Following better than expected euro zone data, French confidence and UK retail sales yesterday, the region follows up with more today. Germany’s IFO business confidence figure for July rose to the highest since July ’07 at 106.2 and well above expectations of 101.5 with both current conditions and the outlook rising. Also, Q2 GDP in the UK rose almost twice expectations at 4.4% annualized. The good data provides a stabilizing backdrop for the markets as we await the bank stress test results at 12pm which will have its issues in terms of toughness but will still provide more info than we currently have. The real test of the banks response themselves to the results of their peers will be the direction next week of 3 mo Euribor and euro LIBOR which continue to rise (definitely in part due to less ECB provided liquidity). Southern European 5 yr CDS are all narrower. Chinese stocks are up for a 5th day as is copper.
