Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Dow 30k before End of 2020? - 13th Jul 20
Credit Market Investments Turned Into End-User Risk Again - 13th Jul 20
Investors Are Going All-In on This Coronavirus Proof Industry - 13th Jul 20
5 Vital Insights That You Can Gain From Instagram Trackers - 13th Jul 20
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Stock Markets Shudder On Club Med Debt Woes

Stock-Markets / Stock Markets 2010 May 05, 2010 - 12:03 PM GMT

By: PaddyPowerTrader

Stock-Markets

Best Financial Markets Analysis ArticleIn a scary day’s trading with liquidity basically gone from Eurozone bond markets, equity markets finally woke up and took note and more than $1.1 trillion was wiped from the value of global stocks. Growing expectations that the €110 billion rescue package for Greece will need to be extended to Spain and Portugal was the cause. This was despite positive US home sales and factory orders data.


EUR/USD slid below $1.30 for the first time in more than a year as the markets switched to full scale risk aversion mode. Alcoa sank 4.3% and Exxon Mobil lost 2% to lead raw-materials and energy producers lower as metal and oil prices slumped on a stronger dollar. Bank of America and JPMorgan followed declines by banks in Europe, where Banco Santander, Banco Comercial Portugues and National Bank of Greece plunged 6% plus. Stories that Spain has more unsold houses than the US wasn’t helping brittle sentiment.

Stocks today in Europe briefly managed to get their head above water led by basic resource and mining names after rating agency Fitch said that the proposed new Aussie super tax on them wouldn’t affect their credit ratings, but banking stocks remain under pressure. Other stocks on the move include Sprint Nextel pre market up 3% after Deutsche bank upped them to a “buy” from a “hold”, but to the downside is News Corp after predicting a decline in Q4 operating income. A JP Morgan lowering of the stock to “neutral” from “overweight” also didn’t help. The biggest mover today is drugmaker InterMune, down an eye catching 80%, after news that it had failed to win FDA approval for a novel lung treatment. BP (down 16% in the last 4 days) has bounced today on a JP Morgan research note saying that fears over the cost of the gulf oil spill are overdone (caveat emptor on that one).

Today’s Market Moving Stories

•Press speculation continues to weigh on the EUR and we got down to a low of 1.2936 overnight as Asian names added to the selling seen all day yesterday. Fleeting relief over the EU-IMF bail-out for Greece has given way rapidly to a fresh bout of investor panic across southern Europe. EUR/USD is down to its lowest level in over a year.
•The latest rout was triggered by comments from Germany’s economics minister, who said that the finance package would last only 18 months, and by Germany’s finance minister, who warned the Greeks that a failure to meet the objectives would lead to bankruptcy. This is not what the market wants to hear now. The Greek two-year yield subsequently rose by 4.2% to 14.5%.
•The EU/IMF deal will find a majority in the Greek parliament, but last night’s decision by Antonis Samaras, leader of the opposition New Democracy, to vote against the IMF/EU package destroys any hopes of a lasting consensus for reform. It signals a return to the politics as usual at a rather early stage in the adjustment process, and destroys any hope of a national consensus, which is so critical when it comes to the implementation of long-term adjustment programmes. (Remember the IMF said the whole adjustment would take 10 years!) The decision makes it very likely that Greece will not be able to maintain the commitments it made in its negotiations, except in the very short term.
•The UK’s recovery from recession is “doomed to disappoint” as the weakness of the pound fails to spur exports, Deloitte economic adviser Roger Bootle said. The boost from the currency will be felt “only gradually” as the economy grows 1% this year and 1.5% in 2011.
•Some good news! The Irish Property Index produced by Jones Lang LaSalle is the second index to show growth of 0.1% in the first three months of 2010. This follows the IPD report of last week, which showed the first positive return for Irish commercial property values in two years. Potentially, we may be seeing the first tentative signs of recovery in the domestic property market, albeit very modest.
•UK PMI construction index rises to its highest level since September 2007 at 58.2. A ComRes poll showed Conservative lead at 37%, Labour at 29% and Liberal Democrats at 26%, leaving the Tories still short of an outright majority.
•Final service sector Eurozone PMI is in line with expectations at 55.6 as is composite PMI (57.3).
•IMF head Dominique Strauss-Khan told French press he still sees risk of Greek crisis spreading, but exempts France, Germany and other “big European countries”. Says a country exiting Eurozone would mark the end of the single currency.


How Do We Break The Negative Feedback Loop / Contagion?
While waiting for the German vote on the Greek bail-out package on Friday and the ECB meeting on Thursday, equity markets and peripheral bond markets are in free fall. The moves count as serious contagion, with risks for the Eurozone economy as a whole. This now has all the hallmarks of a self-fulfilling crisis. If this sell-off is allowed to persist it will get increasingly systemic with the bank channel the biggest risk. While Greece alone would not bring down the system, there is a real risk that it may be the fuse. If governments stood behind the banks, who stands behind the governments? The likelihood of ECB quantitative easing must be increasing. But would that seed the demise of the hard-won credibility of the ECB, the rock of the euro? That, it would seem, is the direction we are heading, whether we be keen to test the idea, or are just sliding toward it under a momentum no one can act alone to stop.

How do you break the negative feedback loop? Well the ECB could again go down unconventional routes. Its options are:

•An outright rate cut – but money market rates are extremely low.
•Wholesale quantitative easing by purchasing government bonds in the secondary market – this would be a serious challenge to its mandate in the Treaty and would amount to debt monetisation. Many Governing Council members are likely to oppose selective buying of sovereign paper.
•The suspension of collateral requirements for other peripheral countries as it has done for Greece – probably not an urgent task.
•The re-introduction of its 6-month and/or 1-year refinancing operations: the most important “unconventional” ECB response to the post-Lehman crisis. We assign a 30% probability to this being announced on Thursday at the regular Governing Council meeting.
•The restoration of an ECB/Fed currency swap line for dollar funding.

Company News

•CRH has reported a decline in like for like sales of 14% for the first four months of the year following the weather disruption to trading in January and February (-23.5%) and some recovery in March and April (-7%). On this basis the group expects H1 like for like sales to be c.10% lower than the comparable period. H1 EBITDA is guided to decline by a high teen percentage (H1 2009: €0.65bn).
•Visa and MasterCard are facing a renewed threat to one of the credit-card industry’s biggest revenue sources after Senator Patrick Leahy backed legislation to help merchants cut the cost of accepting payment cards. Merchants who accept cards typically must pay about 2% per transaction. The industry has escaped previous attempts to curtail so-called interchange or “swipe” fees, which bring in more than $40 billion a year. Now the nation’s biggest card networks and lenders, including Bank of America and JPMorgan, find themselves pitted against two of the most powerful senators over the fees, which some lawmakers and retailers have said are excessive and hurt small businesses.
•French bank Societe Generale said it swung back into the black in the first quarter of 2010, posting net profit well beyond analyst forecasts as write-downs from risky assets receded sharply. The bank said it is confident it can meet market expectations of net profit of around €3 billion for 2010 as a whole.
•Intel said it has begun selling a processor that’s energy-efficient enough to win a place in smartphone designs. The chip, code-named Moorestown by the company, uses 50 times less battery power than its predecessor and runs software faster than those used in handsets currently on the market, said Intel Senior Vice President Anand Chandrasekher.
•In other tech news Microsoft will start selling its Kin mobile phones online tomorrow with Verizon Wireless, the biggest U.S. mobile-phone carrier, as the software company tries to take back ground in the fast growing smartphone market. The Kin One will sell for $49.99 after a $100 rebate and a two-year service contract, the companies said in a statement. The Kin Two, with a larger screen and higher-resolution camera, will cost $99.99. Both phones go on sale in stores on May 13.
•The Obama administration is backing “significantly” higher limits for damages BP might face for the oil spill in the Gulf of Mexico and won’t rule out scaling back plans to expand offshore drilling. “Beyond clean-up and containment, BP must be held responsible for the damages this spill causes,” White House communications director Dan Pfeiffer said. The administration “strongly supports” a move in Congress to raise an existing $75 million cap on damages under the Oil Pollution Act.
•Household consumer products maker Henkel posted a sharper-than-expected rise in operating profit and raised its full-year earnings outlook, as it anticipates further contributions from a strict cost discipline and the integration of the National Starch business. The company, which competes with L’Oreal and Clarins of France, as well as German rival Beiersdorf, now sees a rise of more than 15% in adjusted operating profit and adjusted earnings per preferred share in 2010.
•French building materials company Lafarge swung to a first-quarter net profit and confirmed its outlook for the full year, including for an expansion of up to 5% in the volume of cement it sells. Net profit for the three months to March 31 was €64 million from a net loss of €17 million a year earlier. That exceeds an average analyst net profit expectation of €41 million.
•Handelsblatt reported this morning that Continental was considering an IPO of its Tyre unit (the Tyre unit is by far the more profitable of the Group’s two units) in order to facilitate a merger with Schaeffler. Whilst the proceeds would be welcome for the Conti bank group, further dilution of stakes in the Group structure (following the Continental rights issue and sale of 25% of ContiTech to the pension fund last year) would complicate moving cash around the Group.
•Next came out this morning with a good set of Q1 trading figures, with like for like sales in the Retail business down -0.8% (guidance of -2.5% to +0.5%) and Directory up 7.2% (+1.0% to 4.0%). As a result of the strong figures in Directory, the guidance range for sales during the first half has been raised by 1% to +2.0% to +5.0%, despite the later launch of the Autumn Directory being likely to suppress sales by around 2%. Management also indicated that their pre tax profit forecast was “towards the top end” of current City forecasts between £525m and £565m, thereby effectively raising guidance by around £10m to £15m.
•BMW’s Q1 results were better than expected with the Group generating operating profits of €449M (expectation €383M), rebounding from the loss making position of last year. Auto segment EBIT of €291M still represented a relatively modest margin of 2.6% though some way behind peer Daimler. BMW sounded relatively upbeat on the rest of the year without being particularly specific – the target of betting last year’s meagre profitability remains vague.

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