EU agrees banking union

Late last night EU leaders finally
agreed to a banking union between member states, adopting a legal
framework by the end of 2012 giving the ECB overall control of the
supervision of EU banks. The rapid pace of reform is being cheered
in the markets this morning by a rise in the value of the Euro, but
the key question of whether the EU rescue fund will be able to
inject cash directly into stricken banks was left unanswered after
pressure from the Germans. Overall the move is a very positive one
for the Euro and is likely to continue the momentum the single
currency has built up over the last week as periphery bond yields
continue to fall. Italy also managed to get away almost €18 billion
in bonds yesterday, something that 6 months ago would have been
impossible. The ECB can be pleased with its OMT announcement so
far.

Around the markets today German PPI
data was marginally higher than expected, 1.7% against the
consensus forecast of 1.6%, and we look towards UK public sector
net borrowing data and Canadian CPI date this afternoon. Next week
will be busier on the data front with the Fed meeting on Wednesday
and UK and US GDP numbers due towards the end of the week.

The UK government announced several
large pension schemes have signed up to the pensions infrastructure
platform, a policy aimed at kick starting the economy by using
money from pension funds in under-invested road and rail projects.
The size of the funds is expected to reach €2 billion and is
expected to launch in early 2013.