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Week Ahead: how long can Spain hold out?
After a nail-biting week with the German constitutional court ruling and QE3 in the US, pressure is mounting on Spain to accept a sovereign bailout.
Markets
Phew. After a week of excitement with the German court ruling and the ‘Bernanke bounce’ following the announcement of 'QE3', it looks like it’s back to porridge now with the focus back on the eurozone.
Peripheral eurozone yields have tipped down since the European Central Bank (ECB)'s bond-buying programme through 'outright monetary transactions' (OMT), and the German court ruling has paved the way for a regional bailout fund with real firepower. Now the spotlight falls on Spain.
Can Spain avoid a bailout?
We’ve been here before, right? Assurances and promises about a country’s finances, only to see a midnight clamour for a bailout. Tensions are running high in the Iberian country after people took to the streets when the country pledged growth-boosting reforms to its eurozone partners over the weekend.
But can the country really boost growth in time to avoid a bailout? Analysts at Rabobank commented: ‘At Friday’s Eurogroup meeting, Spanish economy minister Luis de Guindos announced the country would adopt a new set of growth-boosting reforms by the end of this month with these measures to be unveiled alongside the 2013 budget on 28 September, the same day Spain will publish the details of the final stress test of its banking sector.
‘The pledge has variously been interpreted as both paving the way for a bailout request and highlighting the fact that the country sees no need for additional conditionality. At the very least, a bailout request would seem unlikely before 28 September.’
UK inflation and retail sales
British data are set to dominate the scene this week, with inflation figures from the retail and consumer price indices on Tuesday as well as retail sales figures on Thursday.
Economic data from the US will also serve up some food for thought following last week’s announcement of further quantitative easing from the Federal Reserve.
We've got the Empire manufacturing index on Monday; housing stock, building permits and home sales on Wednesday; as well as unemployment claims and further manufacturing figures on Thursday. All of these will set out the state of the country’s economy.
In Europe figures on German economic sentiment will be revealed on Tuesday, followed by a flurry of economic data on Thursday with a raft of European manufacturing data in the morning, and a speech from president of the European Central Bank (ECB) Mario Draghi in the afternoon.
Companies to keep an eye on
It’s more of a subdued week for company news, though investors can look forward to a glut of results on Wednesday with finals from Galliford Try (GFRD.L), which will be closely watched after Barratt Developments (BDEV.L) reported a 159% jump in pre-tax profits last week.
Housebuilder Redrow (RDW.L) will also release its full-year results. The company was catapulted into the spotlight earlier this month when chairman Steve Morgan launched a takeover bid for the group. PZ Cussons (PZC.L) will also release its interim management statement on Wednesday.
Engineer Smiths Group (SMIN.L) will add its final results to the news flow on Wednesday. Sheridan Admans, investment research manager at the Share Centre, has a ‘hold’ rating on the company.
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- Galliford Try PLC (GFRD.L)
- Barratt Developments PLC (BDEV.L)
- Redrow PLC (RDW.L)
- PZ Cussons PLC (PZC.L)
- Smiths Group PLC (SMIN.L)
- Imperial Tobacco Group PLC (IMT.L)
- Aviva PLC (AV.L)
- G4S Plc (GFS.L)
- Melrose PLC (NYN.L)
- Interserve PLC (IRV.L)
More from us
- What is ‘QE3’ and how does it work?
- 'Don't sound the all clear': reactions to today's ESM ruling
- What is OMT and how does it save the euro?
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