Government instead of euro bonds

Berlin and Paris have opted against the idea of ​​euro bonds. Merkel argued that this does not help to overcome the debt crisis. While Sarkozy said that he can imagine euro bonds as the culmination of Euro Zone integration process, rather than at the beginning of the process. Instead he proposed the creation of 'euro council’ for the Euro Zone, a tax on financial transactions and the debt limits, written into national law.

In our opinion the Paris Summit cannot satisfy the markets. Closer economic integration of the Euro Zone is a step in the right direction, but it does not solve the current problems. Those decisions will not help the stock markets today.

Dell disappointed

The results of Sarkozy-Merkel meeting is not the only disappointment the markets have to face today. Dell’s report is another negative factor that can have an impact on the markets. In the second quarter, the computer maker, earned 0.54 USD per share (0.28 USD a year earlier),exceeding market expectations by 5 cents. However the revenue appeared to be worse than expected(15.66 billion USD vs. consensus: 15.75 billion USD). Moreover, Dell lowered its forecasted revenue for the next quarters. Dell predicts that it will rise by 1-5%, while previous estimates were at 5-9%.

SNB’s decision

Today, the Swiss government meets to discuss the situation of the Swiss franc. During the weekend Sonntags Zeitung reported that the government and the Swiss National Bank (SNB) conduct "intensive" talks about the implementation of the target exchange rates EURCHF. Previously, the possibility of stiff links between franc and euro were suggested  by SNB’s vice president, Thomas Jordan. Market speculates that such linkage could occur at the rate of EURCHF in the range of 1,10-1,20.

According to the recent information Swiss National Bank pledged to take further action to weaken the franc. One of them is to extend the value of bank deposits held in central bank of 120 billion CHF to 200 billion CHF. However, there is not any information about the peg to the euro. That is why EURCHF fell from 1.1460 to 1.1300.

Events to watch – Boa minutes, inflation in UE and USA

The publication of the minutes from the last meeting of the Bank of England, data on HICP inflation in the euro area and PPI inflation in the U.S. are the most important figures today.

Paweł Kordala

Disclaimer, investment risk warning
X-Trade Brokers Dom Maklerski S.A. does not take responsibility for investment decisions made under the influence of the information published on this website. more