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Europe Stocks Waver Amid U.s. Deadlock, China Data

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“These arrangements must be in place before we conclude our assessment,” he said. But the ministers’ talks face an additional hindrance because Germany’s finance minister, Wolfgang Schaeuble, is not expected to attend the two-day Luxembourg meeting. Germany, Europe’s biggest economy, in talks to form a new government. During the region’s debt turmoil, the European Union conducted two bank stress tests, considered flops for blunders such as giving a clean bill of health to Irish banks months before they pushed the country to the brink of bankruptcy. The ECB’s new checks are seen as the last chance to come clean for the euro zone as the bloc tries to set up a single banking framework, known as banking union. The debate opens amid ebbing political enthusiasm for banking union – originally planned as a three-stage process involving ECB bank supervision, alongside an agency to shut failing banks and a system of deposit guarantees. It would be the boldest step in European integration since the crisis. “We have to find a solution now,” said Michel Barnier, the EU Commissioner in charge of financial regulation, urging faster progress in the slow talks. “The next financial crisis is not going to wait for us.” ANGLO-GERMAN AXIS? In one sign of the divisions, Britain has repeatedly refused to sign off on the first pillar of the banking union framework, allowing the ECB monitor banks. Having earlier agreed, London now wants additional assurances from ministers this week that Britain, which is outside the euro and polices its own banks, will not face interference from the ECB-led euro bloc. Britain is likely to find a sympathetic ear in Berlin, which wants to keep London on side in its push to prevent stricter EU emissions rules to protect its luxury car makers. Before the ECB takes over as supervisor late next year, it will conduct health checks of the roughly 130 banks under its watch. This is the nub of the problem facing finance ministers at the two-day talks. With the euro zone barely out of recession, a failure to put aside money to deal with the problems revealed could rattle fragile investor confidence and compound borrowing difficulties for companies, potentially killing off the meek recovery.

deadlock More broadly, the losses in Europe came 14 days into the U.S. government shutdown and three days before the country is expected to reach its borrowing limit, unless lawmakers break a stalemate and raise the nations debt ceiling. On Sunday, Senate Republicans and Democrats leaders continued attempts to find a way to break the fiscal impasse between the Republican-led House and President Barack Obama. Read: Fed shutdown and your retirement: Remain calm Treasury Secretary Jack Lew has warned the U.S. will run out of borrowing authority on Oct. 17 unless Congress agrees to raise the debt ceiling. A failure to increase the limit could lead to a technical default, which some fear will drag the economy back into recession . U.S. stocks traded lower on Wall Street . China and Europe data Meanwhile in China, data over the weekend showed a surprise decline in exports in September , signaling the global economy is still struggling to recover. Additionally, Chinese consumer prices rose faster than expected in September, though remaining within the governments target range. On the data front in Europe, Eurostat said industrial production rebounded in August in the euro zone, rising 1% month-on-month. Industrial production data for August support our view that euro-area growth is resuming but is still weak, and risks remain skewed to the downside, said Fabio Fois, southern European economist at Barclays, in a note. Our tentative forecast for euro-area industrial production in Q3 (…) also points to a slowdown in economic activity. That said, we continue to expect euro-area GDP to have increased 0.2% q/q in Q3 (0.1pp below Q2), a view that is supported by various confidence data, including PMIs, he added.

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