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Fiscal issues? What fiscal issues?

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  • he Dow Jones index hit an all time high, seemingly unconcerned by the fiscal issues in Washington. Of course, the Dow is broadly as much about global trends as it is about US trends - the days of equity markets being national barometers belong to the far distant past.
  • The lack of concern about fiscal issues from equity markets was reflected in the US ISM service sector survey yesterday (companies did not voice any fiscal concerns at all, and are concentrated on expansion). More US anecdotal evidence is due today from the Beige Book.
  • The IMF issues a cautious report on Spain, focusing on the banking system's need for recapitalisation and giving the balance of risks as being to the downside. There is nothing especially surprising in any of this, but it does underscore the concerns of some of contagion risks in the Euro area.
  • Germany's finance minister Schaueble was reiterating the benefits of fiscal discipline and dismissing suggestions that the stability pact be softened. Targets are there to be met (unless you are Germany, which was the first country to miss its targets).

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