Euro crisis: Spain, Portugal top reactions in Nordics, along with relief on PMI

Views from Norway, Sweden and Denmark – the three Nordic markets that unlike Finland have not adopted the euro – have taken a number of angles to the latest developments in the eurozone crisis.

Norway’s Dagens Næreingsliv points out that while Spain managed to get away its latest auction of three and six month government securities today, with high cover ratios, the interest rates demanded by buyers were considerable: 2.43% for the three month paper, against 2.36% at the last auction in June, and 3.69% on the six month paper, against 3.02% in June.

Figures put forward to Eurostat by Spain on Monday showed the country running a deficit of 8.5% of GDP, against its target of 6.3% for the whole of 2012. Knut Magnussen, senior economist at DNB Markets, wrote in a morning report that overall Spanish debt is up 7.4% since the first quarter of this year, hitting 72.1% of GDP, the paper reported.

Across the border in Sweden, Dagens Industri has picked up on Commerzbank’s latest note to customers, which says that Portugal’s target deficit rate remains a long way off.

The country’s budget improved in June, by about €3.7bn compared to the same month a year ago, but the deficit is still at 4.5%. And, there are technical reasons why the headline figures need to be put in context, the bank said. Partly the improvement was due to a book keeping exercise that shifted the burden of pension deficits. However, this does not per se address the ongoing budget deficit. Adjusting for this ought to result in a much lower improvement in national accounts of about €1bn. But this too requires adjusting for the payment of salaries to public sector staff, which will not receive additional payments going forward.

Staying on the theme of pensions, Henrik Henriksen, chief strategist at Denmark’s PFA Pension, is quoted in Børsen as saying the crisis would be worse from his perspective if Denmark was in the eurozone.

Any improvement in the near term will depend on the political reaction pending to the latest turn for the worse in the ongoing crisis: “It is an existential crisis for the euro, and it is definitely serious.”

At Nordea Markets, chief analyst European Economies Anders Svendsen said that for all the noise, the latest PMI figures from the eurozone suggested a stabilisation in July, which was in line with expectations.

“The numbers are bad but the situation did not worsen in July compared with June, which means that the ECB is likely to keep interest rates on hold at the August meeting and evaluate the effects on the rate cut earlier this month.”

“The German PMI numbers showed the biggest surprise with a significant drop led by the manufacturing sector. The recession that was barely avoided in Q1 seem very likely to have become reality in Q2 and Q3. Yesterday’s announcement from Moody’s that Germany has been put on negative ratings watch and today’s drop in the PMI shows that even the strongest countries in the euro area are heavily affected by the debt crisis in Southern Europe.”

“The French PMI numbers showed an increase led by a significant improvement in the service sector.”


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