Ahead of the EU summit on June 28-29, German's Chancellor Merkel said that Euro bonds, Euro bills and European deposit insurance with joint liability and much more was economically wrong and counterproductive. Moreover, she openly stated that the upcoming summit will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures....So the goal has to be a political union in which the standard is whatever the best, not mediocrity is. These comments suggested that Merkel continued to oppose the ideas of joint Euro bonds. While this does not mean that she will not accept such as move even though the market situation deteriorates markedly further, the terms and conditions of any joint issuance would likely be under Germany's ruling.
Shortly after Spain's formal request for bailing out its banking sector, Moody's reduced long-term debt and deposit ratings for 28 Spanish banks and two issuer ratings. According to the rating agency, these banks have a link to Spain's creditworthiness which has deteriorated and will affect the credit profile for Spanish banks. The move followed Moody's downgrade of 16 Spanish banks in May. Meanwhile, it's reported that Cyprus has asked for financial assistance from the EU/IMF to save its banks, making it the firth country in the bloc that needed bailout. Yet, the amount and terms will still need negotiation in coming days. It's expected that the required fund will range from 5-10B euro, compared with 100B euro required by Spain.
On the dataflow, Germany's Gfk consumer sentiment probably slipped -0.1 point to 5.6 in July. In the US, consumer confidence might have dropped -0.9 points to 64 in June while S&P/Case-Shiller composite-20 index might have contracted -2.05 y/y in April after a -2.6% drop in the prior month.