Important developments today:
U.S. financial regulators to toughen rules without Congressional Support.
Euro Area factory orders strong; German orders revised upward.
Euro-Area business sentiment pointing up in the New Year.
U.S. financial regulators to toughen rules without Congressional Support. After a long period during which fallout from the financial crisis occupied the energies of U.S. regulatory agencies, a Bloomberg piece this morning suggests that U.S. banking supervisors are planning to use existing authorities to raise standards for capital, liquidity and risk management, without waiting for the Obama Administration and Congress to come to closure on a new regulatory structure. The Federal Reserve and the Office of the Comptroller of the Currency, among other agencies, appear set to propose rule revisions that would follow the recommendations of the Basel Committee. A study by that Committee in October suggested that large banks would have to boost capital they set aside for market risk by an average of 224 percent, and increase overall capital by 11.5 percent to meet new standards. In related developments, President Obama yesterday proposed forbidding banks with insured deposits to engage in proprietary trading solely for their own account, or investing in hedge funds…stay tuned!
Euro Area factory orders strong; German orders revised upward. New industrial orders in the Euro Zone increased 1.6% in November (m/m) according to Eurostat, offering some reassurance to policy makers that the region’s industrial sector was on its way to recovery during the fourth quarter of 2009. In a more surprising report, November’s manufacturing orders in Germany were revised upward today to a 2.8% increase compared to a previously estimated rise of just 0.2% (m/m). Orders for industrial exports rose a substantial 3.6% (m/m) from a previously estimated 1%; while demand for investment goods soared 4.7% instead of an earlier estimate of a 0.1% decline [see chart]. These revisions are welcome news, suggesting that revival of Germany production is likely to be stronger than previously thought for the fourth quarter, increasing the chances that the overall economy continued to expand through the end of 2009.
Euro-Area business sentiment pointing up in the New Year. Surveys of January business confidence in France (INSEE) increased well above levels that analysts expected, on signs that the French recovery is regaining pace. The sentiment index for factory executives jumped to a reading of 92 from 88 in December. “French industry is benefitting from the pick-up in world trade,” notes Joost Beaumont of Fortis Bank Nederland in Amsterdam. “Growth should mainly come from foreign demand.” And the widely watched sentiment index of the Belgian Central Bank increased to highest readings in 17 months in January, as manufacturers and service industries grew more confident that the overall recovery in Europe will underpin stronger orders growth for Belgian firms.