Optimism is spreading throughout Europe following the release of companies’ earnings that continue to surpass market as it challenge the sovereign debt obstacles, meanwhile, UK mortgage approvals retreated beyond expectations, affected by tight credit conditions and the decline in consumer confidence and demand.
The BoE stated today that mortgage approvals retreated in June to 47.643, compared with the previous 49.461, while below the median estimates of market that were set at 48.000.
The housing sector in UK showed various signs over the past period that full-recovery is nearing in the sector, but government reduction in spending that is considered the biggest since WWII affected the sector’s ability to continue on recovery, not forgetting Europe’s debt crisis that suppress activities even more.
House prices retreated in the same month, which was confirmed by the Nationwide House Price index that fell below expectations for the first time in five months, signaling the demand on houses is slowing and affected by the decline in consumer confidence.
Britain treasury, led by George Osborne determined to reduce government spending, the biggest reduction since WWII. The plan aims to reduce the budget deficit by the end of the fiscal 2015-2016, noting that the UK’s budget deficit reached 11.1 percent of 2009 GDP.
Accordingly, the BoE expect the economy to grow by 1.0 percent during the current year, while extending its growth rate by 1.2 percent in 2011. UK slashing spending will have a negative effect on various sectors in the economy therefore; expectations show that the economy might slip back into another contraction throughout the upcoming period.
Economic reports showed that unemployment retreated in Euro-Zone for the thirteen’s consecutive month after Germany’s exports inclined, as the euro slumped in trading against majors, accordingly, spreading optimism among employers to hire again in order to cope with rising demand.
July’s final and seasonally adjusted unemployment rate in Germany witnessed a decline in unemployment, reaching 7.6 percent, compared with the previous 7.7 percent. As for the net unemployment change, the index showed that the German economy lost 20 thousand jobs during July, identical to market expectations and the revised previous from 21 thousand lost jobs.
The European economy continues to send signs of recovery where the industrial and services sectors continue on expanding and growing, along with rising consumer confidence in the region, where it managed to reach a two-year high last month.
The German economy, which contributes in nearly 20 percent in Euro zone growth, continue to expand and will support further the region’s growth rate over the upcoming period, nonetheless, Europe’s government will need to slash the debt they face and reduce spending in order to enable full recovery to materialize.
Business climate in the Euro-Zone rose during July, where the index rose to 0.66 from 0.4. The current base of growth in the region is exports where the euro’s depreciation against the dollar by 14 percent during the first half of this year helped boost exports but would that be enough to pull the economy into long-term growth potentials.
The euro is extending the rise against the dollar, where the pair reached 1.3078. the EUR/USD pair ascended throughout the past four week’s by 7.3 percent, causing fear that the rise will disrupt exports and curve economic recovery.
Finally, companies continue on representing earnings where France Telecom and Sanofi Aventis along with Royal Dutch Shell and others presented better than expected performance throughout the past three months of this year, supporting stock market severely.
