All eyes will be focused on the Parliament results of Greek austerity proposal

Last week, it was the Greek vote of confidence. The Parliament results of the austerity plan will be in the focus this week. As you probably know, there were several important events last week. It came but was overshadowed by the Greek events.

I like to summarize and add a few opinions to the (six-weekly) Fed monetary policy meeting, the International Energy Agency announcement and a new concern, the Italian banks. The week began with the Greek vote of confidence followed by:

Ben Bernanke’s press conference was crucial as it displayed;

·         an acknowledgment that the economic recovery was unfolding more slowly than previously expected,

·         the slowdown is likely to be temporary

·         Commodity-based inflation pressures are expected to dissipate

·         QE2 will be complete at the end of June and

·        Economic conditions are likely to warrant exceptionally low levels for the federal funds rate for an extended period (2-3 quarters).

What worries me is that Ben Bernanke

·         acknowledged that ‘the Fed does not have a precise read on why the slow pace of economic growth is persisting’

·         The Fed's central tendency projections for real GDP growth in 2011 and 2012 were lowered from their April projections.

As discussed earlier, Ben Bernanke is not someone who might be ahead of the curve amidst the European debt crisis and global slowdown concerns. Hence, I was not surprised he did not give any hint to the prospect of QE3. However, it does not mean he would not continue to buy bonds! Read There are no hints on QE3 but

On a separate report on the US economy, Republicans walked out of budget deficit negotiations with talks reaching an impasse.  The dateline of the debt ceiling being raised by August 2 is too close for comfort.

Oil prices went sharply down with the news that the IEA is releasing 60 million barrels from strategic petroleum reserves (30 million from the U.S.). Crude oil futures for August delivery, which sat above $114 per barrel at the start of May, settled the week just under $91 per barrel.

I smell a rat when the reported ‘catalyst’ that Greece reached an agreement with the EU & IMF on a new five-year austerity plan. I wouldn’t have cheered as this wasn’t a real hurdle. I don’t think the ECB, EU nor does the IMF want a credit default. There are two real hurdles the Greeks have to pass to avoid a credit default

1.    Getting the austerity passed through Parliament and

2.    Building confidence that the Greeks can live through the austerity plan

US economic data. The positive Q1 GDP and durable orders report stood at 1.9% was overshadowed by concerns of weak reports from Italian banks and that the austerity plan may not pass through Parliament this coming Thursday (approx Friday 0500am).