Euro cuts: yes, Britain’s government cut spending, but it was the easy stuff. Now for the Budget on June 22. As  Chancellor George Osborne was, in a Joe Hockey sort of way,  boasting of his toughness, a member of the Bank of England’s Monetary Policy Committee was warning that the country was badly placed to handle years of slow or no growth and possible deflation. It’s hair shirts all around in London at the moment. Austerity is the “new cool”, according to The Telegraph. Keynes is so yesterday, like Tony Blair. Let’s see what they say after a year or two of black-and-white living.

Italy cuts: and, according to Reuters, Italy has trumped Britain (again?) with its own austerity Budget to be approved tonight and it will cut cut public sector hiring and pay, temporarily block those set to retire and reduce funding to local government. Only 20% of those who leave the public sector in 2011 to 2013 will be replaced, and transfers to municipal and regional authorities will be reduced by €2 billion next year and almost €4 billion in 2012. Health spending will also be cut. The Budget aims to cut the deficit by about €13 billion  in 2011, 0r 1.6% of GDP. So Italy joins the UK, Spain, Ireland, Greece and Portugal in cutting spending over the next 2-5 years. Germany is reported to be eying €10 billion of cuts a year for the next 5-6 years. Tell me again just how growth is going to be strong enough to make a dent in unemployment and lift government revenues?

US bank watch: the proposed revamp of the US financial and banking laws could see some very significant changes in the ratings of some of America’s biggest banks. The proposed legislation, which will soon enter what’s called a reconciliation meeting that will try and merge the the Senate and the House of Reps versions, effectively ends what has become known as “too big to fail” i.e.  banks and financial groups that have become so large that they are too big to fail. Ratings group Moody’s late last week in a statement said that it will look at whether the proposed new law effectively diminishes the likelihood of support for these big banks (think Goldman Sachs).

US bank watch 2: though it is unclear what provisions will be included in the final legislation, Moody’s expects that there will be elements that are positive and negative to banks’ stand-alone credit profiles … presently, 17 banks in the US receive some ratings “lift” from Moody’s, based on indications of systemic support. Moody’s will be assessing if the future law effectively diminishes the likelihood of support. If this appears to be the case, Moody’s will announce a formal rating review process to explore this in detail before downgrading any supported bank rating. This means that Moody’s could cut the rating of any bank whose current rating assumes some level of government support, which could be a problem for Goldman Sachs, Citigroup, Bank of America and Morgan Stanley, which are most at risk of downgrade.

US bank watch 3: this could cost the banks billions of dollars in new capital and higher interest rates attracting new deposits. US money market funds, which are the funder of so much of the day-to-day liquidity of America and European financial systems, would have to cut the amount of money they can lend to banks with ratings less than AAA. These funds already have heavy exposures to European banks and proved to be an unknown weak point after Lehman Brothers collapsed and a gigantic run started when some funds couldn’t guarantee redemptions on a-dollar-back-for-every-dollar-in basis.

Steel watch: world crude steel production was still strong last month, up on last year (naturally) by 35.7%, but down by 0.4% on March. The 121.65 million tonnes produced in April represented a capacity utilisation ratio of the 66 countries reporting production of 83.4%, the highest since the slump started in August 2008. Compared to April last year, the utilisation ratio in April this year was up by a strong 18.9 percentage points. China’s crude steel production for April this year was a record 55.4 million tonnes, up 27% from April last year and 0.8% from the March figure of 54.98 million tonnes. Japan produced 9 million tonnes in April, up 56.7% compared to the same month last year; South Korea’s crude steel production for April this year was 4.8 million tonnes, 22.9% up compared to the same month last year. The monthly rate so far this year is almost 117 million tonnes against 112.1 million last year. That implies an annual figure of just over 1.4 billion tonnes, against the all-time high of 1.345 billion in 2007.

Car watch: if Australian retailing is so slow, how come car sales figures are so strong? There’s no stimulus for the car sector either, but sales are rising on a month-to-month basis and could quite easily top the 1 million mark again this year. Car finance is costing more as rates rise, the mad, deep discounting from a year ago has eased and the cuts in tariffs and the stronger dollar have given dealers the freedom to jiggle prices and features to market their wares. Data from the Australian Bureau of Statistics on Monday showed that 90,935 vehicles were sold on a seasonally adjusted basis in April, up from 83,876 in March. That followed a 2.8 per cent decline in March. ABS figures yesterday showed an 8.4% rise in the seasonally adjusted number of cars sold in April over March. April’s sales were up 28.7% on April last year (the FCAI figures at the start of the month showed a rise of 27.3% in unadjusted terms).

Car watch 2: WA sales drove the increase in March with a rise of 26.7%, followed by Victoria and South Australia, with increases of 8% and 6.5% respectively. Vehicle sales for Tasmania decreased by 2.5% over this period. The ABS said vehicle sales in all states and territories increased when comparing April this year to April last year. Western Australia and Victoria recorded the largest percentage increases of 47.0% and 39.4% respectively. Some of the increase could be cars previously ordered being registered and delivered. As late as April? The WA surge seems to have been as a result of a lot of bunched orders for the resources sector.

Oil watch: another big oil prospect has been reported by Brazil, the second in a week. Media reports quoted Brazilian regulators as revealing that Libra prospect may hold even more oil than the nearby 4.5-billion-barrel Franco find, which was revealed a couple of days earlier. There’s a well still being drilled on the Libra prospect. Both prospects are in the so-called pre-salt region, a vast formation about 200 kilometres wide and more than 800 kilometres long, off Brazil’s southern coast. Franco is the world’s biggest oil find since 2007, when Brazil revealed the first strike in the area, the mega Tupi field containing an estimated 5 billion-8 billion barrels.