EU summit: Analysts aren’t entirely happy

All the talk is about EU summit. Here are the analysts’ comments on the issue.

UBS: the innovation of an “effective single supervisory mechanism” and the ESM being able to recapitalize banks directly “will likely come far too late to be of immediate use during the recapitalization of the Spanish banking system.” “Any funding provided to recapitalize Spanish banks over the coming months is still very likely to inflate the Spanish sovereign debt levels.”

Lloyds Bank: “It is one step on a very long road. But we don't have any details, and arguably the detail is where the risk lies, because the market will start to pick holes in it as we've seen previously.”

BOTMUFJ: among questions the market will ask is whether the firepower available to the rescue funds will be enough to stabilize the 2.5 trillion euro Spanish and Italian bond markets, and how easy will it be to agree on the banking supervisory mechanism. “Our initial view is this deal is no game-changer, and any EUR/USD rally will simply offer attractive levels to sell”.

Westpac: “Definitely some good news for risk markets here, though it is not the ‘big bazooka’.”