Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Why You Shouldn’t Get Excited About Gold Price Mini-Rally - 26th Jan 21
The Truth About Personal Savings Everybody Should Know and Think About - 26th Jan 21
4 Economic Challenges for 2021 - 26th Jan 21
Scan Computers 2021 "Awaiting Picking" - 5950x RTX 3080 Custom PC Build Stock Status - 26th Jan 21
The End of the World History Stock Market Chart : Big Pattern = Big Move - 26th Jan 21
Stock Market Recent Sector Triggers Suggest Stocks May Enter Rally Phase - 26th Jan 21
3 Top-Performing Tech Stocks for 2021 - 26th Jan 21
5 Tips to Manage Your Debt - 26th Jan 21
Stock Market Intermediate Trend Intact - 25th Jan 21
Precious Metals Could Decline Before their Next Attempt to Rally - 25th Jan 21
Great Ways of Choosing Good CMMS Software for a Business - 25th Jan 21
The Dark Forces behind American Insurrectionists - 25th Jan 21
Economic Stimulus Doesn’t Always Stimulate – Pushing On A String - 25th Jan 21
Can Karcher K7 Pressure Washer Clean a Weed Infested Driveway? Extreme Power Test - 25th Jan 21
Lockdown Sea Shanty Craze - "Drunken Sailor" on the Pirate Falls Crazy Boat Ride - 25th Jan 21
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Financial Markets React to Germany Disappointing Greece Again

Stock-Markets / Stock Markets 2010 Apr 27, 2010 - 08:10 AM GMT

By: PaddyPowerTrader

Stock-Markets

Best Financial Markets Analysis ArticleIn a session yesterday that was largely devoid of economic data, most of the focus was again on Europe’s fiscally troubled sovereigns. Whilst ECB President Trichet noted that he was confident that negotiations on the Greek fiscal package would be “concluded soon and rightly”, Greek 2-year bond yields surged 294bps to 13.16% with the 10-year yield up 91bps to 9.56%. Markets were a little disconcerted by a statement made by German Chancellor Merkel, who faces a state election on 9 May.


She sought to walk the fine line between reassuring markets that Germany’s contribution to the aid package will be forthcoming and reassuring German voters that this contribution is contingent on Greece adopting further savings measures that will return the economy to a sustainable growth path. She is clearly playing to a domestic audience and couching her “support” for Greece in terms of wanting to protect the Euro.

Most US stocks declined yesterday, pulling the S&P 500 Index down from a 19-month high, as concern that proposed legislation will hurt banks overshadowed improving earnings at Caterpillar and Whirlpool. JPMorgan and Goldman Sachs helped lead financial shares lower as Congress prepared to vote on whether to open debate on the financial overhaul. Citigroup tumbled 5.1% on the Treasury Department’s plan to sell as many as 1.5 billion shares. Caterpillar gained 4.2% on its first earnings increase in seven quarters, while Whirlpool rallied 10% as the appliance maker lifted its forecast.

Today’s Market Moving Stories

•In the US, needing 60 votes in the Senate to begin debate on the financial reform bill, Democrats fell three votes short. The setback is unlikely to be permanent with lawmakers in both parties reportedly close to agreement. Ahead of the vote, Senate Republican Leader Mitch McConnell said that “all of us want to deliver a reform that will tighten the screws on Wall Street. But we’re not going to be rushed on another massive bill”.
•Spanish unemployment in Q1 reached 20.05%, with 4.61 million unemployed. The rate is above a Reuters survey which forecast 19.6% and follows a rate of 18.8% for the last quarter of 2009.
•New opinion poll on Greece with 60.9% disagreeing with the government’s activation of the EU/IMF aid package and 70.2% did not agree with IMF involvement in a deal. Nevertheless, PM Papandreou’s personal rating is holding up well (50.8%). With respect to implementation risk, 67.4% of respondent think there could be “social unrest”. Note, the ADEDY public sector union and GSEE private sector union have both said they will call new nationwide strikes in May.
•In an interview with the China Economic Times, senior government economist Ba Shusong said that policy makers should focus more on “making the exchange rate formation mechanism more flexible and marketised… Looking at economic growth forecasts for the second quarter, it’s expected that exports will jump sharply in the second quarter, economic growth in the first quarter was also very strong, and price-rise pressures are quiet large… Therefore, it will be necessary to resume reforming the CNY exchange rate mechanism.”
•Chinese Vice Minister of Commerce, Zhong Shan, says that the government is determined to shore up trade and “continue consolidating (China’s) status as a major trading power”. He notes that “At present, lack of external demand remains a striking problem, and this year exports will show a trend of rising, then falling … At the same time, the cost of exports is continuing to rise rapidly and the room for export profits will narrow. Trade friction will also become more serious …we cannot be too optimistic about the outlook for a recovery in external trade”.
•Thomas Montag, the former head of sales and trading in the Americas at Goldman Sachs, called a set of mortgage-linked investments sold by his firm “one shitty deal”. The transaction was Timberwolf, a $1 billion collateralized debt obligation holding pieces of other CDOs. The CDO also included optimistic side-bets on the performance of CDOs, derivatives in which the firm took the opposite pessimistic side in “many” cases. Within five months of Timberwolf’s debut, the CDO had lost 80% of its value, and it was liquidated in 2008.

Germany Disappoints Greece, Again
Anybody looking yesterday or the day before for reassurance that the Greek crisis was being dealt with effectively, would have been sorely disappointed. More particularly, after a weekend of reassuring words from the IMF and Greek officials, Monday saw fresh signs that support for Greece from Germany is far from a done deal. In fairness, the signs that the road to approving the aid might prove a bumpy one have been apparent to all to see for months now.

So where does this leave Greece? Well the Christian Democratic Union’s budget spokesman Norbert Barthle said that he wants creditor banks to accept a restructuring of their investments in Greek debt as well as a reduction on returns. Could this be the first real sign that a growing number of politicians within Germany now think that a restructuring of Greek debt should be part of the process? Although Christine Lagarde may have insisted yesterday that the possibility of restructuring Greek debt is “off the table,” we are also aware that an unnamed European official quoted by the WSJ over the weekend talked about the “inevitable” restructuring of Greek debt. By the sounds of things it certainly sounds as though it is becoming more likely.

Contagion
The concerns that have been surrounding Greece are increasingly impacting Portugal. Overnight the yield on Portuguese 2-year bonds rose 101bps and that on 10-year bonds rose 26bps. Outright yields (3.99% on the 2-year and 5.23% on the 10-year) remain well below those in Greece but the recent trend looks somewhat alarming. This is spilling over into the Portuguese equity markets which shed 3% another overnight, extending the slump that begin mid-month. Portuguese officials have been quick to point out that the fiscal situation that Portugal faces is not as dire as that in Greece (the ECB’s Weber commented similarly this morning). For one, the country has already issued EUR9bn of this year’s planned EUR22bn programme. And the fiscal metrics in Portugal are not nearly as challenging as Greece – a deficit of 9.4% of GDP in 2009 (versus 13.6% in Greece) and gross public debt of 76.8% of GDP (versus 115% in Greece). Incidentally, overnight Spain’s 2-year yields rose 19bps (to 1.90%) and 10-year yields rose 7bps (to 4.05%).

Company News

•The U.S. Treasury Department said it would approve an initial sale of 1.5 billion shares of Citigroup common stock, the department’s latest move in paring its 27% stake in the company. The Treasury hired Morgan Stanley to manage its Citi holdings. It is estimated that the government’s eventual sale of 7.7 billion Citigroup common shares will raise about $32 billion.
•Germany’s Deutsche Bank said net profit increased 49% in the first quarter on record quarterly pretax profits in its corporate and investment banking segment and fewer write-downs overall. Deutsche Bank confirmed its full year outlook for 2011, when it aims to earn a pretax profit of €10 billion. Germany’s largest listed bank earned a €1.76 billion net profit for the first quarter, compared with €1.19 billion in the year-ago period and outperforming analysts’ expectations of €1.39 billion for the period.
•Lloyds released it Q1 interim management statement. The combined business returned to profit in Q1 in a bullish statement. Income progression is good, it is reaffirming some trends (margin development in line with guidance of c.2% and integration synergies on track) and most importantly saying that impairment trends are even better than initial guidance for 2010, having slowed “significantly”, particularly in wholesale books (ie HBOS where the weakness was).
•Imperial announced a strong set of H1 figures this morning (ahead of expectations), with adjusted operating profit rising 6% on revenue which rose 4%. Volumes were down 3.7% due to market weakness in the US, Spain and Russia, although performance improved in Q2 (down 1.4%) and volumes are expected to be flat in H2.
•Capital Group, Prudential Plc’s biggest shareholder, has approached three UK-based insurers to gauge their interest in a group bid for the company. Capital Group has held informal talks with Aviva, Resolution and an unknown party. Another of Prudential’s biggest investors may support the proposal.
•BlackRock’s first-quarter profit fell short of analysts’ estimates as investors slowed deposits into its funds, sending shares of the world’s biggest asset manager down the most in a year. BlackRock’s profit excluding some costs was $2.40 a share. The average estimate was $2.44. Net income rose fivefold to $423 million as BlackRock benefited from the first full quarter following its purchase of Barclays Global Investors.
•Royal KPN Tuesday kicked off the earnings season for major European telecommunications companies with a 42% increase in first-quarter net profit, mainly on cost cutting. It also reiterated its targets for 2010 and 2011.
•Texas Instruments’ first-quarter profit soared on double-digit sales growth across its businesses, with sales in the chip maker’s analog and embedded units returning to pre-recession highs. Texas Instruments, which makes chips used in everything from cell phones to industrial equipment, has seen a sharp return in demand after the recession caused customers to virtually stop buying chips last year. The results, which topped Wall Street estimates, follow reports from other tech giants, including Intel, that suggest businesses and consumers are spending again on technology.
•Fyffes has confirmed its trading pattern in 2010 will be heavily skewed towards H2 as January snow and a strong dollar make trading during H1 especially difficult. The company is stocking with a FY EBITDA guidance of €14-18m but this assume the benefits of lower banana import duties due as part of an EU restructuring of the banana trade.
•Bank of Ireland’s capital raising plans dominate the coverage of the Irish market this morning. Reports suggest that the private institutional placement at €1.53 was oversubscribed by between 3 and 4 times, reflecting a strong appetite for the deal amongst institutional investors. An indication of such a strong interest reflects positively on the potential follow through for interest in Bank of Ireland and possibly the general Irish investment story. Following Bank of Ireland’s announcement yesterday, focus will switch somewhat to AIB ahead of tomorrow’s AGM statement, were any news on the disposal program will keenly anticipated. The gap between the two banks in terms of capital raising plans has been highlighted by the progress at Bank of Ireland.

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”.© 2010 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