Latvia and the IMF seem to have come to agreement on lending terms to unlock EUR200M from the Fund, notes RBS. Fails still, however,
to understand Latvia’s logic defending its pegged LVL “at all cost,” instead of
taking “a much easier route” and devaluing to a competitive level. Says doing
so will require restructuring some private sector liabilities, but notes that
these liabilities are owed to foreign, mostly Swedish owned banks, which can
“surely look after themselves.” Adds with “much better credit fundamentals than Latvia,” there wouldn’t necessarily be a domino effect on pegged currencies in Estonian and Lithuania if Latvia devalues.
European stocks climbed higher Monday, with optimism regarding the global economic outlook continuing to prompt investors into pushing more cash into the equity asset class.
By 0805 GMT, the Dow Jones pan-European Stoxx 600 index was up 0.6% at 220.9. London’s FTSE 100 index was 0.2% higher at 4587.65, Frankfurt’s DAX index pushed up 0.8% to 5269.14 and the CAC-40 index in Paris up 0.7% at 3388.33.
This session’s rally follows several days of straight gains, with London’s
FTSE heading for its eleventh day of consecutive gains, its longest winning
streak for four years.
ING described the current optimism as “infectious” with analysts moving
recommendations in a positive direction and upgrading earnings forecasts. “This should underpin recent gains and is likely to add further fuel to the rally,” the brokerage said.
It noted that in March, earnings momentum was negative in all sectors, except health. Now half of all sectors are seeing upgrades, led by resources,
financials and technology.
Bunds remain in negative territory Monday, but are showing little immediate reaction to the latest euro zone money supply data which show the M3 measure growing by 3.5% in the year to June, in line with market expectations. The September bund futures contract is currently down 0.17
on the day at 120.16, unchanged from prior to the numbers. The 10-year bund is down 0.26 at 100.00, yielding 3.50%, unchanged from prior to the money supply data.