Germany's Merkel suffers defeat in home state

It is a week of public speeches - including President Obama's jobs speech on Thursday - and central bank meetings, but we ease into it today with no major speeches and no major economic releases. Furthermore the U.S. is closed due to Labor Day. Unfortunately for Chancellor Merkel this gives markets even more time to analyse yet another domestic election defeat, this time in her home region.



CDU suffers another defeat: the chancellor has seen her party, CDU, suffer another defeat at a regional election yesterday, and not just any region, but her home region Mecklenburg-Western Pomerania. The elections saw the CDU receive its worst result on record in the state (have we not heard similar before for other regions?) as voters express their disappointment with Merkel's handling of the Eurozone crisis. Merkel's CDU received just 23.1 percent of the votes, down from 28.8 in the previous election.
A the poor news for Merkel just continues as Reuters reports that two out of three Germans oppose a larger bailout (EFSF) fund while more than half rejects 'Eurobonds' as the solution. Merkel, we have no doubt, will find a bit of energy in the fact that 64 percent of Germans believe that European countries should seek closer coordination on policy.

Eurozone Retail Sales to show stagnation in July: the rather untimely monthly Retail Sales report is expected to show stagnation in july after a revised gain of 0.7 percent in June (from 0.9). This is bound to keep the year-on-year growth rate in negative territory, in which case Retail Sales have been in contraction for four of the first seven months of 2011.