By midday, this morning’s move in the German banks had added 15 points to the Germany 30 index, as this weekend’s adoption of a lighter touch by the Basel Committee has increased profit expectations. It had been anticipated that we would see the ratio requirements for banks increase, and therefore their ability to lend funds tighten. In a complete reversal of expectations, these requirements have instead been reduced.
The economic data input into today is almost non-existent, and equities look set to hold most traders’ interest. However, looking ahead, Thursday morning’s monthly bulletin from the European Central Bank will no doubt provide a little more colour, showing us how well economies around the EU are behaving.
Increasingly, Germany will be looking across its border with France to gauge how far Francois Hollande’s dwindling popularity has affected his ability to steer the country into a more powerful recovery. Historically, the strength of the unions has been a major factor that companies had to consider when doing business in France, but the constitutional approval for a 75% higher-band tax in the country is now looking just as important.