily just with weaker growth. Inflation is still the No. 1 worry for central bankers in the euro region.''

The ECB raised rates in July to prevent a wage-price spiral after inflation accelerated to 4 percent, twice its 2 percent limit. Since then, data showed Europe's economy contracted 0.2 percent in the second quarter and economic confidence has plunged. At the same time, a 20 percent drop in oil prices has slowed inflation to 3.8 percent.

`Wrong to Hike'

``The ECB is defending its July rate increase,'' said Laurent Bilke, an economist at Lehman Brothers International in London who used to work as a forecaster at the ECB. ``To admit two months after a rate increase that inflation pressures are easing would mean they were wrong to hike. The bank is confronted with a recession and will start to cut in January.''

Trichet will on Sept. 4 unveil new economic forecasts that are likely to revise down the growth assessment and ratchet up the outlook for inflation, said Elga Bartsch, an economist at Morgan Stanley in London.

``If you only have one needle in the compass, which in the ECB's case is inflation, then you'll have to toughen your language,'' Bartsch said. The ECB is more likely to raise rates than cut them, she said.

In June, ECB staff projected growth would slow to about 1.8 percent this year and 1.5 percent in 2009 from 2.7 percent in 2007. Inflation was forecast to average 3.4 percent this year and 2.4 percent in 2009.

`Too High'

``Inflation is still high, too high,'' Bini Smaghi told Bloomberg Television on Aug. 28. ``We have a 2 percent target and we must bring it back to 2 percent -- below 2 percent,'' he said, adding its only tool to do so is interest rates.

Should inflation risks materialize, ``we'll have to re- examine our monetary-policy stance,'' Weber said. Papademos warned that the emergence of a wage-price spiral would ``require a stronger degree of monetary tightening.''

Wage inflation is accelerating across Europe as workers seek compensation for higher food and energy costs. IG Metall, Germany's biggest union whose wage accords cover 3.2 million workers, will present this year's claim on Sept. 8. It has said it will demand a bigger pay increase than the 6.5 percent it asked for last year.

The ECB is ``throwing down the gauntlet to IG Metall,'' said Natacha Valla, Goldman Sachs' chief French economist who was previously a forecaster at the ECB. The fact that ``a discreet member like Papademos was so explicit about wage growth possibly requiring further tightening shows how central wage negotiations are to the inflation debate.''

Even so, the ECB won't follow through on its threat, said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. Deutsche Bank expects a rate reduction in the first quarter of 2009.

``The ECB won't cut rates before inflation is under control,'' Bielmeier said. ``But with the economy tanking, it won't need to hike again.''

[kennynah]

all down

***********

450pm +8 gmt 1sep08

germany aiug mfg PMI 49.7 vs 50.9 in jul

french aiug mfg PMI 45.8 vs 47.1 in jul

czech aiug mfg PMI 47.3 vs 49.9 in jul

[millionairemind]

September 2, 2008, 5.40 pm (Singapore time)
Europe economy hardhit, Britain shrinking, US feeble: OECD

PARIS - Europe's economy is slowing harder than predicted and Britain is nearer recession than the other big countries of a region where the economy is close to flat on its back, according to OECD forecasts published on Tuesday.

The US economy, where the current economic downturn in the industrialised world began, did better in the second quarter but is also seriously weakened by a housing downturn that is still unfolding, the Organisation for Economic Co-operation and Development (OECD) said.

'Financial market turmoil, housing market downturns and high commodity prices continue to bear down on global growth while at the same time evolving rapidly,' the Paris-based agency, one of the world's main public forecasters, said in a statement.

'OECD short-term forecasting models point to weak activity through the end of the year,' said the OECD, which nonetheless chose not to use the word 'recession' to describe the situation in any of the countries it spoke of.

The OECD raised its annual forecast for US growth from one it had published in June, to 1.8 per cent from 1.2 per cent, while it cut a previous prediction for the euro zone to 1.3 per cent from 1.7 per cent, and for Japan to 1.2 per cent from 1.7 per cent.

For the Group of Seven (G7) leading industrialised nations as a whole, its annual growth forecast for 2008 was 1.4 per cent, unchanged from the projection it made last June.

For the second half of 2008, Britain was the only one of the G7 industrial powers forecast to contract in both the third and fourth quarters - the general benchmark in economics being that a two consecutive quarters of shrinkage is a recession.

OECD chief economist Jorgen Elmeskov said that, recession or not, Britain was basically stagnating, mainland Europe was doing only marginally better and the United States was also looking sickly even if it got a mid-year lift from the pump-priming efforts of the government and central bank, which has cut interest rates.

'I think the distinction between being or not being in recession is a bit for the birds,' Mr Elmeskov said in an interview.

'Is a small decline in GDP really that much worse than a small increase? - I think not.'

Britain leads race to bottom
Giving its view on the slowdown right now and how it might unfold in the coming months, the OECD said its forecast models suggested US growth of 0.9 per cent in the second quarter and 0.7 per cent in the final quarter, each time versus the previous one.

They are annualised figures, which basically means something close to the real quarterly growth number multiplied by four, as is the routine way of reporting quarterly changes in gross domestic product in the United States.

For Japan, the OECD forecast third-quarter GDP growth of 2.4 per cent and 1.4 per cent, for the euro zone 0.4 per cent and 0.8 per cent, for Britain -0.3 per cent and -0.4 per cent and for Canada 0.8 per cent and 2.0 per cent.

Mr Elmeskov said the OECD had been surprised by the size of the drop in second-quarter Japanese GDP and expected a rebound of sorts there, notably given what was looking like a healthy rise in exports in the early stages of the third quarter, notably to China.

'Japan benefits from being located in the right neighbourhood,' he said.

Among the three biggest economies of mainland Europe, the OECD saw German GDP of zero and 0.1 per cent in the third and fourth quarters, France at 0.2 per cent and 0.6 per cent and Italy at zero and 0.6 per cent respectively.

The OECD acknowledged that its quarterly forecasts were subject to sizeable margins of error, especially in the case of Japan, where Mr Elmeskkov noted that GDP estimates tended to bounce around the most.

He said that the basic message as far as the OECD was concerned was that the economy of the G7 club of industrialised nations was very weak.

'Continued financial turmoil appears to reflect increasingly signs of weakness in the real economy, itself partly a product of lower credit supply and asset prices,' he said in a statement accompanying the new forecasts.

Thumbs up for central banks
The monetary policies being pursued by central banks at the moment were appropriate in current circumstances, the OECD said, referring primarily to the United States and euro currency zone where the European Central Bank (ECB) sets rates for 15 countries.

The Federal Reserve has slashed US interest rates while the ECB's last move was a rise.

Mr Elmeskov defended the ECB's more restrictive strategy in the interview with Reuters.

'The ECB has been faced with a continuous tendency for updrift in inflation, not just something that's arisen over the past five or six months as the oil price spiked.

'There's inflation momentum there that needs to get out of the system.

'In some sense you can say that with a mandate to preserve price stability what can you do as a central bank? You have to accept some degree of slack in the economy in order to bring inflation back to what you define as price stability.' -- REUTERS