Currencies News

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 Yen Extends Gain, Dollar in Range ahead of FOMC

Yen strengthens broadly in Asia today as China's Securities Times reported that regulators have ordered banks to call back some of the loans they extended in January. Investors continue to be concerned with more tightening measures from China to cool inflation. Dollar is staying in tight range while crude oil and gold continue to consolidate above recent low of 73.82 and 1081.9. Markets are cautious on event risks including FOMC announcement, and US President Obama's speech. In particular, focus will be on any comments from Obama on the bank proposal which rocked the financial markets last week.

Fed is expected to keep the policy rate unchanged at 0-0.25% at the January meeting. While there have signs showing improvement in economic outlook, job markets remained the area the Fed concerned the most and Fed will wait until unemployment rate has dropped substantially before considering rate hikes. In December, the Fed said there were plans to discuss alternative approaches to implementing monetary policy in the longer-run. While these comments were rather bearish, we believe policymakers' purpose was to suppress market speculations on premature exit.

On the data front, Australian dollar was supported by stronger than expected CPI reading in Q4. CPI rose 0.5% qoq, 2.1% yoy, above expectation of 0.4% qoq, 2.0% yoy. Japan trader surplus was unchanged at 0.52T JPY. New home sales from US will be released later today and is expected to rise slightly to 370k annualized rate in December.

While Australian dollar is relative firm against European majors, it cannot resist yen's strength so far. AUD/JPY dropped sharply from 86.17 and is now consolidating above 80 psychological level.

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Euro Extends Decline Despite Improved Confidence, British Pound Advances for Second Day

The Euro extended the two-day decline and slipped to a fresh monthly low of 1.3932 during the overnight trade, but we may see a corrective retracement in the EUR/USD over the remainder of the week as the RSI continues to slip deeper into oversold territory.
 Meanwhile, European Central Bank board member Gertrude Tumpel-Gugerell said that “it’s time to gradually return monetary and financial policy to normal” as economic activity improves, but went onto say that “an unsustainable rise in debt would lead to upward pressures on rates in the medium to long term.”

Nevertheless, economic confidence in the Euro-Zone climbed to a 10-month high in January, with the index advancing to 95.7 from a revised 94.1 in the previous month, while the gauge for consumer business sentiment increased to -1.12, which fell short of expectations for a rise to -1.10. Moreover, unemployment in Germany increased 6K during the same period after contracting 3K in December to mark the first rise in seven months, which pushed the jobless rate back up to 8.2% from 8.1%. As the ECB anticipate the region to face a protracted recovery, the ongoing slump in employment paired with tightening credit conditions may lead the central bank to maintain a dovish outlook for future policy, and investors may continue to scale back expectations for a rate hike in the first-half of the year as price pressures remain subdued.

The British Pound continued to strengthen against the greenback, with the exchange rate rising to a high of 1.6135, but the lack of momentum to cross back above the 100-Day SMA at 1.6300 may keep the pair within a broad range going into the U.S. trade as investors weigh the outlook for future growth. At the same time, the GBP/USD appears to have carved a near-term bottom as price action continues to close above the 1.6100 level, and we may see the pair continue to trend higher over the following week as policy makers in the U.K. aim to normalize policy this year. Meanwhile, Chancellor of the Exchequer Alistair darling said that the U.K. has the biggest deficit reduction plan amongst the industrialize countries, and said that the bearish view for U.K. Gilts held by the Pacific Investment Manage Company, the world’s largest mutual fund operator, is a view that is not “shared by others” during an interview with Bloomberg News.

The greenback lost ground overnight following the rebound in risk appetite, while the USD/JPY crossed back above the 100-Day SMA (90.24) to reach a high of 90.56, and the reserve currency may face increased selling pressures going into the North American trade as equity futures foreshadow a higher open for the U.S. market. Nevertheless, demands for U.S. durable goods are forecasted to increase 2.0% in December after rising 0.2% in the previous month, while initial jobless claims are projected to fall to 450K for the week ending January 23 from 482K in the previous week, and conditions are likely to improve going forward as the expansion in monetary and fiscal policy continues to feed through the real economy. However, the Chicago Fed National Activity index is expected to fall to -0.40 from -0.32 in November, and the data could weigh on the outlook for future growth as policy makers continue to see a risk for a protracted recovery.

[jotuk6771]

MAY 6  , 2010

UPDATES ON CURRENT MARKET NEWS  since the last post January 28 , 2010

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 ATHENS/NEW YORK, May 6 (Reuters) - The Greek parliament backed an austerity plan on Thursday despite violent unrest, as European Central Bank inaction on the nation's debt crisis helped to trigger major falls in the euro and weakness on Wall Street.

Shock waves from the relatively small Greek economy spread beyond Europe to rock markets in the United States, Latin America and Asia, as some investors panicked about the chance that one or more government might default on their debt.

German Chancellor Angela Merkel declared that governments were locked in a battle with financial markets, a confrontation she and her fellow politicians were determined to win.

Federal Reserve officials expressed concern about potential consequences for the U.S. economy and the White House said President Barack Obama was close watching developments.

The euro tumbled almost two percent on the day to below $1.26 before recovering partly. "This is a full capitulation sell-off we've seen in the last couple of hours," said Brian Dolan, chief currency strategist, at Forex.com in New Jersey.

"The sovereign credit worries in Europe started the ball rolling and now it's a complete panic."

Wall Street was even more volatile. U.S. stocks lost about three percent but at one point the Nasdaq index was down more than 9 percent and the S&P 500 and Dow briefly wiped out all this year's gains.

CNBC television reported that a trading error at a major firm was to blame for the plunge. Separately, the Nasdaq exchange said it was working with other major markets to review mid-afternoon trading activity.

Chancellor Merkel drew up the battlelines with market speculation. "To some degree this is a battle between the politicians and the markets," she said in a speech in Berlin. "But I am firmly resolved -- and I think all of my colleagues are too -- to win this battle."

European markets have been nervous for weeks, but Thursday's slide accelerated after ECB President Jean-Claude Trichet failed to offer any new measures to ease Greece's debt crisis.

"Nothing short of a sensational announcement can help the euro at this point. And that certainly did not come from Trichet," said Kathy Lien, a director for currency research at GFT Forex, in New York.

In Athens, parliament approved the government's 30 billion euro ($40 billion) austerity bill, imposing years of hard measures in return for a 110 billion euro rescue by the European Union and International Monetary Fund agreed last Sunday.

"This is the time for change. There is not a single day or hour to lose," Socialist Prime Minister George Papandreou said. But he had to expel three Socialist deputies who abstained in a preliminary vote rather than backing their government.

DEFECTIONS

The defections were a first sign of the problems Papandreou faces within his own party in applying the harsh measures needed to pull Greece out of a crisis shaking international markets.

As the vote took place, a crowd of around 10,000 protesting students, workers and pensioners converged on parliament to voice their opposition to the bill, chanting "Take to the streets! Say 'No' to the measures that hurt the Greek people!"

Riot police fired teargas to disperse about 150 protesters who hurled bottles and stones.

On Wednesday, in the biggest and most violent protest since riots shook the country in 2008, some 50,000 Greeks marched in Athens and clashed with police in pitched street battles. A petrol bomb attack killed three workers in a local bank branch.

Germany will bear the brunt of the bailout and the country's parliament will tackle the issue on Friday.

The Bundestag lower house is due to start debating a draft law on the German contribution at 0700 GMT. The debate is due to last two hours, after which lawmakers will vote.

The upper house is scheduled to vote on the bill soon afterwards. Both houses are expected to give their approval.

ECB chief Trichet proved a big disappointment when he said a meeting of the bank's Governing Council in Lisbon had not discussed buying bonds to combat the crisis.

DEFAULT "OUT OF THE QUESTION"

Trichet reiterated the ECB's backing for Greece's savings plans and dismissed the prospect of any euro zone member defaulting on debt. "Default is, for me, out of the question," he said.

But fears that Greece and possibly other governments could indeed default on their debt swept the globe. The Brazilian real currency fell almost four percent and Mexico's peso sank past the key psychological level of 13 per dollar.

Conglomerate Swire Pacific scrapped a 2.7 billion Hong Kong dollar share flotation by its property unit on Thursday, the biggest Asian casualty so far of the damage to capital markets wrought by Greece's economic crisis.

Policymakers' attempts to talk down the risk of contagion and scare off "speculators" had little impact on traders unimpressed by the slow EU response to the crisis.

Yield spreads widened for weaker euro zone countries at risk of being sucked into the debt crisis as investors headed for the greater safety of German government debt. Portuguese, Spanish and even Italian bonds were affected.

In a globalised economy, problems spread fast and the euro zone's troubles provoked worries far afield.

U.S. central bankers said the Federal Reserve was closely monitoring the financial turbulence in Europe as it could have repercussions for the United States and its markets.

James Bullard, president of the St. Louis Fed, argued the crisis posed a threat to an otherwise improving U.S. economy. "One risk to the outlook ... is the fallout from potential sovereign debt default as conditions continue to deteriorate in Greece and other countries," he said.

The Obama administration is keeping a close eye on the debt crisis in Greece and its global impact. "The president has heard regularly from his economic team," White House spokesman Robert Gibbs said.

CONFLAGRATION

German Finance Minister Wolfgang Schaeuble said any restructuring of Greek debt would cause "exactly the kind of conflagration that we could no longer control".

"We are in a really fundamental crisis, the stability of the euro is really at stake," he added.

European Council President Herman van Rompuy, who will chair a euro zone summit on the crisis on Friday, was the latest top EU official to try to erect a verbal firewall, saying the situation of Portugal or Spain had nothing to do with Greece.

"What I now see are totally irrational movements on the markets set off by unsubstantiated rumours, for instance yesterday with Spain, but also as regards Portugal," he said. (Additional reporting by Noah Barkin in Athens, Gernot Heller in Berlin, Tim Heritage in Brussels, George Matlock in London, Pedro Nicolaci da Costa in Richmond, Virginia; writing by Paul Taylor/Andrew Roche/David Stamp; editing by Peter Millership))

(c) Copyright Thomson Reuters 2010.

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 May 7 (Bloomberg) -- Global stocks slid for a fourth day, erasing 2010 gains for U.S. benchmark indexes, and the bonds of debt-laden nations tumbled after Europe’s debt crisis spurred a equity rout yesterday that undermined confidence in trading mechanisms. Oil sank 2.5 percent to lead commodities lower.

The Standard & Poor’s 500 Index fell as much as 3 percent before paring losses to 1.5 percent at the 4 p.m. New York close, leaving it down 0.4 percent in 2010. The MSCI World Index sank 2.1 percent. The Stoxx Europe 600 Index fell 3.9 percent to the lowest since November. Greece led a drop in deficit-stricken European nations’ bonds, with the yield premium demanded to own the 10-year securities instead of benchmark German bunds rising to a record of 9.65 percentage points. Credit-default swaps on European banks surged to an all-time high.

Regulators are reviewing a plunge that briefly wiped out more than $1 trillion in U.S. market value yesterday as the Dow Jones Industrial Average slid almost 1,000 points before paring losses. Concern over the integrity of the electronic trading mechanisms that caused the volatility overshadowed the biggest growth in U.S. jobs in four years.

“The market is manic,” said Philip Orlando, the New York- based chief equity market strategist at Federated Investors, which manages about $400 billion. “The ECB needs to step in here and do something. If that really becomes true, we start to rally and focus on the terrific jobs report we had this morning. They could have solved this six months ago. There’s still a lot of concern about contagion. Investors are scared to death.”

Europe Concern

Stocks have been pummeled the last two weeks amid concern European leaders won’t do enough to keep the most indebted nations from defaulting after a 110 billion-euro ($140 billion) rescue package for Greece failed to halt a rise in government borrowing costs. The Stoxx 600 has tumbled 13 percent from its high for the year last month, while the S&P 500 has lost 8.7 percent from its 19-month high on April 23.

The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission said they will examine “unusual trading” that contributed to the plunge. Two people with direct knowledge of the matter said regulators plan to examine whether securities professionals triggered the selloff or exploited it for profit.

U.S. losses snowballed yesterday as computerized trades caused some stocks to briefly lose more than 90 percent of their value. The Nasdaq OMX Group Inc. said it will cancel trades of stocks that moved more than 60 percent.

Volatility Surges

Hewlett-Packard Co., American Express Co., Microsoft Corp. and General Electric Co. lost at least 2.5 percent to help lead declines in the Dow today as the average slid to the lowest since February. The Dow capped a 5.7 percent weekly plunge, while the S&P 500 tumbled 6.4 over the past five days. It was the worst week since March 2009, when the S&P 500 reached a 12- year low. The S&P 500 is still up 64 percent since then.

The benchmark index for U.S. stock options headed for its highest close in a year, adding to yesterday’s 32 percent surge. The VIX, as the Chicago Board Options Exchange Volatility Index is known, jumped 25 percent to 40.91. Europe’s VStoxx Index, which measures options on the Euro Stoxx 50 Index, rose as much as 42 percent, more than any gain on a closing basis since the Sept. 11, 2001, terror attacks.

The MSCI Asia Pacific Index sank 1.2 percent to the lowest since February 26, while the MSCI gauge of emerging market equities slid 2.2 percent. Brazil’s benchmark Bovespa index lost 1.3 percent to the lowest level since October.

The yield on the benchmark 10-year Treasury note rose 0.3 percent to 3.42 percent. The yields still capped the biggest two-week decline since December 2008 as concern that European leaders will be unable to contain Greece’s debt crisis sent investors to the safety of U.S. government debt.

Portugal’s 10-year bond yield jumped 15 basis points to 6.29 percent, the highest since 1997. Hungary’s 10-year yield surged 29 basis points to 7.56 percent.

Euro Rebounds

The euro rebounded from a 14-month low below $1.27 yesterday. The pound fell to the lowest in more than a year against the dollar as results from the U.K. election put the Conservatives on course to win the most seats, without gaining an overall majority, fueling concern a new government won’t be strong enough to tackle the budget deficit.

The cost of insuring against losses on European bank bonds soared to a record, surpassing levels triggered by the collapse of Lehman Brothers Holdings Inc. in 2008. The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers soared as much as 40 basis points to 223, according to JPMorgan Chase & Co. The index closed at 212 on March 9, 2009. Swaps on Greece, Portugal, Spain and Italy rose to or near all-time high levels.

Money Markets

The bond and stock market turmoil is spilling over into money markets. Overnight deposits at the European Central Bank rose to a 10-month high as the sovereign debt crisis made commercial banks reluctant to lend to each other. Banks yesterday lodged 290 billion euros in the central bank’s ECB’s overnight facility at 0.25 percent, up from 288 billion euros the previous day. That’s the most since July 3 last year. Deposits have exceeded 200 billion euros for the past 10 days.

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Fears intensify about impact of Europe's debt crisis on fragile US recovery


         

Christopher S. Rugaber, AP Economics Writer, On Friday May 7, 2010, 6:50 pm EDT

WASHINGTON (AP) -- The stock market's slump this week reflects a widespread concern among many economists that the European debt crisis could slow the U.S. economic recovery.

Few expect the problems in Greece and other European nations such as Portugal and Spain to drag the United States back into recession. But the crisis has increased the uncertainty facing U.S. business leaders.

"The perception of risk has just changed in a major way," said Mark Vitner, senior economist at Wells Fargo Securities. "Business leaders now think there is more risk in the world economy than they did 30 days ago."

A weaker European economy could reduce demand for U.S. exports, as European consumers cut back their purchases of autos, appliances and other goods.

And as the euro declines in value compared to the dollar, U.S. goods become more expensive in the 16 countries that use the European currency.

"There is some negative effect on the U.S. economy, no doubt," said Michael Mussa, senior fellow at the Peterson Institute for International Economics.

Still, Mussa said the impact in Europe will likely be greater. While Greece's economy isn't that large, many major European banks hold billions of dollars of its debt. Should Greece default on or restructure its debt, which many economists expect, those banks -- still recovering from the 2008-2009 financial crisis -- may cut back lending to conserve cash.

That's even more likely if other highly indebted nations, such as Ireland, Spain, or Portugal also run into problems financing their deficits. Tighter credit would slow Europe's economy.

And efforts by Greece and the others to reduce their deficits, through tax increases and spending cuts, could also worsen their economies.

The growing European debt crisis has sent stock markets on a wild ride. The Dow Jones industrial average fell 140 points, or 1.3 percent on Friday. That followed the 1,000 point plunge Thursday afternoon, before the markets recovered to close with a 348-point loss.

Vitner said he worries that Europe's debt crisis could tip the 16 countries that use the euro back into a recession. The euro area comprises the second-largest economy in the world, after the United States. And as in the United States, Europe's economy has been slowly recovering from recession.

Economists say the situation is reminiscent of the collapse of Lehman Brothers in the fall of 2008. The resulting chaos caused banks to clamp down on lending. Nervous consumers stopped spending. Companies facing plummeting sales cut back on production and laid off millions of workers.

Some economists raise the prospect of a similar cycle in Europe.

"Europe feels like we did after Lehman Brothers," said Barry Eichengreen, an economics professor at the University of California, Berkeley. "No one has seen this kind of thing before ... and they are questioning the competence of their leaders to deal with it, and rightly so."

European consumers may soon cut back on purchases of new cars or appliances, Eichengreen said, "because they don't know what's next."

President Barack Obama's goal of doubling U.S. exports over the next five years is unlikely to be reached under these conditions, economists say.

Obama's plan "is completely off the table if the dollar remains strong and one of the leading economic areas enters a deep recession," said Eswar Prasad, an economics professor at Cornell University.

A $140 billion rescue package agreed to by the International Monetary Fund and European leaders has failed to resolve concerns in the financial markets that Greece might default on its debts.

The concerns are likely amplified, economists said, because memories of the 2008 crisis are still fresh. Before the recession, many experts, including Federal Reserve Chairman Ben Bernanke, said the fallout from the subprime housing bust wouldn't spill over to the broader economy.

"Remember, people thought the subprime mortgage crisis would go away, and it didn't," said Sung Won Sohn, an economics professor at the Smith School of Business at California State University.

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Before Markets Reopen, a EU Fund to Stop Greek Crisis Spreading

By DOUGLAS MCINTYRE Posted 10:30 AM 05/08/10


Eurozone leaders plan to create a financial facility to defend the euro and create a pool of capital aimed at bringing down the interest rates its weaker economies pay for sovereign debt.

The problem may be that, like the funding for a Greece bailout, national leaders may not agree upon exactly what the new measures should be. According to Bloomberg, "leaders of the 16 euro countries said the workings of the financial backstop will be hammered out before Asian markets open late tomorrow European time."

Few Options Available

Despite the desperate need for a firewall to slow soaring yields for Greek, Portuguese and Spanish debt and prevent the flow of capital to stronger economies like the U.S., the size of any capital pool may need to be huge. The speculation on the euro and the debt of certain nations has built as investors gamble on how much the insurance cost of sovereign paper should be. The cost of credit default swaps (CDS) for Europe's largest banks has also grown as fear that their balance sheets could be hurt by their holdings of Greek, Spanish, and Portuguese debt has also expanded.

Put simply, the eurozone faces the prospect of competing with global investors who think the situation in the region will get worse.

The European Central Bank and the financial ministers of its member nations have a modest number of options. They can directly buy sovereign debt from the weakest economies; buy debt or equity in large banks; make investments that will bring down the rate at which sovereign debt is insured; or, they can directly buy euros.

Eurozone Dilemma

It's unclear what the costs of slowing the panic about contagion may be. And to make matters more complex: Where will the money come from? Germany, Europe's largest economy, may be asked to cover some of the costs. The nation has already show great reluctance to bail out Greece at a cost equal to 1% of its GDP. That may be the end of its commitment because at some point, its outside investments will begin to affect the rates it pays to finance its own economy.

The eurozone nations probably believe that they have two choices. The first is to put up billions of euros to halt the currency's slide and back the interest rates that weak nations in the region pay for their sovereign debt. The other options is to let the problem work itself out, which risks the need for bailouts for Spain and Portugal. Those rescues would be much larger than Greece's.

It looks like the eurozone nations have no good choices.

[jotuk6771]

Stocks, Commodities, Greek Bonds Rally on European Loan Package


By Rita Nazareth and Gavin Serkin

May 10 (Bloomberg) -- Stocks rallied around the world, sending the MSCI World Index up the most in 13 months, while Greek, Spanish and Portuguese bonds soared after European policy makers announced an almost $1 trillion loan package to end the region’s sovereign-debt crisis. The euro pared an earlier rally.

The MSCI World gauge of stocks in 23 developed nations jumped 4.5 percent at 2:51 p.m. in New York, while the Standard & Poor’s 500 Index rose 3.7 percent and Spain’s IBEX 35 Index surged a record 14 percent. The premium demanded to hold Greek 10-year bonds instead of benchmark German bunds slid by 484 basis points. Oil snapped a four day slump. Gauges of U.S. and European stock-market volatility slid by records. Treasuries, the dollar and gold fell as investors pursued riskier assets. The euro, which topped $1.30 earlier, traded near $1.28.

Governments of the 16 euro nations agreed today to lend as much as 750 billion euros to the most-indebted countries. The European Central Bank said it will counter “severe tensions” in “certain” markets by purchasing government and private debt. Concerns that the Greek financial crisis will spread wiped $3.7 trillion from the value of global stock markets last week.

“I was rubbing my eyes and trying to make sure I was looking at the right numbers,” James Dunigan, chief investment officer at PNC Wealth Management in Philadelphia, which oversees $104 billion, said of early gains in stocks. “The selloff from last week is overdone. That’s why we’re rallying. If you’re able to stabilize Europe, the growth story continues to be in place in the U.S.”

Improving Economy

The emergency action may allow investors to return their focus to the improving outlook for the global economy. About 69 percent of companies on the MSCI World Index that reported quarterly earnings since April 12 have beaten analysts’ forecasts, according to Bloomberg data. Employment in the U.S. increased in April by the most in four years, the Labor Department said May 7, indicating the recovery is becoming self- sustaining.

The S&P 500 recouped more than half of last week’s 6.4 percent plunge, the biggest drop in a year. Waves of electronic selling helped push the Dow Jones Industrial Average down as much as 9.2 percent on May 6, the biggest drop since the crash of 1987, before paring losses.

The biggest U.S. equity exchanges took a step toward aligning trading rules to prevent conflicting systems from worsening stock-market plunges. Executives from six securities venues, including NYSE Euronext and Nasdaq OMX Group Inc., agreed on a framework for “strengthening circuit breakers and handling erroneous trades,” according to a statement from the Securities and Exchange Commission.

All 10 industry groups in the S&P 500 rallied at least 1.9 percent today, led by gains of more than 4.7 percent in gauges of industrial and financial companies. General Electric Co., Caterpillar Inc. and Bank of America Corp. jumped more than 6 percent to lead the Dow Jones Industrial Average up as much as 455 points.

‘Rally Is Justified’

“The rally is justified,” said David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds in New York. “All the actions taken by the European governments and the commitments by central banks were steps in the right direction. The market had sold off because of the fear that this financial crisis would get out of hand. Investors have a chance to look at the economic fundamentals in the U.S. now, which are good and expanding.”

The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell as much as 37 percent to 25.68 after a record weekly gain last week. The index measures the cost of using options as insurance against declines in the S&P 500. The VStoxx Index, a gauge of Euro Stoxx 50 Index options, lost 22 percent to 38.66 for the biggest drop in its 11-year history. Futures on both options indexes also fell as investors bet that stock swings will decrease.

The euro climbed 0.3 percent to $1.2793 after climbing as much as 2.7 percent. The 16-nation currency is down about 10 percent against the dollar this year.

‘Take the Measures’

For now, the rescue package “may be viewed as a positive and we may recover some of the losses we had in equities last week,” Oscar Pulido, a portfolio specialist at BlackRock Inc., said in a briefing in Seoul today. “In the longer-term, it’s going to be very much dependent on whether governments in these countries can truly take the measures to reduce the deficits they’ve accumulated.” BlackRock managed $3.36 trillion in assets as of March 31, according to its Web site.

The pound rose amid speculation Conservative leader David Cameron may forge a coalition government with his Liberal Democrat counterpart Nick Clegg after last week’s election failed to give any one party a parliamentary majority. Sterling appreciated 0.5 percent versus the dollar and strengthened 2.2 percent compared with the yen.

Greece led a record decline in the cost of insuring against a sovereign default. Credit-default swaps on Greece tumbled 358.5 basis points to 557, the biggest one-day fall, Portugal dropped 178 to 247, Spain declined 82.5 to 156 and Italy fell 82 to 143.5, according to CMA DataVision. Benchmark indexes linked to government debt in Europe and Asia also fell.

‘Mother of All Aid’

The yield on the Greek 10-year bond slid 468 basis points to 7.77 percent, narrowing the extra yield, or spread, to bunds to 481 basis points, from 965 basis points at end of last week. The Portuguese 10-year yield tumbled 163 basis points to 4.65 percent and the yield premium to German debt shrank to 170 basis points from 349 basis points. The Spanish spread declined to 97 basis points from 164 basis points.

“The authorities have put in place the mother of all aid plans, in an effort to prevent further losses in confidence,” Ciaran O’Hagan, a fixed-income strategist at Societe Generale SA in Paris, wrote in a note to investors. “We are seeing standard moves in favor of risk appetite after all the announcements. Whilst the market reaction has been positive, it is still very early days.”

European Gains

The Stoxx Europe 600 Index rallied 7.2 percent, the most since November 2008, with France’s CAC 40 Index jumping 9.7 percent and Germany’s DAX Index rising 5.3 percent.

Banco Santander SA, Spain’s largest lender, climbed 23 percent in Madrid, reversing last week’s 18 percent loss. BNP Paribas, the biggest French bank, advanced 21 percent in Paris while Barclays Plc gained 16 percent in London.

BP Plc, battling an oil spill in the Gulf of Mexico, had one of only two declines in the Stoxx 600, slipping 0.9 percent as it prepared to lower a second, smaller containment dome over the main leak point after suspending efforts to place an initial cover over the weekend.

The MSCI Asia Pacific Index climbed 1.5 percent, snapping five days of losses. Esprit Holdings Ltd., which gets 85 percent of its revenue from Europe, rose 3.7 percent in Hong Kong. Commonwealth Bank of Australia, the nation’s biggest bank by market value, gained 5.2 percent in Sydney. Bridgestone Corp. increased 4.7 percent in Tokyo after the tiremaker boosted its profit forecast.

Treasuries Drop

U.S. Treasuries declined as demand for the safest assets waned. The 10-year yield jumped nine basis points to 3.52 percent. The Dollar Index, which gauges the U.S. currency against six major trading partners, fell 0.3 percent. The dollar weakened against all 16 major counterparts except the Swiss franc and the Japanese yen. The Brazilian real and Mexican peso lead gains against the dollar, climbing more than 3 percent.

Gold for immediate delivery retreated 0.4 percent to $1,203.20 an ounce, after rising to within 1.1 percent of a record on May 7.

Developing-nation bonds climbed, sending the spread over U.S. Treasuries down 34 basis points, according to JPMorgan Chase & Co.’s EMBI+ Index.

The MSCI Emerging Markets Index climbed 4.4 percent, rebounding from a 9.1 percent drop last week that was the steepest for the equities gauge since February 2009. Hungary’s BUX Index rose 11 percent, the most since October 2008, and the forint strengthened 2.2 percent against the euro, the most in a year.

Oil and nickel led gains in commodities on speculation the European funding initiative will maintain economic growth in the region. Crude oil gained 2 percent to $76.58 a barrel. Nickel climbed 2 percent. The Reuters/Jefferies CRB Index of commodities jumped 1.6 percent, breaking a four-day slump.

[jotuk6771]

Stocks Gain as Europe Crisis Eases; Treasuries Fall, Gold Rises



May 12 (Bloomberg) -- Stocks rallied, with the Standard & Poor’s 500 Index recovering losses from its May 6 plunge, as a successful Portuguese bond sale and planned budget cuts in Spain and the U.K. bolstered optimism the European debt crisis is subsiding. Treasuries fell and gold rose to a record.

The S&P 500 surged 1.4 percent to 1,171.67 at 4 p.m. in New York, above its highest close since May 4. The Stoxx Europe 600 Index climbed 1.5 percent as all 19 of its industry groups gained. The 10-year Treasury yield increased six basis points to 3.58 percent after a $24 billion auction of the notes, while gold futures surged to a record $1,249.20 an ounce on speculation international financial support for indebted European nations will depress currencies.

Portugal’s bond sale, Spain’s reduction in public wages and new U.K. Prime Minister David Cameron’s plans to cut the deficit added to optimism that Europe’s debt crisis will ease after leaders pledged almost $1 trillion in emergency loans over the weekend. Better-than-estimated earnings at companies from A.P. Moeller-Maersk A/S to ING Groep NV and faster-than-forecast growth in the euro region’s economy also lifted sentiment, as did a potential $15 billion leveraged buyout in the U.S.

“It’s not another Lewis Carroll’s ‘Alice in Wonderland’ tale,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “David Cameron’s budget-deficit plan reminds people that you have some adults in the world when it comes to addressing the problems. The European package was another adult response. The global economic recovery is continuing and will likely not be derailed by the European crisis.”

U.S. Rally

Gauges of technology and industrial companies rose at least 2 percent to lead gains among all 10 groups in the S&P 500, with International Business Machines Corp., Intel Corp., Cisco Systems Inc. and Caterpillar Inc. rising at least 3 percent to help lead the Dow Jones Industrial Average up 148.65 points, or 1.4 percent, to 10,896.91, also the highest since May 4. Cisco reported better-than-estimated results after the close of trading, while IBM forecast earnings-per-share may double by 2015.

Morgan Stanley fell 2 percent after the Wall Street Journal reported that U.S. prosecutors are investigating some of the bank’s transactions in collateralized debt obligations, citing people familiar with the matter. Chief Executive Officer James Gorman, speaking at a press conference in Tokyo today, said there is “no substance” to any allegations.

M&A Watch

Blackstone Group LP slipped 0.2 percent as the world’s biggest private equity company, Thomas H. Lee Partners LP and TPG Capital are in talks to pay more than $15 billion including debt for Fidelity National Information Services Inc., according to a person with knowledge of the deal. Fidelity National rallied 2.9 percent.

Sybase Inc. jumped 35 percent after Bloomberg News reported SAP AG is close to buying the company for $6 billion, according to two people with knowledge of the matter.

The MSCI World Index of stocks in 23 developed nations advanced 1.1 percent, recouping yesterday’s drop. Maersk, the owner of the world’s largest container-shipping line, rallied 9 percent after saying it returned to profit as freight rates jumped and global trade picked up. ING, the largest Dutch financial services company, jumped 4.2 percent in Amsterdam after reporting a better-than-estimated profit as bad loans fell.

European Austerity

The U.K.’s FTSE 100 Index rose 0.9 percent as Conservative leader Cameron took over as prime minister. Cameron’s chancellor of the exchequer, George Osborne, will prepare an emergency budget within 50 days containing 6 billion pounds ($9 billion) of spending cuts to narrow the deficit. The measure is part of the Conservative Party’s deal with its coalition partners, the Liberal Democrats, announced yesterday.

Spain’s IBEX 35 Index, which jumped a record 14 percent two days ago after the European loan package was announced, climbed 0.8 percent today and the cost of insuring against default on Spain’s largest banks fell to the lowest in three weeks after Prime Minister Jose Luis Rodriguez Zapatero announced measures to cut the country’s deficit.

Credit-default swaps on Banco Santander SA, Spain’s biggest lender, declined 35 basis points to 130, the lowest since April 20, according to CMA DataVision prices. Contracts on Banco Bilbao Vizcaya Argentaria SA fell 31.5 basis points to 148, indicating an improvement in the perception of credit quality.

Spain, France

Spain will reduce public-sector wages 5 percent this year and freeze them in 2011 in response to calls from European finance ministers for deeper budget cuts as part of the aid package for the region’s most indebted nations. Zapatero’s deficit reduction plan triggered a 22 basis-point decline in the country’s sovereign default swaps to 139.

The CAC-40 Index of French equities rallied 1.1 percent today, trimming its 2010 decline to 5.1 percent.

Nicolas Lenoir, chief market strategist at ICAP Futures LLC in Jersey City, New Jersey, advised shorting the French equity market on speculation that any potential austerity measures will not be well-received in that nation.

“Being French I can promise you first hand that if there is any form of austerity required as part of the $1 trillion package it will not fly one bit,” Lenoir said in a note to clients. “We had riots with a daily car-burn rate above 1,200 for over a week because a teenager electrocuted himself trying to escape from the cops, so just try and imagine if railway workers can no longer retire at 50 or 55 after being driven to exhaustion watching a computer do their job 35 hours a week.”

Portugal Bond Sale

In Portugal, Finance Minister Fernando Teixeira dos Santos said the nation’s sovereign debt is enjoying better market conditions as borrowing costs eased.

Portugal sold 1 billion euros ($1.3 billion) of 10-year bonds today, getting more demand than at previous auctions. The country’s debt agency priced the 4.8 percent bonds due 2020 to yield 4.52 percent, 181 basis points below last week’s high, which was a record since the euro’s introduction.

Gross domestic product in the 16 euro nations rose 0.2 percent from the fourth quarter, when it remained unchanged, the EU’s statistics office in Luxembourg said today. Germany’s economy unexpectedly grew in the first three months of the year as rising exports and company investment outweighed the effects of the cold winter.

Gains for the Greek two-year note drove the yield down 4 basis points to 6.98 percent. The nation’s 10-year bond yield lost 20 basis points to 7.24 percent, with the yield premium demanded to own the debt instead of benchmark German bunds narrowing for a third day to 430 basis points from a record 965 basis points on May 7.

Asset-Backed Downgrade

Moody’s Investors Service lowered 22 billion euros ($28 billion) of Greek bonds backed by loans to consumers and companies as the country adopts austerity measures to qualify for European aid, leaving the notes under review for further downgrades.

Spain’s 10-year bond yield slipped one basis point to 3.91 percent, the lowest since April 21, and Italy’s decreased two basis points to 3.92 percent.

The MSCI Asia Pacific fell 0.1 percent. Mitsubishi UFJ Financial Group Inc., which holds about 20 percent of Morgan Stanley, sank 2.4 percent in Tokyo. China Resources Land Ltd., a property developer, lost 3.1 percent in Hong Kong. Posco, South Korea’s largest steelmaker, declined 2.5 percent.

The yen weakened against 14 of its 16 most-traded counterparts, dropping more than 1 percent against the Brazilian real, Mexican peso, South African rand and Swedish krona and at least 0.2 percent against the dollar and euro amid demand for high-yielding currencies. The Dollar Index, a gauge of the currency against six major trading partners, rose 0.5 percent to 84.889.

Emerging Markets

The MSCI Emerging Markets Index of equities rallied 1 percent, with the Micex Index in Russia, the world’s largest energy exporter, jumping 4.3 percent for the biggest gain among global equity gauges.

Brazil’s Bovespa increased 1.2 percent after retail sales rose at the fastest pace on record and BM&FBovespa SA, Latin America’s biggest securities exchange, reported better-than- estimated earnings. .

Argentina gave institutional investors more time to turn over defaulted bonds in a $20 billion restructuring offer and said it may shelve plans to sell new debt as its borrowing costs surge.

Argentina Restructuring

Argentina extended the deadline for swapping securities to May 14 from today and said further extensions are possible, according to a government statement distributed by Barclays Capital, which is managing the offer. Economy Minister Amado Boudou said yesterday the country may scrap a $1 billion bond sale that formed part of the restructuring after yields rose to a two-month high on concern the Greek crisis was spreading.

Gold futures for June delivery rose $22.80, or 1.9 percent, to $1,243.10 an ounce. In electronic trading after settlement, the price reached $1,249.20, the highest ever.

Crude oil declined, losing 0.9 percent to $75.65 a barrel in New York, after a U.S. government report showed that inventories climbed for the 14th time in 15 weeks.

[jotuk6771]

EUR/USD falls to fresh 14-month lows

Thu, May 13 2010, 20:45 GMT

   

FXstreet.com (Córdoba) – The Euro extended its downside rally and hit fresh 14-month lows at 1.2517. EUR/USD has completed a reversal of 570 pips from 1.3090 (May 10 high). The pair continues under pressure and is headed toward the fifth consecutive weekly decline.

Currently trades at the lows at 1.2518/22, 0.89% below today’s opening price. To the downside support levels could be located at 1.2500 and below at 1.2470/80 and 1.2430.

[jotuk6771]

 EUR/USD extends fall to 1.2358

Fri, May 14 2010, 16:17 GMT


Fxstreet.com (Buenos Aires)- EUR/USD printed another year low at 1.2358, following Wall Street slump, and rumors of a probable downgrade to France, already denied by Fitch ranking agency reiterating the AAA stable outlook. Limited pullbacks had found resistance at 1.2400, with the pair still pushing lower despite oversold readings in almost any possible time frame.

As Wall Street keeps tumbling on global woes with Dow Jones in triple-digit sell-off, and Nasdaq and S&P 500 down more than 2.5%, EUR/USD keeps trading in a very narrow range barely above mentioned 1.2358 low. According to Slobodan Drvenica from Windsor Brokers Ltd “immediate focus now stands at 1.2331, key Oct 2008 higher low, break of which may signal extension of the long-term weakness”.

[jotuk6771]

Euro Drops, Stocks Trim Weekly Gain on European Debt Concern

May 14 (Bloomberg) -- The euro slid to the lowest since the aftermath of Lehman Brothers Holdings Inc.’s collapse and stocks tumbled, trimming a weekly rally, on concern the sovereign debt crisis will trigger a breakup of the European currency. Oil fell to a three-month low and U.S. and German bonds rallied.

The Standard & Poor’s 500 Index declined 1.9 percent at 4 p.m. in New York, paring its weekly gain to 2.3 percent. The Stoxx Europe 600 Index slumped 3.4 percent to finish a 4.8 percent weekly advance. The euro weakened below $1.24 to levels not seen since October 2008.

Deutsche Bank AG Chief Executive Officer Josef Ackermann said Greece may not be able to repay its debt in full, and former Federal Reserve Chairman Paul Volcker said he’s concerned the euro area may break up. Sony Corp., the world’s second- largest maker of consumer electronics, said it may suffer a “significant impact” if Europe’s deficit spreads, while Chinese Premier Wen Jiabao said the foundations for a worldwide recovery aren’t “solid” as the sovereign-debt crisis deepens.

“It’s a classic risk-off trading day,” said Win Thin, senior currency strategist at Brown Brothers Harriman & Co. in New York. “Commodities are down, stocks are down, emerging markets are down. Europe still has problems. The euro breakup is not a base-case scenario, but I have to acknowledge that everyone else is talking about it. There’s concern that if Europe implodes, the global recovery is jeopardized.”