Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Stock Markets Calm Ahead of Bank Stress Test Results

Stock-Markets / Financial Markets 2009 May 06, 2009 - 04:56 AM GMT

By: PaddyPowerTrader

Stock-Markets

Best Financial Markets Analysis ArticleMarkets paused for reflection and traded in a narrow range yesterday finishing neutral after their recent bout of bullish fireworks. The S&P 500 managed to just hold onto the 900 handle. Oil stocks struggled on a fall in crude prices while Disney shone on better than expected numbers. This was despite more upside data surprises this time from the services ISM and a cautiously upbeat testimony from Fed Chairman Bernanke. However news that Bank of America may require $35 billion in additional capital has futures in the red this morning.


Today’s Market Moving Stories

  • Bank of America has been deemed to need an additional $35bn in capital, according to the results of a government stress test, a source familiar with the results said on Tuesday. The FT reports U.S. regulators are set to impose tough conditions on banks that wish to repay TARP monies making them prove that they can issue debt without government banking / guarantees. This news will pressure European banks at the open. As I write I note both UBS and Barclays are down early doors. The Telegraph is reporting that Barclays are considering a rights issue. In contrast French bank BNP is up 8% at the off after topping analysts forecasts.
  • The most significant comments overnight were from San Francisco Fed President Janet Yellen, coming too late for the US close. She noted that the necessary inventory correction may be “quite far along” with recent “hints” of stabilisation in housing. Still, the recovery will be “frustratingly tepid” when it starts. She predicts that the ongoing deterioration in the US jobs market understates unemployment, noting that the “under-employment rate” has risen sharply. She continues to fear deflation is more likely than inflation, but it would not be a severe bout.
  • British consumer morale enjoyed its biggest monthly boost last month in two years as people sensed the worst of the recession may have passed. The Nationwide Building Society’s consumer confidence index rose to 50 last month from 42 in March. The eight-point rise was the most marked improvement in the index since May 2007 while the level was the highest since December. The figures tally with a GfK survey last week which found consumer confidence recovered in April to its highest level in a year.
  • Standard and Poor’s rating agency will downgrade all German Landesbanks by one notch today. The move is said to increase the political pressure for consolidation in the sector.
  • ECB sources this morning say a modest interest rate cut (1/4%) this Thursday may be flanked with a commitment to keep rates low for an extended period. The odds are low that the Council will agree on more controversial non-standard measures like the purchase of government bonds or private sector paper, given the difficulties involved and the lack of consensus so far.
  • Peer Steinbruck, Germany’s accident-prone finance minister, did it again. Yesterday in Brussels he launched another attack on tax havens by listing the tax shelters as follows: Luxemburg, Liechtenstein, Switzerland, Austria and Ougadougou. Unlike the former three the latter is not a country, but the capital of Burkina Faso, one of the poorest countries in the world. More importantly, the latter is not a tax haven. Steinbruck seems to be making the point that those small European countries are banana republics.
  • Some people are born to be customers! Brooklyn cab driver convinces you he is a hedge fund managers, steals $20 million.
  • The new game in town - Shoot the Banker.

Last Word On Those Annoying Stress Tests
I must start with a broad impression. This whole stress test exercise is probably the most ridiculous thing that the government has done through this entire crisis (and the field is crowded!) Let’s think about what exactly the government is doing here. Financial regulators oversaw the most colossal failure of regulatory policy in the history of the world in this decade. The entire financial system was allowed to run amok. And regulators stood by and watched. But now regulators have decided that banks should go from being far undercapitalised to far overcapitalised in the middle of an economic recession and financial crisis, i.e. at just the time when it is really expensive (if not impossible) to raise capital. In a deleveraging financial system, the notion of forcing banks to drastically increase their capital ratios at the bottom of a recession based on what could happen if the recession gets even worse is stupendously ill-advised in my view. If there are banks that are insolvent, then by all means have the FDIC take them over. But running this hypothetical exercise strikes me as a monumental waste of time and energy.

The stated purpose of the stress tests was to increase confidence in the banking system, but it feels like the end result has been the opposite. Financial conditions are getting better (having nothing to do with the stress tests, regardless of what Treasury might like you to believe). In any case, here we are, the regulators are delivering the final results to banks today, with a public release due out late Thursday afternoon. The latest leaks suggest that the number of banks that will be forced to raise capital has gone from 2 or 3 to 4 to 6 to now 10.

But the really important question is whether banks are going to be able to coerce private holders of preferred paper to convert to common equity or, better yet, whether banks might be able to raise new private money in the next six months. If the answer to both of those questions is no, then banks are going to be driven into an even tighter bear hug with Uncle Sam, and I can predict unequivocally that such a result would be bad news for the financial system and for the economy.

Equities

  • Luxury carmaker BMW has posted a smaller than expected loss of €152 million this morning.
  • Tullow Oil announced this morning that the Ngosa-1 well exploration well, which is located in the Butiaba region of Uganda, has encountered good quality Kasamene-type oil bearing reservoirs in a down-dip location at the oil water contact.
  • United Drug released first half results this morning and delivered a 6% increase in revenue on a constant currency basis to €850.9m, slightly below consensus estimates. Operating profit increased 5% yoy to €21.9m, with adjusted EPS slightly below expectations at 10.63c. The packaging business weighed on earnings as did Sterling. Management expect the group’s pre-tax profits for the year to September 2009 to at least be in line with the prior year.
  • CRH has issued an interim management statement indicating that poor weather conditions and a deteriorating economic environment impacted its performance in the first four months of the year. As a result, profits in the first half of the year are likely to be below previous expectations.

Data Ahead
There have been some signs in initial jobless claims data that the worst job losses are behind the US economy. Yet jobless claims represent the flow into the jobless pool. The ADP (13.15 today, consensus –645k) and nonfarm payroll reports include this flow in as well as the flow out. A slowing of job cuts comes well before the hiring begins and so even if the pace of job cuts is easing the payroll numbers will stay elevated for a while, even if the worst is over.

Earnings from Unilever, CBS, Nvidia.

And Finally… The Original Bankers Song


Disclosures = None

By The Mole
PaddyPowerTrader.com

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules