It seems alot but from below it seems this will not bring a turning point to the problems !!
Still a lot of uncertainty !!
Per Bloomberg.com :
"Dec. 21 (Bloomberg) -- The European Central Bank will lend euro-area banks more than economists forecast for three years in its latest attempt to keep credit flowing to the economy during the sovereign debt crisis.
The Frankfurt-based ECB awarded 489 billion euros ($645 billion) in 1,134-day loans, more than economists’ median estimate of 293 billion euros in a Bloomberg News survey. The ECB said 523 banks asked for the funds, which will be lent at the average of its benchmark rate -- currently 1 percent -- over the period of the loans. They start tomorrow.
Government bond markets may continue to rally if demand for the three-year loans exceeds 250 billion euros, Steven Barrow, head of Group of 10 currency strategy at Standard Bank Plc in London, said before the ECB announced the results.
Europe’s debt crisis has increased the risk of government and bank defaults, making institutions wary of lending to each other and driving up the cost of credit. The ECB is trying to ensure that banks have access to cheap cash for the medium term so that they can keep lending to companies and households. In addition to the longer-term loans, the ECB has widened the pool of collateral banks can use to secure the funds.
Italian and Spanish government bond yields have dropped since the ECB announced the loans on Dec. 8 as banks buy the securities to use them as collateral. French President Nicolas Sarkozy has suggested banks could use the loans to buy even more government debt.
‘Carry Trades’
"What the ECB wants is that the funds be used by banks to keep handing out loans," said Michael Schubert, an economist at Commerzbank AG in Frankfurt. "But there’s a second argument, which is to do carry trades by borrowing on the cheap at the ECB and buying sovereign bonds. We don’t know what the banks are using the money for."
ECB Vice President Vitor Constancio in a Dec. 19 interview predicted "significant" demand for the loans as banks face "very high refinancing needs early next year."
Some 230 billion euros of bank bonds mature in the first quarter of 2012 alone, ECB President Mario Draghi told the European Parliament this week.
"Banks represent about 80 percent of lending to the euro area," Draghi said. "The banking channel is crucial to the supply of credit." He predicted banks will experience "very significant funding constraints" for the "whole" of 2012.
No Turning Point
Banks from the euro region need to refinance 35 percent more debt next year than they did this year, according to a Bank of England study. Lenders have more than 600 billion euros of debt maturing in 2012, around three quarters of which is unsecured, the study says.
The ECB is focusing on greasing the banking system to fight the debt crisis as it resists calls to increase its bond purchases to reduce governments’ borrowing costs. It will offer a second three-year loan in February and banks have the option of repaying them after a year.
"It’s very significant and very helpful for the banks," Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London, told Bloomberg Television. "But it’s not going to bring about a turning point in this crisis."
Wednesday, 21 December 2011
A interesting read !!
I think we in for some negativity.
Bllomberg.com
"Dec. 21 (Bloomberg) -- Some of Wall Street’s biggest firms signaled optimism in October after posting their worst trading and investment-banking period since the financial crisis. Now, analysts say the fourth quarter may have been worse.
Fixed-income trading revenue at U.S. banks may fall 12 percent from the third quarter, minus accounting adjustments, while equities drop 10 percent and investment-bank revenue will probably be unchanged, David Trone, an analyst at JMP Securities, wrote in a Dec. 16 report.
Some analysts had expected a rebound after the third quarter was the worst for trading and investment banking since 2008, when the collapse of real estate markets contributed to a worldwide credit crunch. Now many are looking ahead to 2012 after investors stayed on the sidelines amid concern that the European debt crisis would lead to a global slowdown.
"We’re in a difficult environment," Brad Hintz, an analyst at Sanford C. Bernstein & Co., said yesterday on Bloomberg Television’s "In The Loop" program. "I really don’t think anyone’s going to be focusing on the earnings of these firms. They’re really going to be focusing forward." Hintz is a former Morgan Stanley treasurer.
Twelve analysts cut earnings estimates for Goldman Sachs Group Inc. in the past four weeks and 14 trimmed theirs for JPMorgan Chase & Co., according to data compiled by Bloomberg. Goldman Sachs, which gets the majority of its revenue from trading, may post its lowest annual net income after preferred dividends since 1998 and the least revenue since 2005, Roger Freeman, a Barclays Capital analyst, said in a note titled "Another Year to Forget."
Trading Revenue
Trading revenue at the five biggest Wall Street banks -- JPMorgan, Goldman Sachs, Bank of America Corp., Citigroup Inc. and Morgan Stanley -- may drop from a year earlier for the sixth time in seven quarters. Trading and investment-banking revenue fell 47 percent in the third quarter from the first three months, excluding accounting adjustments.
Richard Staite, an analyst at Atlantic Equities in London, said a weak fourth quarter and the sovereign debt crisis in Europe will "rapidly" turn market attention to the banks’ outlooks for next year.
"Goldman and Morgan Stanley will struggle to paint an upbeat picture of 2012," Staite wrote in a note this month. "With no sign of a clear solution to the problems in Europe and a deteriorating economic backdrop, it will be hard for the pure investment banks to predict the timing of any upturn."
Goldman Sachs Chief Executive Officer Lloyd C. Blankfein, 57, said last month that global growth will "snap back" faster than most forecasters expect. He said he didn’t know when that will happen.
JPMorgan’s Dimon
JPMorgan CEO Jamie Dimon, 55, said at an investor conference this month that revenue at the investment bank will probably be unchanged or down from the third quarter. He said that the decline may be cyclical.
"I don’t think you should look at the business and say, ‘OK that’s permanent.’ It’s not permanent," Dimon said on Dec. 7. "We service a lot of investors. Those investors are going to have twice as much money 10 years from now than they have today to invest. And they’re going to need to invest their money."
Financial firms globally have announced plans this year to eliminate more than 200,000 jobs. New York-based Morgan Stanley, the sixth-biggest U.S. bank by assets and owner of the world’s largest brokerage, said last week it will cut about 1,600 jobs in the first quarter of next year.
Compensation Declines
Firms are also cutting pay. Annual compensation on Wall Street may fall 27 percent to 30 percent from a year earlier, making it the lowest level since 2008, according to New York- based recruitment firm Options Group. Bonuses on average may drop 35 percent to 40 percent, Options Group said.
The Standard & Poor’s 500 Financials Index has fallen 20 percent this year, led by Bank of America’s 61 percent plunge. Goldman Sachs, Morgan Stanley and Citigroup have all fallen at least 45 percent, while JPMorgan has dropped 24 percent.
Bank of America Chief Financial Officer Bruce Thompson said in October that the markets had been better that month than in August and September. Morgan Stanley CFO Ruth Porat said the challenging credit-markets conditions had "hopefully started to moderate." Porat and Dimon indicated the fourth quarter environment would probably depend on macroeconomic developments, such as progress from European leaders on responding to the region’s debt crisis.
Average daily equity-trading volume on the largest U.S. exchanges is down 11 percent from the third quarter. Dollar volume of high-yield corporate bonds has declined 26 percent from a year earlier, while volume of investment-grade bonds dropped 7.5 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Sluggish Activity
"Despite a rise in equity prices, trading and investment banking activity has remained sluggish so far in the fourth quarter," Glenn Schorr, an analyst at Nomura Holdings Inc., wrote this week in a note to investors. "With the usually slower holiday season coming, we see little sign that activity will pick up as we close out 2011." He rates Goldman Sachs, Citigroup and JPMorgan as "buys."
Trading volume, an indicator of performance, may not correlate directly with firms’ revenue because banks make money on changes in the value of the securities they hold and transaction fees that may not be related to volume.
Spokesmen for the five banks declined to comment or didn’t return requests for comment.
Banks’ trading-revenue decline may be mitigated by the lack of inventory losses that were seen in the third quarter, Trone said. Trone is the top-rated analyst covering JPMorgan this year, according to data compiled by Bloomberg.
Credit Trading
The ten largest global investment banks saw combined net losses of about $850 million in their credit-trading units within fixed income in the third quarter, compared with positive revenue of $2.7 billion a year earlier, according to industry consultant Coalition Ltd.
Yields on global corporate bonds relative to similar- maturity Treasuries rose 100 basis points to 263 basis points in the third quarter, Bank of America Merrill Lynch index data show. The average spread has risen 14 basis points this quarter.
Credit trading, along with mortgages, is "very weak," Staite wrote. Interest rates accounted for almost half of all third-quarter fixed-income trading revenue, according to Coalition data. Staite wrote that may stay the strongest area.
Jefferies Group Inc., the New York-based investment bank that’s been expanding its advisory and fixed-income businesses, reported yesterday that trading revenue dropped about 31 percent from a year earlier.
Trading throughout the year was held back by "investors’ reluctance to take risks in transactions in the face of abject political and economic uncertainty," Jefferies CEO Richard Handler, 50, said during a conference call with investors. "2012 is a new year." "
Happy Holidays !!
I think we in for some negativity.
Bllomberg.com
"Dec. 21 (Bloomberg) -- Some of Wall Street’s biggest firms signaled optimism in October after posting their worst trading and investment-banking period since the financial crisis. Now, analysts say the fourth quarter may have been worse.
Fixed-income trading revenue at U.S. banks may fall 12 percent from the third quarter, minus accounting adjustments, while equities drop 10 percent and investment-bank revenue will probably be unchanged, David Trone, an analyst at JMP Securities, wrote in a Dec. 16 report.
Some analysts had expected a rebound after the third quarter was the worst for trading and investment banking since 2008, when the collapse of real estate markets contributed to a worldwide credit crunch. Now many are looking ahead to 2012 after investors stayed on the sidelines amid concern that the European debt crisis would lead to a global slowdown.
"We’re in a difficult environment," Brad Hintz, an analyst at Sanford C. Bernstein & Co., said yesterday on Bloomberg Television’s "In The Loop" program. "I really don’t think anyone’s going to be focusing on the earnings of these firms. They’re really going to be focusing forward." Hintz is a former Morgan Stanley treasurer.
Twelve analysts cut earnings estimates for Goldman Sachs Group Inc. in the past four weeks and 14 trimmed theirs for JPMorgan Chase & Co., according to data compiled by Bloomberg. Goldman Sachs, which gets the majority of its revenue from trading, may post its lowest annual net income after preferred dividends since 1998 and the least revenue since 2005, Roger Freeman, a Barclays Capital analyst, said in a note titled "Another Year to Forget."
Trading Revenue
Trading revenue at the five biggest Wall Street banks -- JPMorgan, Goldman Sachs, Bank of America Corp., Citigroup Inc. and Morgan Stanley -- may drop from a year earlier for the sixth time in seven quarters. Trading and investment-banking revenue fell 47 percent in the third quarter from the first three months, excluding accounting adjustments.
Richard Staite, an analyst at Atlantic Equities in London, said a weak fourth quarter and the sovereign debt crisis in Europe will "rapidly" turn market attention to the banks’ outlooks for next year.
"Goldman and Morgan Stanley will struggle to paint an upbeat picture of 2012," Staite wrote in a note this month. "With no sign of a clear solution to the problems in Europe and a deteriorating economic backdrop, it will be hard for the pure investment banks to predict the timing of any upturn."
Goldman Sachs Chief Executive Officer Lloyd C. Blankfein, 57, said last month that global growth will "snap back" faster than most forecasters expect. He said he didn’t know when that will happen.
JPMorgan’s Dimon
JPMorgan CEO Jamie Dimon, 55, said at an investor conference this month that revenue at the investment bank will probably be unchanged or down from the third quarter. He said that the decline may be cyclical.
"I don’t think you should look at the business and say, ‘OK that’s permanent.’ It’s not permanent," Dimon said on Dec. 7. "We service a lot of investors. Those investors are going to have twice as much money 10 years from now than they have today to invest. And they’re going to need to invest their money."
Financial firms globally have announced plans this year to eliminate more than 200,000 jobs. New York-based Morgan Stanley, the sixth-biggest U.S. bank by assets and owner of the world’s largest brokerage, said last week it will cut about 1,600 jobs in the first quarter of next year.
Compensation Declines
Firms are also cutting pay. Annual compensation on Wall Street may fall 27 percent to 30 percent from a year earlier, making it the lowest level since 2008, according to New York- based recruitment firm Options Group. Bonuses on average may drop 35 percent to 40 percent, Options Group said.
The Standard & Poor’s 500 Financials Index has fallen 20 percent this year, led by Bank of America’s 61 percent plunge. Goldman Sachs, Morgan Stanley and Citigroup have all fallen at least 45 percent, while JPMorgan has dropped 24 percent.
Bank of America Chief Financial Officer Bruce Thompson said in October that the markets had been better that month than in August and September. Morgan Stanley CFO Ruth Porat said the challenging credit-markets conditions had "hopefully started to moderate." Porat and Dimon indicated the fourth quarter environment would probably depend on macroeconomic developments, such as progress from European leaders on responding to the region’s debt crisis.
Average daily equity-trading volume on the largest U.S. exchanges is down 11 percent from the third quarter. Dollar volume of high-yield corporate bonds has declined 26 percent from a year earlier, while volume of investment-grade bonds dropped 7.5 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Sluggish Activity
"Despite a rise in equity prices, trading and investment banking activity has remained sluggish so far in the fourth quarter," Glenn Schorr, an analyst at Nomura Holdings Inc., wrote this week in a note to investors. "With the usually slower holiday season coming, we see little sign that activity will pick up as we close out 2011." He rates Goldman Sachs, Citigroup and JPMorgan as "buys."
Trading volume, an indicator of performance, may not correlate directly with firms’ revenue because banks make money on changes in the value of the securities they hold and transaction fees that may not be related to volume.
Spokesmen for the five banks declined to comment or didn’t return requests for comment.
Banks’ trading-revenue decline may be mitigated by the lack of inventory losses that were seen in the third quarter, Trone said. Trone is the top-rated analyst covering JPMorgan this year, according to data compiled by Bloomberg.
Credit Trading
The ten largest global investment banks saw combined net losses of about $850 million in their credit-trading units within fixed income in the third quarter, compared with positive revenue of $2.7 billion a year earlier, according to industry consultant Coalition Ltd.
Yields on global corporate bonds relative to similar- maturity Treasuries rose 100 basis points to 263 basis points in the third quarter, Bank of America Merrill Lynch index data show. The average spread has risen 14 basis points this quarter.
Credit trading, along with mortgages, is "very weak," Staite wrote. Interest rates accounted for almost half of all third-quarter fixed-income trading revenue, according to Coalition data. Staite wrote that may stay the strongest area.
Jefferies Group Inc., the New York-based investment bank that’s been expanding its advisory and fixed-income businesses, reported yesterday that trading revenue dropped about 31 percent from a year earlier.
Trading throughout the year was held back by "investors’ reluctance to take risks in transactions in the face of abject political and economic uncertainty," Jefferies CEO Richard Handler, 50, said during a conference call with investors. "2012 is a new year." "
Happy Holidays !!
Banks May Flock to ‘Free Money’ as ECB Awards 3-Year Loans
Very Worrying !!, cause him inflation !!
Dec. 21 (Bloomberg) -- The European Central Bank is set to flood euro-area banks with cheap cash as they flock to its offer of three-year loans today.
Banks will ask the ECB for 293 billion euros ($384 billion) of the 1,134-day funds, according to the median of 14 forecasts in a Bloomberg News survey of economists. Estimates range from 150 billion euros to as much as 600 billion euros. The money will be lent at the average of the ECB’s benchmark rate -- currently 1 percent -- over the period of the loan. Results are due at 11:15 a.m. in Frankfurt and the loans start tomorrow.
"This is basically free money," said Jens-Oliver Niklasch, a strategist at Landesbank Baden-Wuerttemberg in Stuttgart. "The conditions are unbeatable. Everybody who can will try to get a piece of this cake."
Europe’s debt crisis has increased the risk of government and bank defaults, making institutions wary of lending to each other and driving up the cost of credit. The ECB is trying to ensure that banks have access to cheap cash for the medium term so that they can keep lending to companies and households. In addition to the longer-term loans, the ECB has widened the pool of collateral banks can use to secure the funds.
The euro rose for a second day amid speculation the ECB’s loans will spur demand for sovereign bonds. The 17-nation currency gained 0.3 percent to $1.3123 at 9 a.m. in Frankfurt.
‘Significant’ Demand
Yields on Italian and Spanish government bonds have dropped since the ECB announced the loans on Dec. 8 as banks buy the securities to use them as collateral. French President Nicolas Sarkozy has suggested banks could use the loans to buy even more government debt.
The ECB’s intention is that banks utilize the funds to refinance themselves, Vice President Vitor Constancio said in a Dec. 19 interview. He predicted "significant" demand as banks face "very high refinancing needs early next year."
Some 230 billion euros of bank bonds mature in the first quarter of 2012 alone, ECB President Mario Draghi told the European Parliament this week.
"Banks represent about 80 percent of lending to the euro area," Draghi said. "The banking channel is crucial to the supply of credit." He predicted banks will experience "very significant funding constraints" for the "whole" of 2012.
Capital Requirements
Banks from the euro region need to refinance 35 percent more debt next year than they did this year, according to a Bank of England study. Lenders have more than 600 billion euros of debt maturing next year, around three quarters of which is unsecured, the study says.
"The good news is that banks won’t have to worry about liquidity for three years," said Carsten Brzeski, an economist at ING Group in Brussels. "However, it remains to be seen whether the money will filter through to the real economy as the ECB hopes. Many banks still have to increase their capital ratios to meet the Basel III criteria by mid-2012."
Regulators are forcing European banks to increase buffers so they can cope with future crises. The European Banking Authority earlier this month ordered the region’s financial firms to raise 114.7 billion euros of additional capital to bolster their core Tier 1 ratios to more than 9 percent of risk- weighted assets by the middle of 2012.
Faced with a potential credit crunch, the regulator told banks to raise the money from investors, retained earnings and lower bonuses. Failing that, companies may sell assets, provided the disposals don’t limit overall lending to the "real" economy, the EBA said in a Dec. 8 statement.
‘Lender of Last Resort’
The ECB is focusing on greasing the banking system to fight the debt crisis as it resists calls to increase its bond purchases to reduce governments’ borrowing costs. It will also award 98-day loans today and offer a second three-year loan in February. Banks have the option of repaying them after a year.
With the loans, the ECB is showing it "is the lender of last resort for banks, not for sovereigns," said Royal Bank of Scotland Group Plc economist Silvio Peruzzo.
"This will stabilize the banking sector and is another building block in the ECB’s policy to prevent a much dreaded credit squeeze," said Jan Holthusen, head of fixed-income research at DZ Bank in Frankfurt. "But it’s just one building block and by itself not decisive."
Dec. 21 (Bloomberg) -- The European Central Bank is set to flood euro-area banks with cheap cash as they flock to its offer of three-year loans today.
Banks will ask the ECB for 293 billion euros ($384 billion) of the 1,134-day funds, according to the median of 14 forecasts in a Bloomberg News survey of economists. Estimates range from 150 billion euros to as much as 600 billion euros. The money will be lent at the average of the ECB’s benchmark rate -- currently 1 percent -- over the period of the loan. Results are due at 11:15 a.m. in Frankfurt and the loans start tomorrow.
"This is basically free money," said Jens-Oliver Niklasch, a strategist at Landesbank Baden-Wuerttemberg in Stuttgart. "The conditions are unbeatable. Everybody who can will try to get a piece of this cake."
Europe’s debt crisis has increased the risk of government and bank defaults, making institutions wary of lending to each other and driving up the cost of credit. The ECB is trying to ensure that banks have access to cheap cash for the medium term so that they can keep lending to companies and households. In addition to the longer-term loans, the ECB has widened the pool of collateral banks can use to secure the funds.
The euro rose for a second day amid speculation the ECB’s loans will spur demand for sovereign bonds. The 17-nation currency gained 0.3 percent to $1.3123 at 9 a.m. in Frankfurt.
‘Significant’ Demand
Yields on Italian and Spanish government bonds have dropped since the ECB announced the loans on Dec. 8 as banks buy the securities to use them as collateral. French President Nicolas Sarkozy has suggested banks could use the loans to buy even more government debt.
The ECB’s intention is that banks utilize the funds to refinance themselves, Vice President Vitor Constancio said in a Dec. 19 interview. He predicted "significant" demand as banks face "very high refinancing needs early next year."
Some 230 billion euros of bank bonds mature in the first quarter of 2012 alone, ECB President Mario Draghi told the European Parliament this week.
"Banks represent about 80 percent of lending to the euro area," Draghi said. "The banking channel is crucial to the supply of credit." He predicted banks will experience "very significant funding constraints" for the "whole" of 2012.
Capital Requirements
Banks from the euro region need to refinance 35 percent more debt next year than they did this year, according to a Bank of England study. Lenders have more than 600 billion euros of debt maturing next year, around three quarters of which is unsecured, the study says.
"The good news is that banks won’t have to worry about liquidity for three years," said Carsten Brzeski, an economist at ING Group in Brussels. "However, it remains to be seen whether the money will filter through to the real economy as the ECB hopes. Many banks still have to increase their capital ratios to meet the Basel III criteria by mid-2012."
Regulators are forcing European banks to increase buffers so they can cope with future crises. The European Banking Authority earlier this month ordered the region’s financial firms to raise 114.7 billion euros of additional capital to bolster their core Tier 1 ratios to more than 9 percent of risk- weighted assets by the middle of 2012.
Faced with a potential credit crunch, the regulator told banks to raise the money from investors, retained earnings and lower bonuses. Failing that, companies may sell assets, provided the disposals don’t limit overall lending to the "real" economy, the EBA said in a Dec. 8 statement.
‘Lender of Last Resort’
The ECB is focusing on greasing the banking system to fight the debt crisis as it resists calls to increase its bond purchases to reduce governments’ borrowing costs. It will also award 98-day loans today and offer a second three-year loan in February. Banks have the option of repaying them after a year.
With the loans, the ECB is showing it "is the lender of last resort for banks, not for sovereigns," said Royal Bank of Scotland Group Plc economist Silvio Peruzzo.
"This will stabilize the banking sector and is another building block in the ECB’s policy to prevent a much dreaded credit squeeze," said Jan Holthusen, head of fixed-income research at DZ Bank in Frankfurt. "But it’s just one building block and by itself not decisive."
Asia Stocks, Euro Gain on U.S. Growth, Europe; Bond Risk Falls
A good read from Bloomberg.com !!
"Dec. 21 (Bloomberg) -- Asian stocks jumped the most in almost three weeks, the euro and won strengthened and bond risk dropped after Chinese Premier Wen Jiabao pledged support for exports, better-than-forecast U.S. housing starts and a decline in Spanish borrowing costs.
The MSCI Asia Pacific Index added 1.8 percent at 11:17 a.m. in Tokyo, set for the largest gain since Dec. 1. Standard & Poor’s 500 Index futures were little changed after the stock gauge rallied 3 percent yesterday. The euro climbed 0.3 percent and the won strengthened 0.9 percent. The Markit iTraxx Asia index of credit-default swaps slumped the most since Dec. 7. Oil rose 1.3 percent in New York.
Wen said yesterday China will stabilize policies on exports and provide capital support to small companies. U.S. builders broke ground in November on the most houses in over a year, while German business confidence unexpectedly improved. The European Central Bank will announce results of its first tranche of unlimited three-year loans today, a day after Spain sold more than its maximum target of bills, driving borrowing costs lower.
"The U.S. is showing it’s fairly robust in terms of not being dragged down to the extent of European economies, but there remain significant structural impediments," said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. "There will be significant gains today. The question is, given we are coming into a holiday period, how sustainable those gains are going to be over the next week or so."
Stocks Gain
Almost 11 shares rose for every one that fell on MSCI’s Asia Pacific Index. Japan’s Nikkei 225 Stock Average gained 1.4 percent, South Korea’s Kospi Index rallied 2.7 percent and Australia’s S&P/ASX 200 Index gained 2.1 percent. Onesteel Ltd. jumped 7.1 percent after Goldman Sachs Group Inc. named it among top Australian stock picks for next year.
Taiwan’s Taiex index jumped 4 percent, the region’s biggest advance. Vice Premier Sean Chen said yesterday the island will let the National Stabilization Fund buy stocks to support local markets when necessary. The Shanghai Composite Index added 0.5 percent, with Jiangxi Copper Co. and Anhui Conch Cement Co. pacing gains among companies most-dependent on economic growth.
The S&P 500 jumped yesterday by the most this month after Commerce Department figures showed housing starts increased 9.3 percent to a 685,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News and the most since April 2010. Building permits, a proxy for future construction, also climbed to a more than one-year high.
Bond Yields Fall
The Dollar Index, which tracks the U.S. currency against those of six trading partners, slipped 0.2 percent. The euro traded at $1.3120 and rose 0.2 percent to 102.14 yen. Italian and Spanish two-year rates have slipped more than one percentage point since ECB President Mario Draghi announced unprecedented loans on Dec. 8 as investors bet that banks will use the cash to buy government debt.
Economists forecast banks would seek 293 billion euros ($383 billion), according to the median of 14 estimates in a Bloomberg News survey. Results will be announced today and the loans will start tomorrow.
"There has to be some link between the fact that the sovereign supply that’s come onto the market recently has been so well received and what the ECB is doing here," said Chris Weston, an institutional dealer at IG Markets in Melbourne. "We’ve got a little bit left in this euro rally. We’ll probably see more positive flows," coming from the long-term refinancing operation, he said.
Won, Aussie
The won climbed to 1,151.25 per dollar, extending yesterday’s 1.1 percent increase. Finance Minister Bahk Jae Wan said today that South Korean markets have been stabilizing quickly after the death of North Korean leader Kim Jong Il. The Malaysian ringgit strengthened 0.4 percent to 3.1685 versus the dollar before the release of data on consumer prices, while Australia’s currency rose 0.5 percent to $1.0124.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped four basis points to 210 basis points, Credit Agricole SA prices show. The index is on course for its biggest daily fall since Dec. 7 and is set for the lowest level since Dec. 13, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
Crude for February delivery rose as much as 1.2 percent to $98.44 a barrel in New York, following a 3.4 percent gain yesterday. The industry-funded American Petroleum Institute said crude inventories declined 4.57 million barrels last week. An Energy Department report today may show supplies fell 2.13 million barrels, according to a Bloomberg News survey.
Rubber futures in Tokyo jumped as much as 3.1 percent, the most since Dec. 1, to 279.7 yen a kilogram ($3,592 a metric ton). Palladium, used to make pollution-control devices in autos, gained for a second day, rising as much as 0.9 percent to $633.50 an ounce, the highest level in a week. "
"Dec. 21 (Bloomberg) -- Asian stocks jumped the most in almost three weeks, the euro and won strengthened and bond risk dropped after Chinese Premier Wen Jiabao pledged support for exports, better-than-forecast U.S. housing starts and a decline in Spanish borrowing costs.
The MSCI Asia Pacific Index added 1.8 percent at 11:17 a.m. in Tokyo, set for the largest gain since Dec. 1. Standard & Poor’s 500 Index futures were little changed after the stock gauge rallied 3 percent yesterday. The euro climbed 0.3 percent and the won strengthened 0.9 percent. The Markit iTraxx Asia index of credit-default swaps slumped the most since Dec. 7. Oil rose 1.3 percent in New York.
Wen said yesterday China will stabilize policies on exports and provide capital support to small companies. U.S. builders broke ground in November on the most houses in over a year, while German business confidence unexpectedly improved. The European Central Bank will announce results of its first tranche of unlimited three-year loans today, a day after Spain sold more than its maximum target of bills, driving borrowing costs lower.
"The U.S. is showing it’s fairly robust in terms of not being dragged down to the extent of European economies, but there remain significant structural impediments," said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. "There will be significant gains today. The question is, given we are coming into a holiday period, how sustainable those gains are going to be over the next week or so."
Stocks Gain
Almost 11 shares rose for every one that fell on MSCI’s Asia Pacific Index. Japan’s Nikkei 225 Stock Average gained 1.4 percent, South Korea’s Kospi Index rallied 2.7 percent and Australia’s S&P/ASX 200 Index gained 2.1 percent. Onesteel Ltd. jumped 7.1 percent after Goldman Sachs Group Inc. named it among top Australian stock picks for next year.
Taiwan’s Taiex index jumped 4 percent, the region’s biggest advance. Vice Premier Sean Chen said yesterday the island will let the National Stabilization Fund buy stocks to support local markets when necessary. The Shanghai Composite Index added 0.5 percent, with Jiangxi Copper Co. and Anhui Conch Cement Co. pacing gains among companies most-dependent on economic growth.
The S&P 500 jumped yesterday by the most this month after Commerce Department figures showed housing starts increased 9.3 percent to a 685,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News and the most since April 2010. Building permits, a proxy for future construction, also climbed to a more than one-year high.
Bond Yields Fall
The Dollar Index, which tracks the U.S. currency against those of six trading partners, slipped 0.2 percent. The euro traded at $1.3120 and rose 0.2 percent to 102.14 yen. Italian and Spanish two-year rates have slipped more than one percentage point since ECB President Mario Draghi announced unprecedented loans on Dec. 8 as investors bet that banks will use the cash to buy government debt.
Economists forecast banks would seek 293 billion euros ($383 billion), according to the median of 14 estimates in a Bloomberg News survey. Results will be announced today and the loans will start tomorrow.
"There has to be some link between the fact that the sovereign supply that’s come onto the market recently has been so well received and what the ECB is doing here," said Chris Weston, an institutional dealer at IG Markets in Melbourne. "We’ve got a little bit left in this euro rally. We’ll probably see more positive flows," coming from the long-term refinancing operation, he said.
Won, Aussie
The won climbed to 1,151.25 per dollar, extending yesterday’s 1.1 percent increase. Finance Minister Bahk Jae Wan said today that South Korean markets have been stabilizing quickly after the death of North Korean leader Kim Jong Il. The Malaysian ringgit strengthened 0.4 percent to 3.1685 versus the dollar before the release of data on consumer prices, while Australia’s currency rose 0.5 percent to $1.0124.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped four basis points to 210 basis points, Credit Agricole SA prices show. The index is on course for its biggest daily fall since Dec. 7 and is set for the lowest level since Dec. 13, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
Crude for February delivery rose as much as 1.2 percent to $98.44 a barrel in New York, following a 3.4 percent gain yesterday. The industry-funded American Petroleum Institute said crude inventories declined 4.57 million barrels last week. An Energy Department report today may show supplies fell 2.13 million barrels, according to a Bloomberg News survey.
Rubber futures in Tokyo jumped as much as 3.1 percent, the most since Dec. 1, to 279.7 yen a kilogram ($3,592 a metric ton). Palladium, used to make pollution-control devices in autos, gained for a second day, rising as much as 0.9 percent to $633.50 an ounce, the highest level in a week. "
Monday, 19 December 2011
Euro 8% Stronger Than Average as Losses Seen for 2012
Per Bloomberg :
"Dec. 19 (Bloomberg) -- The euro, after falling to its weakest level against the dollar since January, is poised to depreciate further as traders lose confidence in the ability of European leaders to contain the region’s debt crisis.
Measures in the derivatives market ranging from future volatility implied by option prices to the cost of insuring against a drop in the euro to the record number of bearish bets by hedge funds and other speculators, show traders expect the blueprint unveiled by European leaders this month for a closer fiscal accord will fail to stem the declines.
While the euro at $1.3024 remains about 8 percent above the average since it began trading in 1999, bears say that provides more scope for depreciation as bond yields in Italy and Spain approach levels that prompted bailouts of Greece, Ireland and Portugal. Companies from Spain’s Grupo Gowex to Germany’s GEA Group AG are preparing for some countries to leave the euro and bank failures.
"The euro trading where it is now reflects a global lack of confidence in those dealing with the sovereign debt crisis," Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London, said in a telephone interview on Dec. 14. "It is also a signal of more bad news to come in the euro zone. I am not certain what future euro negatives lie ahead, but I am certain there will be more."
Ratings Peril
Stress in Europe’s financial system, coupled with slower growth, prompted Standard & Poor’s on Dec. 5 to say Germany and France may be stripped of their AAA credit ratings as it put 15 euro nations on review for possible downgrade. Fitch Ratings lowered its outlook on France to "negative" on Dec. 16 and put Spain and Italy on review for a downgrade, citing Europe’s failure to find a "comprehensive solution" to the debt crisis.
"Things are far from complete," said London-based Fredrik Nerbrand, global head of asset allocation at HSBC Holdings Plc, Europe’s biggest bank by market value, in a telephone interview on Dec. 13.
"Most of policy makers’ recent debate was with regard to fiscal positions as opposed to the underlying problem, which is a lack of growth," he said. "It’s kind of like a doctor trying to treat the symptoms rather than the cause." Nerbrand said he currently has no euro-denominated debt.
The euro depreciated 2.54 percent last week, after trading below $1.30 for the first time since January. It declined to a 10-week low against Japan’s currency, finishing at 101.47 yen, down 2.33 percent from Dec. 9.
Merkel’s Confidence
Even with the losses, the euro is only down 1.27 percent the past 12-months against the dollar. Its average since 1999 is about $1.2049, and has ranged from 82.3 U.S. cents in October 2000 to a high of $1.6038 in July 2008.
The results of the Dec. 9 summit, at which 26 of the 27 European Union members agreed to sign up to or consider tighter deficit limits and sanctions against offenders, would have been "unthinkable" a few months ago and "can’t be overstated," German Chancellor Angela Merkel said in a Dec. 14 speech in Berlin.
Economists at Barclays Plc say a European recession has already begun. The euro area’s gross domestic product will contract 1.4 percent this quarter, 0.6 percent in the first three months of 2012 and stagnate in the second quarter before resuming growing in the third, Barclays said in a Dec. 8 report.
Rising Yields
The debt of Italy was among the worst performing last week of higher-yielding European government securities last week. Italy’s 10-year bond yield climbed 23 basis points to finish the week at 6.59 percent, down from a surge to over 6.75 percent during the week. Italy’s yields rose last month above the 7 percent threshold that led Greece, Ireland and Portugal to seek bailouts. The 10-year yield climbed to 6.78 percent at 7:13 a.m. New York time.
"With the contagion of the crisis having spread to Italy, the risk of a euro breakup is now viewed as no longer non- trivial," David Woo, the global head of rates and currencies in New York at Bank of America Merrill Lynch, said in a Dec. 13 interview. The bank sees the euro falling to $1.25 by April.
Most measures of the future for the euro has deteriorated this quarter. The six-month euro-dollar option butterfly, which measures the gap in implied volatility of out-of-the money, or virtually worthless, options and those that would likely produce a profit, was 0.55 percentage point today.
Risk Reversal Rates
That compares with the 0.76 percentage point reached on Sept. 26, the highest since April 2009, and is up from 0.36 in March, when EU leaders agreed on a retooled bailout plan for the region’s most indebted nations. A higher number signals traders expect large moves in the currency and are buying insurance to hedge that risk.
The so-called 25-delta risk reversal rate had a 3.64 percentage point premium for euro puts over calls during the first three trading days of last week, before retreating to end the week at 3.12 percent points and to trade today at 2.99 percentage points. A 4.39 percentage-points premium reached Nov. 17 was the biggest since at least 2005, when Bloomberg began to track the data. Puts grant the right to sell the euro, while calls allow for purchases. An increase in the put premium signals investors are wagering the common currency will slide further.
Implied volatility on three-month options for the euro- dollar pair ended last week at 14.3 percent, about four percentage points above its low this year. The gap, which narrowed by the end of the week to 1.2 percentage points, is viewed by traders as an indicator of how expensive or cheap options are.
‘Hedging Downside’
The increase in volatility and the price of the option butterfly since September is a result of demand from longer-term investors, such as corporations, for contracts to provide insurance against further depreciation of the euro, said Bank of America’s Woo.
Grupo Gowex, a Spanish provider of Wi-Fi wireless services, said it is moving funds to Germany because it expects Spain to exit the euro, according to Jenaro Garcia, founder and chief executive officer of Madrid-based Grupo Gowex. Juerg Oleas, CEO of GEA Group, a machinery maker based in Dusseldorf, said it is limiting amounts held at any one bank.
Three-month implied volatility on euro-dollar options reached 2.6 percentage points above the level of historic volatility, which measures the pace of actual price swings in the underlying currency. The gap, which narrowed by the end of the week to 1.2 percentage points, is viewed by traders as a sign that option prices being expensive amid heightened demand.
Option Hedges
"The high price of option hedges against a slide in the euro shows a quiet resignation to the situation rather than out- and-out panic," Simon Smollett, a senior options strategist at Credit Agricole Corporate & Investment Bank in London, said in a telephone interview on Dec. 12. "The work the ECB and European politicians are going to do is going to take time; there is no instant solution."
That’s little comfort for European banks which saw their cost to borrow in dollars in the currency swaps market surge last week. The three-month cross-currency basis swap, the rate banks pay to convert euro-based payments into dollars, fell to 147 basis points below the euro interbank offered rate, signaling an increased price for dollar funding, before easing by the end of the week to 122 basis points below Euribor, and moving to 119 basis points below today.
On Dec. 8, banks received only 109 basis points less than Euribor when using the swaps market.
‘Range of Outcomes’
Hedge funds and other large speculators held a record net 116,457 contracts at the CME Group as of Dec. 13 that the 17- nation currency will fall versus the dollar in the, according to Commodity Futures Trading Commission data. The so-called net- shorts exceeded the previous all-time high of 113,890 in May 2010, when Greece accepted a 110 billion-euro ($145 billion) aid package.
"The possible range of outcomes for Europe is quite binary," Jose Wynne, the head of North America foreign-exchange research at the investment banking unit of Barclays, said during a briefing at the firm’s New York office Dec. 8. "Either you fix it or trouble comes. If more trouble comes then all of the banking sector in Europe will be feeling the stress." "
"Dec. 19 (Bloomberg) -- The euro, after falling to its weakest level against the dollar since January, is poised to depreciate further as traders lose confidence in the ability of European leaders to contain the region’s debt crisis.
Measures in the derivatives market ranging from future volatility implied by option prices to the cost of insuring against a drop in the euro to the record number of bearish bets by hedge funds and other speculators, show traders expect the blueprint unveiled by European leaders this month for a closer fiscal accord will fail to stem the declines.
While the euro at $1.3024 remains about 8 percent above the average since it began trading in 1999, bears say that provides more scope for depreciation as bond yields in Italy and Spain approach levels that prompted bailouts of Greece, Ireland and Portugal. Companies from Spain’s Grupo Gowex to Germany’s GEA Group AG are preparing for some countries to leave the euro and bank failures.
"The euro trading where it is now reflects a global lack of confidence in those dealing with the sovereign debt crisis," Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London, said in a telephone interview on Dec. 14. "It is also a signal of more bad news to come in the euro zone. I am not certain what future euro negatives lie ahead, but I am certain there will be more."
Ratings Peril
Stress in Europe’s financial system, coupled with slower growth, prompted Standard & Poor’s on Dec. 5 to say Germany and France may be stripped of their AAA credit ratings as it put 15 euro nations on review for possible downgrade. Fitch Ratings lowered its outlook on France to "negative" on Dec. 16 and put Spain and Italy on review for a downgrade, citing Europe’s failure to find a "comprehensive solution" to the debt crisis.
"Things are far from complete," said London-based Fredrik Nerbrand, global head of asset allocation at HSBC Holdings Plc, Europe’s biggest bank by market value, in a telephone interview on Dec. 13.
"Most of policy makers’ recent debate was with regard to fiscal positions as opposed to the underlying problem, which is a lack of growth," he said. "It’s kind of like a doctor trying to treat the symptoms rather than the cause." Nerbrand said he currently has no euro-denominated debt.
The euro depreciated 2.54 percent last week, after trading below $1.30 for the first time since January. It declined to a 10-week low against Japan’s currency, finishing at 101.47 yen, down 2.33 percent from Dec. 9.
Merkel’s Confidence
Even with the losses, the euro is only down 1.27 percent the past 12-months against the dollar. Its average since 1999 is about $1.2049, and has ranged from 82.3 U.S. cents in October 2000 to a high of $1.6038 in July 2008.
The results of the Dec. 9 summit, at which 26 of the 27 European Union members agreed to sign up to or consider tighter deficit limits and sanctions against offenders, would have been "unthinkable" a few months ago and "can’t be overstated," German Chancellor Angela Merkel said in a Dec. 14 speech in Berlin.
Economists at Barclays Plc say a European recession has already begun. The euro area’s gross domestic product will contract 1.4 percent this quarter, 0.6 percent in the first three months of 2012 and stagnate in the second quarter before resuming growing in the third, Barclays said in a Dec. 8 report.
Rising Yields
The debt of Italy was among the worst performing last week of higher-yielding European government securities last week. Italy’s 10-year bond yield climbed 23 basis points to finish the week at 6.59 percent, down from a surge to over 6.75 percent during the week. Italy’s yields rose last month above the 7 percent threshold that led Greece, Ireland and Portugal to seek bailouts. The 10-year yield climbed to 6.78 percent at 7:13 a.m. New York time.
"With the contagion of the crisis having spread to Italy, the risk of a euro breakup is now viewed as no longer non- trivial," David Woo, the global head of rates and currencies in New York at Bank of America Merrill Lynch, said in a Dec. 13 interview. The bank sees the euro falling to $1.25 by April.
Most measures of the future for the euro has deteriorated this quarter. The six-month euro-dollar option butterfly, which measures the gap in implied volatility of out-of-the money, or virtually worthless, options and those that would likely produce a profit, was 0.55 percentage point today.
Risk Reversal Rates
That compares with the 0.76 percentage point reached on Sept. 26, the highest since April 2009, and is up from 0.36 in March, when EU leaders agreed on a retooled bailout plan for the region’s most indebted nations. A higher number signals traders expect large moves in the currency and are buying insurance to hedge that risk.
The so-called 25-delta risk reversal rate had a 3.64 percentage point premium for euro puts over calls during the first three trading days of last week, before retreating to end the week at 3.12 percent points and to trade today at 2.99 percentage points. A 4.39 percentage-points premium reached Nov. 17 was the biggest since at least 2005, when Bloomberg began to track the data. Puts grant the right to sell the euro, while calls allow for purchases. An increase in the put premium signals investors are wagering the common currency will slide further.
Implied volatility on three-month options for the euro- dollar pair ended last week at 14.3 percent, about four percentage points above its low this year. The gap, which narrowed by the end of the week to 1.2 percentage points, is viewed by traders as an indicator of how expensive or cheap options are.
‘Hedging Downside’
The increase in volatility and the price of the option butterfly since September is a result of demand from longer-term investors, such as corporations, for contracts to provide insurance against further depreciation of the euro, said Bank of America’s Woo.
Grupo Gowex, a Spanish provider of Wi-Fi wireless services, said it is moving funds to Germany because it expects Spain to exit the euro, according to Jenaro Garcia, founder and chief executive officer of Madrid-based Grupo Gowex. Juerg Oleas, CEO of GEA Group, a machinery maker based in Dusseldorf, said it is limiting amounts held at any one bank.
Three-month implied volatility on euro-dollar options reached 2.6 percentage points above the level of historic volatility, which measures the pace of actual price swings in the underlying currency. The gap, which narrowed by the end of the week to 1.2 percentage points, is viewed by traders as a sign that option prices being expensive amid heightened demand.
Option Hedges
"The high price of option hedges against a slide in the euro shows a quiet resignation to the situation rather than out- and-out panic," Simon Smollett, a senior options strategist at Credit Agricole Corporate & Investment Bank in London, said in a telephone interview on Dec. 12. "The work the ECB and European politicians are going to do is going to take time; there is no instant solution."
That’s little comfort for European banks which saw their cost to borrow in dollars in the currency swaps market surge last week. The three-month cross-currency basis swap, the rate banks pay to convert euro-based payments into dollars, fell to 147 basis points below the euro interbank offered rate, signaling an increased price for dollar funding, before easing by the end of the week to 122 basis points below Euribor, and moving to 119 basis points below today.
On Dec. 8, banks received only 109 basis points less than Euribor when using the swaps market.
‘Range of Outcomes’
Hedge funds and other large speculators held a record net 116,457 contracts at the CME Group as of Dec. 13 that the 17- nation currency will fall versus the dollar in the, according to Commodity Futures Trading Commission data. The so-called net- shorts exceeded the previous all-time high of 113,890 in May 2010, when Greece accepted a 110 billion-euro ($145 billion) aid package.
"The possible range of outcomes for Europe is quite binary," Jose Wynne, the head of North America foreign-exchange research at the investment banking unit of Barclays, said during a briefing at the firm’s New York office Dec. 8. "Either you fix it or trouble comes. If more trouble comes then all of the banking sector in Europe will be feeling the stress." "
Tuesday, 13 December 2011
PAIA - PROMOTION OF ACCESS TO INFORMATION ACT - SUBMISSION OF MANUAL BEFORE 31 DECEMBER 2011
Deadline for all entities (Company, CC, Partnership, Sole Traders, Professionals) fit the requirements to submitt their PAIA Manual before 31 December 2011.
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Asia Stocks Drop on European Credit-Rating Concern; Won Weakens
Per Bloomberg, a good read I came across.
"Dec. 13 (Bloomberg) -- Asian stocks dropped, sending the benchmark regional gauge to a two-week low, and the won weakened on speculation that credit-ratings may be cut for European countries. The euro was little changed against the dollar after falling to the weakest level in two months yesterday.
The MSCI Asia Pacific Index slid 1.3 percent as of 11:52 a.m. in Tokyo. The won declined against 16 major counterparts, while the euro held at $1.3186. Gold for immediate delivery dropped as much as 0.9 percent to $1,650.93 an ounce, a seven- week low. Oil was little changed at $97.88 a barrel, while Standard & Poor’s 500 Index futures gained 0.1 percent.
The European Union summit last week offered few new measures and doesn’t diminish the risk of credit downgrades on European nations, Moody’s Investors Service said yesterday. Fitch Ratings said a comprehensive solution has not yet been offered and predicted a "significant economic downturn" in the region. Data today may show German investor confidence slid to a three-year low, while sales at U.S. retailers probably rose in November, based on a survey of economist estimates by Bloomberg.
"The ratings agencies are reminding us of sovereign downgrade risk" in Europe, said Sacha Tihanyi, a Hong Kong- based currency strategist at Scotia Capital, the investment banking unit of Bank of Nova Scotia. "The dollar will have no choice but to find support on the back of euro weakness."
Bond Auction
The Dollar Index was little changed at 79.524 after rising 1.2 percent yesterday. The European Financial Stability Facility will auction as much as 2 billion euros ($2.6 billion) of 91-day bills today, while Greece will sell 1.25 billion euros of 182- day bills. Belgium will offer 1.2 billion euros of short-term debt and Spain will auction 364-day and 553-day bills.
About seven stocks fell for each that rose in the MSCI Asia Pacific Index. The equity gauge, poised for the lowest close since Nov. 30, has fallen 17 percent this year.
The MSCI China Index lost 1.2 percent. Housing transactions in China declined in 27 out of 35 cities tracked by Soufun between Dec. 5 and Dec. 11. Transactions fell more than 60 percent in at least four cities, including Tianjin and Hangzhou.
China Gas Holdings Ltd. surged 22 percent for the biggest advance in the MSCI Asia Pacific Index. ENN Energy Holdings Ltd. and China Petroleum & Chemical Corp. will make an all-cash buyout offer for the piped-gas supplier as they seek to purchase a controlling stake, China Gas said.
German Confidence
S&P 500 futures rose to 1,230.80. The yield on 10-year U.S. Treasuries increased two basis points to 2.03 percent. Sales at retailers probably rose 0.6 percent last month, following a 0.5 percent advance in October, according to the median forecast of 64 economists surveyed by Bloomberg News ahead of the Commerce Department report today.
The ZEW Center for European Economic Research may say its index of German investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 55.8 in December, according to the median estimate in a Bloomberg News survey of economists. That would be the lowest reading since October 2008.
The South Korean won fell for a fourth day, declining 0.7 percent to 1,155.38 per dollar. It touched 1,160.00 earlier, the weakest level since Nov. 28. Copper retreated 0.2 percent to $7,589.75 a metric ton, extending yesterday’s 2.7 percent decline, the most in three weeks. Gold traded at $1,654.88 an ounce. "
"Dec. 13 (Bloomberg) -- Asian stocks dropped, sending the benchmark regional gauge to a two-week low, and the won weakened on speculation that credit-ratings may be cut for European countries. The euro was little changed against the dollar after falling to the weakest level in two months yesterday.
The MSCI Asia Pacific Index slid 1.3 percent as of 11:52 a.m. in Tokyo. The won declined against 16 major counterparts, while the euro held at $1.3186. Gold for immediate delivery dropped as much as 0.9 percent to $1,650.93 an ounce, a seven- week low. Oil was little changed at $97.88 a barrel, while Standard & Poor’s 500 Index futures gained 0.1 percent.
The European Union summit last week offered few new measures and doesn’t diminish the risk of credit downgrades on European nations, Moody’s Investors Service said yesterday. Fitch Ratings said a comprehensive solution has not yet been offered and predicted a "significant economic downturn" in the region. Data today may show German investor confidence slid to a three-year low, while sales at U.S. retailers probably rose in November, based on a survey of economist estimates by Bloomberg.
"The ratings agencies are reminding us of sovereign downgrade risk" in Europe, said Sacha Tihanyi, a Hong Kong- based currency strategist at Scotia Capital, the investment banking unit of Bank of Nova Scotia. "The dollar will have no choice but to find support on the back of euro weakness."
Bond Auction
The Dollar Index was little changed at 79.524 after rising 1.2 percent yesterday. The European Financial Stability Facility will auction as much as 2 billion euros ($2.6 billion) of 91-day bills today, while Greece will sell 1.25 billion euros of 182- day bills. Belgium will offer 1.2 billion euros of short-term debt and Spain will auction 364-day and 553-day bills.
About seven stocks fell for each that rose in the MSCI Asia Pacific Index. The equity gauge, poised for the lowest close since Nov. 30, has fallen 17 percent this year.
The MSCI China Index lost 1.2 percent. Housing transactions in China declined in 27 out of 35 cities tracked by Soufun between Dec. 5 and Dec. 11. Transactions fell more than 60 percent in at least four cities, including Tianjin and Hangzhou.
China Gas Holdings Ltd. surged 22 percent for the biggest advance in the MSCI Asia Pacific Index. ENN Energy Holdings Ltd. and China Petroleum & Chemical Corp. will make an all-cash buyout offer for the piped-gas supplier as they seek to purchase a controlling stake, China Gas said.
German Confidence
S&P 500 futures rose to 1,230.80. The yield on 10-year U.S. Treasuries increased two basis points to 2.03 percent. Sales at retailers probably rose 0.6 percent last month, following a 0.5 percent advance in October, according to the median forecast of 64 economists surveyed by Bloomberg News ahead of the Commerce Department report today.
The ZEW Center for European Economic Research may say its index of German investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 55.8 in December, according to the median estimate in a Bloomberg News survey of economists. That would be the lowest reading since October 2008.
The South Korean won fell for a fourth day, declining 0.7 percent to 1,155.38 per dollar. It touched 1,160.00 earlier, the weakest level since Nov. 28. Copper retreated 0.2 percent to $7,589.75 a metric ton, extending yesterday’s 2.7 percent decline, the most in three weeks. Gold traded at $1,654.88 an ounce. "
Monday, 12 December 2011
Europe Stocks, Euro Drop on Moody’s Review; Commodities Fall
Per Bloomberg.com
"Dec. 12 (Bloomberg) -- European stocks and U.S. equity futures fell and the euro weakened as Moody’s Investors Service said it will review ratings for countries in the region. Italian bonds stayed lower after a debt sale, while commodities retreated.
The Stoxx Europe 600 Index dropped 0.8 percent at 10:55 a.m. in London, after declining as much as 1.3 percent. Standard & Poor’s 500 Index futures lost 0.9 percent. The euro depreciated 0.9 percent to $1.3268. The 10-year Italian bond yield jumped 30 basis points as the government sold 7 billion euros ($9.3 billion) of bills. The cost of insuring against default on European government debt approached a record high. Silver and natural gas declined.
Last week’s European Union summit offered few new measures and doesn’t diminish the risk of credit-ranking revisions, Moody’s said today. While a European accord to limit budget deficits represents "progress," the onus is on governments rather than the European Central Bank to resolve the crisis with financial backing, Bundesbank President Jens Weidmann told Frankfurter Allgemeine Sonntagszeitung, according to a report published yesterday.
"The European situation will continue to bother us into next year as policy initiatives seem insufficient," said Mark Matthews, the Singapore-based head of research for Asia at Bank Julius Baer & Co., which oversees about $180 billion globally.
LSE Rating Review
Six shares fell for every one that advanced in the Stoxx 600, extending last week’s 0.1 percent drop. Xstrata Plc and Eurasian Natural Resources Corp. led mining companies lower. London Stock Exchange Group Plc slipped 4.1 percent as S&P placed its credit rating on review for a downgrade and the company agreed to buy the 50 percent of FTSE International Ltd. it doesn’t already own from Pearson Plc.
The decline in S&P 500 futures signaled the U.S. equity benchmark may trim its 1.7 percent gain on Dec. 9. The measure has climbed for two straight weeks, its first back-to-back weekly advance since October.
The two-year Italian note pared declines, with the yield climbing 17 basis points. The government sold 365-day bills at an average yield of 5.952 percent, compared with 6.087 percent at the previous auction. The extra yield investors demand to hold 10-year French bonds instead of benchmark German bunds climbed 11 basis points as the government prepared to offer as much as 6.5 billion euros of 91-, 182- and 308-day instruments.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed for a fifth day, jumping seven basis points to 370, the highest since Nov. 28, close to its all-time high of 385. The Markit iTraxx Financial Index of contracts linked to the senior bonds of 25 banks and insurers increased five basis points to 301.
U.S. Debt Sales
The yield on the 30-year Treasury bond fell four basis points to 3.07 percent, with 10-year yields also slipping four basis points.
U.S. debt auctions over the next two weeks will probably total $177 billion, the largest concentration of so-called duration supply ever, JPMorgan Chase & Co., one of the 21 primary dealers that underwrite America’s borrowings, said in a report Dec. 9. This week’s sales will consist of $78 billion in notes, bonds and inflation-linked securities in four auctions starting today with $32 billion of three-year debt. The Treasury will announce on Dec. 15 how much it plans to raise in three offerings starting Dec. 19.
The dollar appreciated against most of its major peers monitored by Bloomberg, strengthening 0.2 percent versus the yen and 0.4 percent against the pound.
The Swedish krona weakened against 14 of its 16 most- actively traded counterparts, tumbling 1.4 percent versus the dollar and 0.5 percent against the euro.
European carbon prices rose from record lows after the world’s largest polluters backed away from positions that stymied global climate talks for more than a decade. EU permits for delivery this month rose as much 6.2 percent and traded at 8.10 euros on the ICE Futures Europe exchange in London.
Commodities Fall
Silver dropped 2.4 percent to $31.48 an ounce and natural gas fell 2.3 percent to $3.24 for a million British thermal units. Copper declined 1.7 percent to $7,680 a metric ton and Brent crude was 1.5 percent lower at $107.08 a barrel.
The MSCI Emerging Markets Index slipped 0.1 percent, erasing earlier gains of as much as 0.9 percent. India’s Sensex Index fell 2.1 percent after industrial production fell for the first time since June 2009. The Shanghai Composite Index lost 1 percent after data showed overseas shipments rose by the least in two years. Benchmark gauges in Turkey, Poland and the Czech Republic lost more than 1 percent. "
"Dec. 12 (Bloomberg) -- European stocks and U.S. equity futures fell and the euro weakened as Moody’s Investors Service said it will review ratings for countries in the region. Italian bonds stayed lower after a debt sale, while commodities retreated.
The Stoxx Europe 600 Index dropped 0.8 percent at 10:55 a.m. in London, after declining as much as 1.3 percent. Standard & Poor’s 500 Index futures lost 0.9 percent. The euro depreciated 0.9 percent to $1.3268. The 10-year Italian bond yield jumped 30 basis points as the government sold 7 billion euros ($9.3 billion) of bills. The cost of insuring against default on European government debt approached a record high. Silver and natural gas declined.
Last week’s European Union summit offered few new measures and doesn’t diminish the risk of credit-ranking revisions, Moody’s said today. While a European accord to limit budget deficits represents "progress," the onus is on governments rather than the European Central Bank to resolve the crisis with financial backing, Bundesbank President Jens Weidmann told Frankfurter Allgemeine Sonntagszeitung, according to a report published yesterday.
"The European situation will continue to bother us into next year as policy initiatives seem insufficient," said Mark Matthews, the Singapore-based head of research for Asia at Bank Julius Baer & Co., which oversees about $180 billion globally.
LSE Rating Review
Six shares fell for every one that advanced in the Stoxx 600, extending last week’s 0.1 percent drop. Xstrata Plc and Eurasian Natural Resources Corp. led mining companies lower. London Stock Exchange Group Plc slipped 4.1 percent as S&P placed its credit rating on review for a downgrade and the company agreed to buy the 50 percent of FTSE International Ltd. it doesn’t already own from Pearson Plc.
The decline in S&P 500 futures signaled the U.S. equity benchmark may trim its 1.7 percent gain on Dec. 9. The measure has climbed for two straight weeks, its first back-to-back weekly advance since October.
The two-year Italian note pared declines, with the yield climbing 17 basis points. The government sold 365-day bills at an average yield of 5.952 percent, compared with 6.087 percent at the previous auction. The extra yield investors demand to hold 10-year French bonds instead of benchmark German bunds climbed 11 basis points as the government prepared to offer as much as 6.5 billion euros of 91-, 182- and 308-day instruments.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed for a fifth day, jumping seven basis points to 370, the highest since Nov. 28, close to its all-time high of 385. The Markit iTraxx Financial Index of contracts linked to the senior bonds of 25 banks and insurers increased five basis points to 301.
U.S. Debt Sales
The yield on the 30-year Treasury bond fell four basis points to 3.07 percent, with 10-year yields also slipping four basis points.
U.S. debt auctions over the next two weeks will probably total $177 billion, the largest concentration of so-called duration supply ever, JPMorgan Chase & Co., one of the 21 primary dealers that underwrite America’s borrowings, said in a report Dec. 9. This week’s sales will consist of $78 billion in notes, bonds and inflation-linked securities in four auctions starting today with $32 billion of three-year debt. The Treasury will announce on Dec. 15 how much it plans to raise in three offerings starting Dec. 19.
The dollar appreciated against most of its major peers monitored by Bloomberg, strengthening 0.2 percent versus the yen and 0.4 percent against the pound.
The Swedish krona weakened against 14 of its 16 most- actively traded counterparts, tumbling 1.4 percent versus the dollar and 0.5 percent against the euro.
European carbon prices rose from record lows after the world’s largest polluters backed away from positions that stymied global climate talks for more than a decade. EU permits for delivery this month rose as much 6.2 percent and traded at 8.10 euros on the ICE Futures Europe exchange in London.
Commodities Fall
Silver dropped 2.4 percent to $31.48 an ounce and natural gas fell 2.3 percent to $3.24 for a million British thermal units. Copper declined 1.7 percent to $7,680 a metric ton and Brent crude was 1.5 percent lower at $107.08 a barrel.
The MSCI Emerging Markets Index slipped 0.1 percent, erasing earlier gains of as much as 0.9 percent. India’s Sensex Index fell 2.1 percent after industrial production fell for the first time since June 2009. The Shanghai Composite Index lost 1 percent after data showed overseas shipments rose by the least in two years. Benchmark gauges in Turkey, Poland and the Czech Republic lost more than 1 percent. "
Thursday, 8 December 2011
Analysts see rand 5% stronger in a year
Per FIN 24:
"Johannesburg - The rand should bounce back 5% in the next year after its hammering since August by investors worried about the knock-on effects of weak eurozone and US economic growth, a Reuters poll showed on Wednesday.
Considered a high-risk asset, the rand is one of the world’s most traded currencies and of late has tended to be sold by global investors at the first signs of bad news coming out of Brussels or Washington.
Analysts said the currency’s roughly 20% decline over the last four months was overdone.
“We think that the market has excessively priced in negative news for the global economy,” said Murat Toprak, a regional strategist at HSBC in London.
“If we assume that the market settles down and this 'risk-on, risk-off' parameter eases, we do not see any reason why the South African rand will trade at such weak levels against the dollar.”
The foreign exchange poll of 30 strategists, traders and economists, which is conducted monthly with other major currencies, saw the rand trading at R8.1 against the dollar in 3 months, R8.0 in 6 months, and R7.68 in a year.
Seven of the respondents saw the currency trading weaker than R8.00 in a year’s time.
Slightly weaker-than-expected retail sales data helped weaken the rand to around R8.08 on Wednesday, but analysts said the ability of the eurozone to resolve its debt crisis would still be the currency’s biggest driver.
“Bad news from the euro area can always cause a pullback, particularly if the euro region fails to demonstrate urgent commitment in finding a solution,” said Annabel Bishop, economist at Investec.
The leaders of France and Germany will not leave this week’s EU summit until a “powerful” deal is reached to arrest the eurozone debt crisis, Paris said on Wednesday, as the latest borrowing figures exposed the stressed state of Europe’s banks.
“The EU leaders summit on Friday is key,” Bishop said.
“South Africa may go on holiday over the end of the year/start of the next but northern markets continue to operate and risk aversion levels will not go into hiatus,” Bishop added. "
"Johannesburg - The rand should bounce back 5% in the next year after its hammering since August by investors worried about the knock-on effects of weak eurozone and US economic growth, a Reuters poll showed on Wednesday.
Considered a high-risk asset, the rand is one of the world’s most traded currencies and of late has tended to be sold by global investors at the first signs of bad news coming out of Brussels or Washington.
Analysts said the currency’s roughly 20% decline over the last four months was overdone.
“We think that the market has excessively priced in negative news for the global economy,” said Murat Toprak, a regional strategist at HSBC in London.
“If we assume that the market settles down and this 'risk-on, risk-off' parameter eases, we do not see any reason why the South African rand will trade at such weak levels against the dollar.”
The foreign exchange poll of 30 strategists, traders and economists, which is conducted monthly with other major currencies, saw the rand trading at R8.1 against the dollar in 3 months, R8.0 in 6 months, and R7.68 in a year.
Seven of the respondents saw the currency trading weaker than R8.00 in a year’s time.
Slightly weaker-than-expected retail sales data helped weaken the rand to around R8.08 on Wednesday, but analysts said the ability of the eurozone to resolve its debt crisis would still be the currency’s biggest driver.
“Bad news from the euro area can always cause a pullback, particularly if the euro region fails to demonstrate urgent commitment in finding a solution,” said Annabel Bishop, economist at Investec.
The leaders of France and Germany will not leave this week’s EU summit until a “powerful” deal is reached to arrest the eurozone debt crisis, Paris said on Wednesday, as the latest borrowing figures exposed the stressed state of Europe’s banks.
“The EU leaders summit on Friday is key,” Bishop said.
“South Africa may go on holiday over the end of the year/start of the next but northern markets continue to operate and risk aversion levels will not go into hiatus,” Bishop added. "
Tuesday, 6 December 2011
Imperial takes tobacco fight to court
Should be a test case !!!
Canberra - A second major tobacco company has gone to Australia's High Court to argue that new laws banning logos from cigarette packs are unconstitutional.
Imperial Tobacco Australia Ltd. on Tuesday filed pleadings in the country's highest court. British American Tobacco Australia Ltd. last week initiated similar action against laws banning distinctive colors and designs from packs and render them uniformly olive-brown starting December 2012.
Imperial Tobacco argues the laws breach Australia's constitution because they acquire intellectual property on unjust terms.
Australia last month became the first country to pass such strict packaging laws aimed at stripping away any lingering glamour associated with smoking. - Sapa-AP
Merkel, Sarkozy Unite on EU Revamp as S&P Warns on Ratings
Dec. 6 (Bloomberg) -- German Chancellor Angela Merkel and French President Nicolas Sarkozy strengthened their push for new rules to tighten euro area economic cooperation after Standard & Poor’s said it may downgrade credit ratings across the region.
The leaders of Europe’s two biggest economies responded in a joint statement late yesterday that they "took note" of the move by S&P, while both countries "reinforce their conviction" that common proposals for closer fiscal union in the European Union will "strengthen coordination of budget and economic policy," and promote stability and growth.
"The actions of the last three years have shown that the euro zone governments are not prepared to act collectively in a way that convinces markets," said Paul Donovan, deputy head of global economics at UBS AG in London. The S&P move "may perhaps heighten the desirability of coming out with a compelling solution for the French and the Germans."
Germany and France risk losing their AAA credit ratings in a review of 15 euro nations for possible downgrade, S&P said. At an earlier meeting in Paris, Merkel and Sarkozy said both countries were aligned on backing automatic penalties for deficit violators and locking limits on debt into euro states’ constitutions. Investors say such moves might pave the way for the European Central Bank to do more to fight the debt crisis.
ECB Focus
The question is whether the Franco-German push toward integration is enough to prompt ECB President Mario Draghi to step up the central bank’s response, said Carsten Brzeski, an economist at ING Group in Brussels.
While the leaders’ announcement is "a good start to the week of truth," Merkel and Sarkozy still "need to put money where their mouth is and bring everyone else on board," Brzeski said by phone. "From a financial market perspective, it’s about them doing enough to deliver Draghi’s fiscal compact."
The euro fell for a third day after S&P’s announcement, which put European nations including the six AAA-rated countries on watch for potential downgrades pending the outcome of a Dec. 8-9 leaders summit. The 17-nation currency declined 0.3 percent to $1.3367 at 12:47 p.m. in Tokyo. Asia stocks dropped for the first time in seven days.
‘Excessive’
The S&P move was "excessive," said Vincent Truglia, managing director at New York-based Granite Springs Asset Management LLP and a former head of the sovereign risk unit at Moody’s Investors Service, a rival rating company.
"Countries like Germany, Luxembourg, Netherlands, Finland are AAA, and Austria is a pretty strong AAA," he said.
S&P said that ratings could be cut by one level for Austria, Belgium, Finland, Germany, Netherlands and Luxembourg, and by up to two notches for the other governments.
The other countries warned are Estonia, France, Ireland, Italy, Malta, Portugal, Slovakia, Slovenia and Spain, according to S&P. The company said it maintained the negative outlook for Cyprus, and Greece wasn’t put on "creditwatch."
"The credit opinion is based on factors that can’t be influenced by Austria alone," according to a statement from Austria’s finance ministry. "It is important that the summit later this week comes up with concrete results."
With the fate of the currency shared by the 17 euro states at risk, Merkel and Sarkozy are stressing their common platform going into the summit that aims to end the crisis now in its third year.
‘United’ Resolve
"Germany and France are united in their resolve to take all necessary measures together with their European partners and the European institutions to safeguard the stability of the euro zone," according to their statement e-mailed late yesterday after the S&P announcement.
Among the measures announced were plans to fast-track the euro’s permanent rescue fund to 2012, one year earlier than envisaged. Germany and France will also seek to ensure that decisions by the fund, the European Stability Mechanism, can be made by a "qualified majority" rather than a unanimous vote by the participating governments. Sarkozy said they aimed to reach consensus on treaty change with other euro leaders by March.
"We don’t have time -- we are conscious of the gravity of the situation," Sarkozy said after meeting with Merkel over lunch at the Elysee palace. "We want to go as fast as possible based on this agreement between France and Germany, which is open to others."
Response
Safeguarding banks, limiting the damage to Italy and Spain and finding additional rescue funds may hinge on the response to Franco-German demands for closer economic integration and tougher policing of fiscal rules.
Draghi signaled last week that should a "new fiscal compact" emerge among the euro nations, "other elements might follow." Merkel and Sarkozy both declined to comment on Draghi’s comments, stressing the ECB’s independence.
"It’s a step in the right direction for the ECB but we’ll want to know how the automatic sanctions are triggered," said Klaus Baader, co-chief economist at Societe Generale SA. "When France and Germany have joint press conferences and say we agree on everything you have to take that with a pinch of salt."
With the EU summit looming, U.S. Treasury Secretary Timothy Geithner arrives in Frankfurt to meet with Draghi and Bundesbank President Jens Weidmann before heading to Berlin for talks with German Finance Minister Wolfgang Schaeuble. The ECB holds a policy meeting on Dec. 8.
‘Bit of Trust’
European leaders will seek to "win back a bit of trust" at the summit after "our reliability has suffered," Merkel said in Paris. "We are steadfastly determined to make the decision at the council now."
Merkel and Sarkozy yesterday repeated their rejection of jointly sold euro bonds in solving the crisis, while seeking to calm concerns of euro-area member states that the European Court of Justice would be able to veto national budgets as part of their proposal for centralized deficit supervision.
With euro bonds ruled out, "the onus is still on the ECB to print money to make huge loans or bond purchases and draw a line under the crisis," said Jennifer McKeown, senior European economist at Capital Economics in London.
The move by S&P adds impetus to that, said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.
"Anything which impacts the perceived creditworthiness of the main guarantors of euro zone debt is bad news for planned steps towards a fiscal union," he said in an e-mail. "All this puts more pressure on the ECB to hold the fort."
Sent from Bloomberg
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
The leaders of Europe’s two biggest economies responded in a joint statement late yesterday that they "took note" of the move by S&P, while both countries "reinforce their conviction" that common proposals for closer fiscal union in the European Union will "strengthen coordination of budget and economic policy," and promote stability and growth.
"The actions of the last three years have shown that the euro zone governments are not prepared to act collectively in a way that convinces markets," said Paul Donovan, deputy head of global economics at UBS AG in London. The S&P move "may perhaps heighten the desirability of coming out with a compelling solution for the French and the Germans."
Germany and France risk losing their AAA credit ratings in a review of 15 euro nations for possible downgrade, S&P said. At an earlier meeting in Paris, Merkel and Sarkozy said both countries were aligned on backing automatic penalties for deficit violators and locking limits on debt into euro states’ constitutions. Investors say such moves might pave the way for the European Central Bank to do more to fight the debt crisis.
ECB Focus
The question is whether the Franco-German push toward integration is enough to prompt ECB President Mario Draghi to step up the central bank’s response, said Carsten Brzeski, an economist at ING Group in Brussels.
While the leaders’ announcement is "a good start to the week of truth," Merkel and Sarkozy still "need to put money where their mouth is and bring everyone else on board," Brzeski said by phone. "From a financial market perspective, it’s about them doing enough to deliver Draghi’s fiscal compact."
The euro fell for a third day after S&P’s announcement, which put European nations including the six AAA-rated countries on watch for potential downgrades pending the outcome of a Dec. 8-9 leaders summit. The 17-nation currency declined 0.3 percent to $1.3367 at 12:47 p.m. in Tokyo. Asia stocks dropped for the first time in seven days.
‘Excessive’
The S&P move was "excessive," said Vincent Truglia, managing director at New York-based Granite Springs Asset Management LLP and a former head of the sovereign risk unit at Moody’s Investors Service, a rival rating company.
"Countries like Germany, Luxembourg, Netherlands, Finland are AAA, and Austria is a pretty strong AAA," he said.
S&P said that ratings could be cut by one level for Austria, Belgium, Finland, Germany, Netherlands and Luxembourg, and by up to two notches for the other governments.
The other countries warned are Estonia, France, Ireland, Italy, Malta, Portugal, Slovakia, Slovenia and Spain, according to S&P. The company said it maintained the negative outlook for Cyprus, and Greece wasn’t put on "creditwatch."
"The credit opinion is based on factors that can’t be influenced by Austria alone," according to a statement from Austria’s finance ministry. "It is important that the summit later this week comes up with concrete results."
With the fate of the currency shared by the 17 euro states at risk, Merkel and Sarkozy are stressing their common platform going into the summit that aims to end the crisis now in its third year.
‘United’ Resolve
"Germany and France are united in their resolve to take all necessary measures together with their European partners and the European institutions to safeguard the stability of the euro zone," according to their statement e-mailed late yesterday after the S&P announcement.
Among the measures announced were plans to fast-track the euro’s permanent rescue fund to 2012, one year earlier than envisaged. Germany and France will also seek to ensure that decisions by the fund, the European Stability Mechanism, can be made by a "qualified majority" rather than a unanimous vote by the participating governments. Sarkozy said they aimed to reach consensus on treaty change with other euro leaders by March.
"We don’t have time -- we are conscious of the gravity of the situation," Sarkozy said after meeting with Merkel over lunch at the Elysee palace. "We want to go as fast as possible based on this agreement between France and Germany, which is open to others."
Response
Safeguarding banks, limiting the damage to Italy and Spain and finding additional rescue funds may hinge on the response to Franco-German demands for closer economic integration and tougher policing of fiscal rules.
Draghi signaled last week that should a "new fiscal compact" emerge among the euro nations, "other elements might follow." Merkel and Sarkozy both declined to comment on Draghi’s comments, stressing the ECB’s independence.
"It’s a step in the right direction for the ECB but we’ll want to know how the automatic sanctions are triggered," said Klaus Baader, co-chief economist at Societe Generale SA. "When France and Germany have joint press conferences and say we agree on everything you have to take that with a pinch of salt."
With the EU summit looming, U.S. Treasury Secretary Timothy Geithner arrives in Frankfurt to meet with Draghi and Bundesbank President Jens Weidmann before heading to Berlin for talks with German Finance Minister Wolfgang Schaeuble. The ECB holds a policy meeting on Dec. 8.
‘Bit of Trust’
European leaders will seek to "win back a bit of trust" at the summit after "our reliability has suffered," Merkel said in Paris. "We are steadfastly determined to make the decision at the council now."
Merkel and Sarkozy yesterday repeated their rejection of jointly sold euro bonds in solving the crisis, while seeking to calm concerns of euro-area member states that the European Court of Justice would be able to veto national budgets as part of their proposal for centralized deficit supervision.
With euro bonds ruled out, "the onus is still on the ECB to print money to make huge loans or bond purchases and draw a line under the crisis," said Jennifer McKeown, senior European economist at Capital Economics in London.
The move by S&P adds impetus to that, said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.
"Anything which impacts the perceived creditworthiness of the main guarantors of euro zone debt is bad news for planned steps towards a fiscal union," he said in an e-mail. "All this puts more pressure on the ECB to hold the fort."
Sent from Bloomberg
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Stocks cheer as Merkel, Sarkozy meet
Per Fin 24 :
Paris - European stocks rose early on Monday, adding to last week’s 8.5% jump on growing hopes of a comprehensive solution to the eurozone debt crisis as French President Nicolas Sarkozy and German Chancellor Angela Merkel meet ahead of a key summit.
Italy’s fresh €30bn package of austerity measures also eased tensions surrounding the country’s finances and sparked a rally in Italian shares, with Milan’s FTSE MIB index up 3.1% while Italian 10-year bond yields dropped towards 6%.
Banco Popolare surged 7%, UniCredit 5% and Enel was up 3.6%. In afternoon trade the FTSEurofirst 300 index of top European shares was up 1% at 994.84 points, a level not seen in five weeks.
“Markets now seem to want to believe that Merkel and Sarkozy will come out with a common point of view and a lot of austerity and structural measures to bring down the debt and increase competitiveness,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
“And when you listen to their speeches, it looks like the points of view which were far apart clearly have come closer together. If they manage to come to an understanding, they still have to sell some of these very unpopular measures to the rest of Europe. And this would open the door for the European Central Bank to get more involved.”
Shares in financial institutions led the gains, with ING Groep up 3%, BNP Paribas climbing 5.5% and BBVA up 2.6%.
The STOXX eurozone banking index has surged 23% since tumbling to a near-three year low in late November.
Commerzbank bucked the trend, sinking 7% after announcing the buyback of €600m of hybrid capital instruments in a bid to meet European capital requirements without asking for more state intervention, but the move was seen as too timid by investors.
The eurozone’s blue chip Euro STOXX 50 index was up 1.5% at 2 377.67 points, partly filling a downward gap on the chart left open in early November.
The benchmark index was reaching "overbought" territory, with its nine-day relative strength index at 68.5, signalling the index was poised for a short-term pullback. A reading of 70 and above is considered "overbought".
Despite Monday’s gains on the market, the Euro STOXX 50 volatility index - Europe’s yardstick of investor sentiment known as the VSTOXX - was steady at 35.7, signalling investors’ hesitation about piling up more risky assets before the outcome of the Merkel-Sarkozy meeting.
Ripe for pullback?
Kepler Capital Markets trader Patrice Perois said the market looked ripe for a pullback after its best weekly gain in three years.
“There are still significant differences between Sarkozy and Merkel, so we’re in for a volatile week, and the risk is that any kind of disappointment could trigger a pullback,” he said.
“But the medium term looks relatively positive. The Italian government is really regaining credibility, and that’s very important to restore confidence.”
Meeting in Paris on Monday ahead of a key European Union summit later in the week, Sarkozy and Merkel are under pressure to iron out their differences on how to centralise control of eurozone budgets to resolve the region’s debt crisis.
The two leaders will try to reach common ground on measures to boost coercive budget discipline in the eurozone, likely via EU treaty change, which they want all 27 EU leaders to approve at Friday’s summit.
“Too many times before, eurozone leaders have pledged their determination to end the crisis, but end up merely fudging the issue and delaying any decision until later,” said IG Markets analyst Chris Beauchamp.
“The fear now is that this week will turn out the same way, with fine words but little action.” Around Europe, UK’s FTSE 100 index was up 0.7%, Germany’s DAX index up 0.9%, and France’s CAC 40 up 1.4%.
Paris - European stocks rose early on Monday, adding to last week’s 8.5% jump on growing hopes of a comprehensive solution to the eurozone debt crisis as French President Nicolas Sarkozy and German Chancellor Angela Merkel meet ahead of a key summit.
Italy’s fresh €30bn package of austerity measures also eased tensions surrounding the country’s finances and sparked a rally in Italian shares, with Milan’s FTSE MIB index up 3.1% while Italian 10-year bond yields dropped towards 6%.
Banco Popolare surged 7%, UniCredit 5% and Enel was up 3.6%. In afternoon trade the FTSEurofirst 300 index of top European shares was up 1% at 994.84 points, a level not seen in five weeks.
“Markets now seem to want to believe that Merkel and Sarkozy will come out with a common point of view and a lot of austerity and structural measures to bring down the debt and increase competitiveness,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
“And when you listen to their speeches, it looks like the points of view which were far apart clearly have come closer together. If they manage to come to an understanding, they still have to sell some of these very unpopular measures to the rest of Europe. And this would open the door for the European Central Bank to get more involved.”
Shares in financial institutions led the gains, with ING Groep up 3%, BNP Paribas climbing 5.5% and BBVA up 2.6%.
The STOXX eurozone banking index has surged 23% since tumbling to a near-three year low in late November.
Commerzbank bucked the trend, sinking 7% after announcing the buyback of €600m of hybrid capital instruments in a bid to meet European capital requirements without asking for more state intervention, but the move was seen as too timid by investors.
The eurozone’s blue chip Euro STOXX 50 index was up 1.5% at 2 377.67 points, partly filling a downward gap on the chart left open in early November.
The benchmark index was reaching "overbought" territory, with its nine-day relative strength index at 68.5, signalling the index was poised for a short-term pullback. A reading of 70 and above is considered "overbought".
Despite Monday’s gains on the market, the Euro STOXX 50 volatility index - Europe’s yardstick of investor sentiment known as the VSTOXX - was steady at 35.7, signalling investors’ hesitation about piling up more risky assets before the outcome of the Merkel-Sarkozy meeting.
Ripe for pullback?
Kepler Capital Markets trader Patrice Perois said the market looked ripe for a pullback after its best weekly gain in three years.
“There are still significant differences between Sarkozy and Merkel, so we’re in for a volatile week, and the risk is that any kind of disappointment could trigger a pullback,” he said.
“But the medium term looks relatively positive. The Italian government is really regaining credibility, and that’s very important to restore confidence.”
Meeting in Paris on Monday ahead of a key European Union summit later in the week, Sarkozy and Merkel are under pressure to iron out their differences on how to centralise control of eurozone budgets to resolve the region’s debt crisis.
The two leaders will try to reach common ground on measures to boost coercive budget discipline in the eurozone, likely via EU treaty change, which they want all 27 EU leaders to approve at Friday’s summit.
“Too many times before, eurozone leaders have pledged their determination to end the crisis, but end up merely fudging the issue and delaying any decision until later,” said IG Markets analyst Chris Beauchamp.
“The fear now is that this week will turn out the same way, with fine words but little action.” Around Europe, UK’s FTSE 100 index was up 0.7%, Germany’s DAX index up 0.9%, and France’s CAC 40 up 1.4%.
Thursday, 1 December 2011
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