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German Free Democratic Party lawmaker Frank Schaeffler said Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble should make the case for a ‘temporary’ exit of Greece from the Eurozone, Handelsblatt has reported. Schaeffler, criticizing the German government’s handling of the Greek crisis, said Greece should be given the option of temporarily leaving monetary union as this is the only “sensible way” to make the southern European country’s economy competitive again, according to the German newspaper. German Chancellor Angela Merkel said that the euro debt crisis CANNOT be solved in one step “tomorrow” and that there won’t be a single “spectacular” step at the July 21st European Union summit in Brussels to deal with the problem. Speaking to reporters today in Hanover, Merkel said the euro region’s problems must be solved “from the core,” which means reducing debt and increasing competitiveness.

The German ZEW index dropped again in July; its fifth consecutive drop. The ZEW index, which measures investors' confidence now stands at -15.1, from -9.0 in June, its lowest level since January 2009. At the same time, the current assessment component surprised with a rebound to 90.6, from 87.6. Dropping expectations and increasing current assessment shows that investors’ confidence seems to suffer from the sovereign debt crisis at both sides of the Pond, rather than from a soft patch. Financial market turmoil of the last week has clearly dented confidence. However, weaker confidence should not (yet) translate into weaker economic growth. With strong fundamentals, a high backlog of orders as a safety net for production and a pick-up in private consumption, the German economy looks set to cruise through the summer months.

The German ZEW index dropped again in July; its fifth consecutive drop. The ZEW index, which measures investors' confidence now stands at -15.1, from -9.0 in June, its lowest level since January 2009. At the same time, the current assessment component surprised with a rebound to 90.6, from 87.6. Dropping expectations and increasing current assessment shows that investors’ confidence seems to suffer from the sovereign debt crisis at both sides of the Pond, rather than from a soft patch. Financial market turmoil of the last week has clearly dented confidence. However, weaker confidence should not (yet) translate into weaker economic growth. With strong fundamentals, a high backlog of orders as a safety net for production and a pick-up in private consumption, the German economy looks set to cruise through the summer months.

The German ZEW index dropped again in July; its fifth consecutive drop. The ZEW index, which measures investors' confidence now stands at -15.1, from -9.0 in June, its lowest level since January 2009. At the same time, the current assessment component surprised with a rebound to 90.6, from 87.6. Dropping expectations and increasing current assessment shows that investors’ confidence seems to suffer from the sovereign debt crisis at both sides of the Pond, rather than from a soft patch. Financial market turmoil of the last week has clearly dented confidence. However, weaker confidence should not (yet) translate into weaker economic growth. With strong fundamentals, a high backlog of orders as a safety net for production and a pick-up in private consumption, the German economy looks set to cruise through the summer months.

The German ZEW index dropped again in July; its fifth consecutive drop. The ZEW index, which measures investors' confidence now stands at -15.1, from -9.0 in June, its lowest level since January 2009. At the same time, the current assessment component surprised with a rebound to 90.6, from 87.6. Dropping expectations and increasing current assessment shows that investors’ confidence seems to suffer from the sovereign debt crisis at both sides of the Pond, rather than from a soft patch. Financial market turmoil of the last week has clearly dented confidence. However, weaker confidence should not (yet) translate into weaker economic growth. With strong fundamentals, a high backlog of orders as a safety net for production and a pick-up in private consumption, the German economy looks set to cruise through the summer months.

The German ZEW index dropped again in July; its fifth consecutive drop. The ZEW index, which measures investors' confidence now stands at -15.1, from -9.0 in June, its lowest level since January 2009. At the same time, the current assessment component surprised with a rebound to 90.6, from 87.6. Dropping expectations and increasing current assessment shows that investors’ confidence seems to suffer from the sovereign debt crisis at both sides of the Pond, rather than from a soft patch. Financial market turmoil of the last week has clearly dented confidence. However, weaker confidence should not (yet) translate into weaker economic growth. With strong fundamentals, a high backlog of orders as a safety net for production and a pick-up in private consumption, the German economy looks set to cruise through the summer months.

Disagreement among European policymakers on Greece and the handling of the Eurozone's debt crisis helped push 18-month Spanish Treasury-bill yields to 9-year highs today. Spain sold €4.4bn of 12- and 18-month T-bills. Concerns that little progress would be made at a Eurozone meeting on Thursday has spooked fixed-income investors, sending debt costs for large peripheral economies Spain and Italy to euro-era highs on Monday. Spain will face a still tougher test of investor appetite when it seeks to borrow over a much longer term on Thursday, issuing up to €2.75bn in 10- and 15-year bonds. Ten-year bond yields in Spain fell back slightly on the secondary market Tuesday, though held near the peak of 6.31%t with a move above 7.0% unsustainable for the Eurozone's fourth largest economy. The Treasury sold €3.8bn of the 12-month T-bill, paying an average yield of 3.702% v 2.695% at the previous auction last month. The marginal yield of 3.76% was the highest level in a primary auction...

The Mexican growth outlook has deteriorated on expectations for slower US growth this year. Owing to their high correlation via the export sector, decelerating US growth will feed into Mexico’s economic expansion, which we expect to firm 0.3% below our previous forecast at 4.2% in 2011. The main culprit is the deceleration in IP due to supply-chain disruptions in Japan. The car sector has been the worst hit among manufacturing industries, although this is likely to be just a temporary correction. According to our math, Mexico is currently growing above potential, but private consumption (still the weak link) is not providing enough support to GDP. The export sector continues to perform despite the strong MXN. Eighty percent of Mexican exports still go to the US market. Hence, a medium-term deterioration of America’s largest economy (we expect a deceleration to 2.5% in 2011 from 2.9% in 2010, and a rebound to 3.0% in 2012) is likely to translate into weaker growth for...

Borrrrrrrrrrrrrrrrrrrrrrrrrrrrrring!! Overnight markets are again characterised by a combination of independent EUR weakness and generally diminishing appetite for risk. Although off the low ($1.4015), EUR/USD is still 100 pips down from Friday’s close. Ostensibly, EUR weakness is attributed to the limited credibility of Friday’s bank stress tests and is mirrored in wider peripheral spreads (Italy +13 bps; Spain +20 bps). More generally, equities are soft (US futures -0.6%), leaving JPY the top performing currency in G-10, with USD not far behind. SEK is the worst performer, though this has more to do with general risk appetite than the Riksbank minutes, which added little to the policy debate. White House and Republican leaders appear to have made little progress over the weekend in striking a deal to raise the debt limit, which is also weighing on risk sentiment. The House plans to vote on July 19th to increase the debt ceiling. Press reports suggest that President Obama has already moved to the...

The seasonally adjusted (SA) unemployment rate, following the sharp downtrend from its peak in April 2009 of 14.8% to a single-digit 9.9% in March 2011, showed a slight increase to 10.0% in April 2011. Despite the continuing increase in the SA labour force participation rate (49.9% in April), the SA employment rate (44.9%) maintained its improvement, implying that job creation in the Turkish economy is still strong, and the improvement in the unemployment rate will continue in coming months. In fact, the job opportunities index, derived from the consumer confidence index, reached its highest level since March 2006, confirming our view that the unemployment rate should maintain its downtrend. The non-farm unemployment rate, on the other hand, fell to its lowest level in the last 2 years at 12.5%, once again indicative of a recovery in labour market conditions to pre-crisis levels. It should be noted that the uptrend in labour force participation still limits the decline in employment rates and...