-Monetary policy cannot replace fiscal policy - Merkel
-Likely delays to European banking union
-Liikanen (ECB): Aid-seeking states must submit to tough conditions
-Liikanen (ECB): Crisis like this often last 10 years
-Spanish 10 year bond yields rising 15bp to 5.91%

FTSE-100: -0.29%
Dax-30: -0.30%
Cac-40: -0.66%
FTSE-Mibtel: -1.0%
Ibex 35: -0.86%
Stoxx 600: -0.30%

Preposterous. That is how some observers defined the possibility, over the weekend, that Spain might be looking to try and avoid having to ask for a full European bail-out. Thus, amongst the risks which investors are now monitoring is the possibility that it will take a renewed rise in Spanish yields before Spanish PM Rajoy asks his partners for a full bailout.

In particular, some observers continue to fret over the latest data showing capital flight from the Mediterranean country. In that same vein, data released by the Bank of Spain last Friday showed that households and companies drained €26bn ($34bn) from Spanish bank accounts in July, driving the ratio of loans to deposits among lenders to 187% from 182% one year ago.

Having said that, Eurozone finance Ministers meeting in Cyprus on Saturday were described as divided over whether Spain ought to ask for a rescue immediately or instead try and tough it out.

In any case, the news flow points to more than likely delays in plans for having a European banking union in place by year-end. That as Germany presses for a slower and more methodical process and non-Eurozone countries protest over the prospect of not having a say on the European Central Bank´s decisions in matters relating to bank supervision.

On a more positive note, it seems increasingly possible that Greece will be given two more years to meet its fiscal adjustment goals.

Also worth pointing out are the remarks from German Chancellor Angela Merkel, today, backing European Central Bank President Mario Draghi´s bond purchase plans.

Swedish stocks under pressure



SSAB is sinking as the Swedish steelmaker said demand for strip products has been much weaker-than-expected.

Swedish fashion retailer Hennes & Mauritz AB is also lower after third-quarter sales missed estimates.

From a sector stand-point the worst performance on the DJ Stoxx 600 is to be seen now in the following industrial groups: Basic resources (-0.85%), Telecommunications (-0.76%) and Retail (-0.79%).

Italian trade date ahead of economists´ forecasts



The Eurozone´s trade balance improved to €15.6bn in July, after €13.6bn in the month before (revised down from €14.9bn).

Italy´s trade surplus rose to €4.49bn in July, after €2.52bn in June.

Labour costs in the single currency area grew at a 1.6% year-on-year pace in the second quarter, as expected.

Single currency moving slightly lower



The euro/dollar is now down by 0.32% to the 1.3088 dollar mark.

Front month Brent crude futures are off by 0.353 dollars, to the 116.25 dollar mark on the ICE.





AB

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