Markets stabilized in Asia today as Portugal announced EUR 4.9b bailout of Banco Espirito Santo SA. The Bank of Portugal's Resolution Fund will transfer the assets of Banco Espirito Santo to a new company called Novo Banco and the treasury loan will eventually be repaid by sale of the new company. The bad assets would be left with the shareholders and junior bond holders of Banco Espirito Santo. The Finance Ministry emphasized in the statement that it's not the "taxpayers" who would "shoulder the losses". The yen is mildly lower in Asian session today as stocks rebounded on the news. Meanwhile, European majors are staying in tight range.
The Aussie is mildly higher today as retail sales showed 0.6% mom in June versus expectation of 0.3% mom. That's more than recovered May's loss of -0.3% mom. Nonetheless, the Australian dollar stays week ahead of tomorrow's RBA rate decision which should deliver little new information. The central bank would pledge that "the most prudent course is likely to be a period of stability in interest rates". Note also that the Quarterly Monetary Policy Statement to be released on Friday should give some revisions to the economic outlook. Elsewhere, Japan monetary base rose 42.7% yoy in July. Swiss will release SVME PMI today. Eurozone will release Sentix investor confidence and PPI. UK will release PMI construction.
Looking ahead, we have a heavy calendar this week with RBA, ECB, BOE and BOJ holding monetary meetings while a number of important economic data due. ECB meeting due Thursday is expected to stand on the sideline in August as policymakers would take time to gauge the impacts of the rate cut in June. Preside Draghi might address the issue related to the impacts of sanctions against Russia on the Eurozone, as well as the banking crisis in Portugal's banking sector. The BOE would also leave the Bank Rate at 0.5% and asset purchases at 375B pound on Thursday. The quarterly Inflation Report released later this month should give more indications on the monetary outlook of the central bank.
Here are some highlights of the week:
- Tuesday: RBA rate decision, Australia trade balance; Eurozone services PMI, retail sales; UK services PMI; US ISM services, factory orders.
- Wednesday: New Zealand employment; Swiss CPI; UK industrial and manufacturing productions; Canada trade balance; US trade balance
- Thursday: Australia employment; BoE rate decision; ECB rate decisions; Canada building permits, Ivey PMI; US jobless claims
- Friday: China trade balance; BoJ rate decision; Swiss unemployment; German trade balance; UK trade balance; Canada employment; US productivity