So the worst kept secret in the EU is revealed and Ireland finally succumb to the pressure and ask for a bailout. The market reaction has been muted or at least it certainly can’t be seen as euphoric as past bailouts. Even the currency markets are drifting slightly aimlessly so despite the news released over the week end the market has commenced the week as if nothing really happened!
Now that Ireland seems to have set the precedent, others may possibly follow in their footsteps with Portugal most likely the next ones to seek a bailout. The likelihood of this is almost inevitable now. As frequently mentioned in this comment the bailouts will do little to resolve the problems that the PIGS face and simply push the hard decisions further down the line.
There are a few grumbles from some people in the UK asking why we have to stump up for the Irish bailout when we’re not a part of the euro and we face similar problems at home. In fact our problems are so similar it’s a wonder that we’ve kept our prized triple A credit rating. The UK’s budget deficit as a percentage of GDP is the same as Ireland’s and the cuts recently mentioned by the coalition do not go as far as they really ought to in order to tackle our mountain of debt significantly.
Economic data is thin on the ground today with only consumer confidence from the EU being released this afternoon. This is not a market mover so there’s little read into the data, but needless to say it is expected to decline a little as a result of all the sovereign debt concerns over the past few weeks.
GDP will be the focus of this week as Germany and the US release figures tomorrow and the UK gives its second reading on Wednesday. After then the week winds down early due to the Thanksgiving holidays in the US on Thursday and then their markets treat themselves to a half day on Friday. As a result volumes are likely to be low this week and we may not see much volatility. Historically equities do rally into US Thanksgiving and considering the rally since the summer is still in tact we could possibly see the grind higher continue.
As mentioned currencies have not exactly been pinging around following Ireland’s bailout request but…
