Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Coronavirus Deviation from Overall Outlook for 2020 - Video - 28th Feb 20
Stock Market SPX to Rise back to 3350 - 28th Feb 20
Stock Performance in the Rising Coronavirus Fever - 28th Feb 20
Stock Market SPY Breaks Below Fibonacci Bearish Trigger Level - 28th Feb 20
Will CoronaVirus Pandemic Trigger Stocks Bear Market 2020? - 28th Feb 20
Dow Long-term Trend Analysis - Coronavirus Triggering a Stocks Bear Market? - 27th Feb 20
Trump or Sanders? Both will pile up the Debt - 27th Feb 20
Oil Price Is Now More Volatile Than Bitcoin - 27th Feb 20
A Digital “Fedcoin” May Be Coming… And It Would Be Terrifying - 27th Feb 20
India's Nifty 50 Stocks: Does the Bad Jobs Outlook Spell Trouble for Stocks? - 27th Feb 20
How Crypto Currencies Are Helping Players Go Private - 27th Feb 20 -
Gold and Silver The Die Is Cast - 27th Feb 20
US Economy Permanently Addicted to Zero Interest Rates - 27th Feb 20
Has the Stock Market Waterfall Event Started Or A Buying Opportunity? - 27th Feb 20
Advantages of Enrolling in a Retirement Plan - 27th Feb 20 - LS
South Korea Coronavirus Outbreak Data Analysis Warning Rate of Infection is Exponential! - 26th Feb 20
Gold Price Long-term Trend Analysis Forecast 2020 - 26th Feb 20
Fake Markets Are on Collision Course with Reality - 26th Feb 20
Microsoft is Crushing the S&P 500, Secret Trait Of Stocks That Soar 1,000%+ - 26th Feb 20
Europe's Best Ski Resorts For The Ultimate Adventure - 26th Feb 20
Samsung Galaxy S20+ vs Galaxy S10+ Which One to Buy? - 26th Feb 20
Gold Is Taking on $1,700 amid Rising Coronavirus Fears - 26th Feb 20
Is This What Falling Through the Floor Looks Like in Stocks? - 26th Feb 20
Gold Minsky Moment Coming - 26th Feb 20
Why Every Student Should Study Economics - 26th Feb 20
Stock Market Correction Over? - 26th Feb 20
US Bond Market Yield Curve Patterns – What To Expect In 2020 - 25th Feb 20
Has Stock Market Waterfall Event Started Or A Buying Opportunity? - 25th Feb 20
Coronavirus IN Sheffield! Royal Hallamshire Hospital treating 2 infected Patients, UK - 25th Feb 20
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

China, ECB and the Rumour Mill Hurting Stocks

Stock-Markets / Stock Markets 2010 Jun 01, 2010 - 09:23 AM GMT

By: PaddyPowerTrader

Stock-Markets

Best Financial Markets Analysis ArticleWe’re back in full scale risk aversion mode. A weak crazy rumour driven opening in Europe today with wild talk of French and Italian credit rating downgrades which I give really no credence to as rating agencies have to put countries on negative watch or outlook BEFORE they take the knife to the sovereign rating (neither are currently on watch or negative outlook). For me the it’s the rather glum ECB Financial Stability Review report released yesterday evening which is the main culprit as it predicts “sizeable” bank loans losses next year and expects these to be higher than 2009. A further €195bn (gulp) is the number they mention.


This all goes to highlight the perception that European bank are still lagging the balance-sheet improvements already seen in the US/UK banks. Meanwhile comments from ECB members such as Weber only re-enforce the rumours of a Franco-German rift at the heart of the ECB : Weber’s weekend criticism of the ECB bond purchase programme and warnings that the Euozone must not become a fiscal transfer union come amidst stories that the decision to buy PIIG bonds was nothing less than a French coup designed specifically to assist French banks. Finally we’ve had a weak German retail sales figure which is adding to the gloom.

Post it’s spectacular “Top Kill” failure BP is the big fall guy today, off some 15% (making that bet with Paddy Power on the CEO, Tony Hayward losing his head look better by the day). But to the upside is insurance giant Prudential (up 3.5% today) on talk that the purchase of AIG’s Asian AIA unit won’t go ahead after AIG said that they “will adhere to the original terms of its previously announced agreement”. The Pru had been seeking a cut price deal over the last few days. GBP is bid on this news. Expect AIG to struggle this afternoon.

Today’s Market Moving Stories

•Over night risk aversion mode drove the market trend in the Tuesday Asian session. The main catalysts were weak economic releases from China; May Chinese NBS manufacturing PMI declined to 53.9 from 55.7 in April (cons. 54.5) and May Market PMI declined to 52.7 from 55.4 in April. Although these figures stayed comfortably above the expansionary thresholds of 50, suggesting industrial activity has continued to expand steadily, these also suggest that the growth momentum has eased somewhat recently. The Shanghai index declined 1.0% partly due to the weak PMI figures and stocks in other Asian countries also posted declines (-0.6% to -1.0%).
•China: The FT quotes Li Daokui, a member of the PBOC’s monetary policy committee, as saying “China is running the risk or is on the verge of overheating” and that deposit rates should increase modestly because they were negative in real terms. Li also added that a gradual appreciation of the CNY would help companies prepare for an eventually much stronger currency.
•In a reality check the official PMI eased to 53.9 in May from 55.7 in April. That was close to the consensus forecast of 54.0. A companion index compiled by Markit dropped to an 11-month low of 52.7 in May from a downwardly revised 55.2 in April.
•On the subject of credit ratings agencies, ECB Council member Christian Noyer said “They are not sending the signals at a certain point of time when it should be warranted but sending when it’s too late, and increasing problems … For us, it’s an enormous problem … Certainly I would consider the present situation as absolutely unsatisfactory”.
•Greek finance minister George Papaconstantinou said “The (aid package) money is sufficient till the start of 2012 … We have short-term paper expiring, some of it in July, then we will be in the markets.”
•In its financial stability review, the European Central Bank predicted €195bn in bank write downs in 2010 and 2011, and warns of dangerous financial contagion as a direct result of the sovereign debt crisis. Specifically, the ECB warned about “a number of hazardous contagion channels and adverse feed-back loops between financial systems and public finances.” The FT writes that the ECB’s gloominess could contribute to concerns over the euro area’s weak growth prospects.
•Caja Madrid, Spain’s second largest savings bank has asked for government support to the tune of up to $3bn as it attempts to merge with several other smaller regional Spanish banks. Spain’s bond spreads are again under the kosh again today.
•Unemployment in Germany continued its downtrend and dropped 45k (seasonally-adjusted) in May. Unemployment started to drop in July 2009. Since then, the German labour market confounded skeptics and performed much better than could been hoped for. The reasons for this seem to be significantly increased flexibility on the companies’ levels and also the German “Kurzarbeit”. This is a govt subsidy scheme which allows firms to hold on to their employees at much reduced working hours. We draw two conclusions: 1) Public budgets may get some relief from the improving labour market; 2) The German labour market trend could be another indication of widening divergences within EMU
•May’s UK CIPS/Markit report on manufacturing suggests that the industrial recovery is still going strong. Although the headline PMI only tracked sideways in May, it has risen sharply over the past few months. So by holding steady at 58, it stayed at its highest level in over 14 years. And although the output balance slid a touch, it still points to quarterly gains in manufacturing output of close to 2%. Admittedly, the survey has been a bit more optimistic than the official data. What’s more, industry makes up less than a fifth of the economy – and the CBI services survey released overnight suggested that the recovery in the much bigger services sector is flagging. Nonetheless, the news on the manufacturing sector clearly remains upbeat.

Ryanair Flying High

Bloxham’s write today that Ryanair’s FY results show, as expected, a strong rise in FY10 pre-tax profits to €341m with adjusted net income of €319m (+194%). As importantly, guidance for FY11 contains a number of key pointers including 1) yields to rise 5-10% 2) special dividend of €500m to be paid in October 2010 with another €500m guided for FY 13 if an aircraft order is not secured 3) costs per pax to rise just 4% this year depsite higher hedged fuel costs (-6% stage length adjusted) 4) additional fuel hedges extending to H1 FY12 (Q1 50% at $750 per tonne, Q2 20% at $750) which is a 3% rise in dollar terms for a cost item accouting for over 40% of expenses 5) 34 aircraft deliveries financed at an all-in cost of 4% with associated FX crossed at $1.46 and 6) net profit guidance of €350m to €375m for FY11 relative to consensus of €360m i.e a 10-15% rise in net profit. Normally in June Ryanair is extremely cautious in its outlook statement and this guidance must be judged relative to a Q1 affected by ash (net profit to be slightly lower in Q1) for which a €50m maximum exceptional cost has been flagged. Guidance of a 10-15% rise in net profit together with timed special dividends of €1bn are specifically positive backdrops to the analyst briefing at 8.30am.

Company / Equity News

•Aussie PM confirms he is committed to the mining tax and negotiations will be protracted. As the war of words intensifies Rio Tinto issued a statement saying it currently paid “its fair share” of Australian taxes.
•The Nikkei newspaper reports BHP agreed to raise prices of coking coal by 12.5% with Japanese steelmakers for 3-month contracts. Despite this, basic resources stocks, miners & steel makers are all weaker today as copper, nickel, tin & zinc prices all fell on the LME after the relatively disappointing economic news from China. Expect Alcoa , Freeport McMoran etc to show weakness in the NY session.
•In M&A news Covidien has agreed to buy medical device company Ev3 for $2.6bn.
•Combined price estimates from more than 2,000 forecasters tracked by Bloomberg show the S&P 500 will rise 25 percent in the next year, the fastest projected rate since February 2009, data compiled by Bloomberg show. The rally above 1,350 will be led by industries most tied to the economy, according to analysts who boosted individual share projections by an average of 0.9 percent in May, the 14th straight monthly increase.

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