Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

A Post Payrolls Stock Market Bounce?

Stock-Markets / Stock Markets 2010 Jul 02, 2010 - 10:07 AM GMT

By: PaddyPowerTrader

Stock-Markets

Best Financial Markets Analysis ArticleThe S&P 500 Index fell for the fourth straight day Thursday losing 0.3% to close at it’s lowest since Oct. 2, 2009, after sinking as much as 1.9% earlier in the day. That was because of more worrying jobs data in the form of weekly and continuing jobless claims which gave the double dippers argument more ammunition. But European equity markets opened marginally higher this morning following their lead from Asia overnight despite the weak economic data from the US yesterday.


Indeed the last 24 hours have highlighted the shifting nature of the bearish forces, from sovereign and bank risk to economic data. Some of the negative press focus thus is now shifting from Europe into US after a number of very poor data releases from the US – and the FX market have responded accordingly by sending EUR/USD above 1.25 again and even EUR/CHF went to 1.34 after trading with a 1.30 handle – looked like SNB intervention. Same goes for EUR/JPY now back above 111.

So the big event of the day pre the long US weekend was the release of the Non Farm Payrolls number for June and though it came pretty much on the money i.e. just 5k better than consensus expectations, I suspect perhaps that The Street / dealer community was bracing themselves for a far worse number of around -200 after the tepid ADP report Wednesday so we may see something of a relief rally in stocks this afternoon. Note the fall in the employment rate to 9.5%

Today’s Market Moving Stories

So what exactly just happened over the past 24 hours ?

•ECB skillfully engineered a key step of its exit strategy. Very graceful. And hats off to them. Makes the frenzied wall of worry press coverage at the start of the week look all the more ridiculous. We had several tenders. Net-net? ECB persuaded banking system to return EUR 188 bn in unused excess liquidity. This usually ended up being parked at the ECB every night. Now it has vanished. Completely. And the maturity profile of what is left is a lot shorter (442bn in 12m cash was taken in, and largely replaced with 3m and 6d cash, although the 6d cash will be transformed into 1m cash next week). This will give the ECB a bit more control over near-term conduct of policy. But there’s still a long way to go: EUR 722 bn of ECB cash is still “out there”, and will have to be mopped up over coming months.
No doubt the Fed will have been watching carefully, and will be hoping for similar success when it tries to reduce excess reserves in the US (still above $1 trn). The situation is different in the US though. ECB’s cash injections were naturally time-limited and were executed via repo. The Fed and the BoE went down the road of outright asset purchases to inject liquidity (QE), so they have to decide *when* to sell the assets. Also will have to be done using combination of asset sales, reverse repos, and natural wastage, on a scale never attempted before. To make matters worse, unlike the ECB’s repos, there is no obligation on the original asset owners to buy back. So ECB success in the past day, doesn’t hugely reduce risks for Fed and BoE.
•We learned the Eurozone banking system is healthier than we thought

ECB agreed to give them unlimited cash, and they didn’t overdo it. They clearly are not as desperate for cash as market supposed. This bodes well for the upcoming and much leaked stress tests, although be careful here: need for liquidity is one thing, solvency, vulnerability to bad debts from a double dip, and exposure to sovereign debt is another thing entirely. There are more euro risk events ahead.

So now what?

•Greece is to try to issue T-bills in the next 2 weeks. No firm dates yet, but we know a total of 4bn euro have to be rolled on July 13, and July 20 (in 3m, 6m and 12m bills), so bills will have to be issued before then. It’s a Big gamble as there seems to be little appetite out there for this supply. If it fails, expect knock-on consequences for Portugal and Spain.
•The banking stress test results due. Mid-July to end-July. Today’s FT says expect up to 20/100 of Europe’s banks to be forced into cash calls as a result of stress tests, raising up to €30bn ($37.3bn) of fresh equity. The same article says ECB’s Weber held a meeting of 16 bank CEOs at the Budesbank Wednesday. Told them to prepare emergency capital-raising plans in case they fail the stress tests. It says publication of Europe-wide tests has been delayed a week to July 23rd. There was chatter in the wires yesterday that a stress test scenario that sovereign risk could be simulated by assuming a 3% writedown in value of all sovereign bond holdings would be a fudged way of dealing with the writing down issue without singling out Greece. Nothing official on this yet.
•End of July, IMF/EU/ECB delegation examines progress on Greece fiscal consolidation. If they are not happy, then the next tanche of funding will not be released. There’s nothing to suggest they will not be impressed though.
•The Australian government has announced significant changes to the Australian minerals tax system –it looks at first glance to be a sensible outcome that ensures projects previously under threat are now more likely to proceed. The Resource Super Profits Tax (RSPT) has been re-named the Minerals Resource Rent Tax (MRRT). The key changes are: a) headline tax rate to 30% from the earlier proposal of 40%; b) it now applies only to iron ore & coal, with base metals, precious metals, industrial minerals etc. exempt; c) the trigger point is at c12% from the earlier proposal of c5%; d) corporate tax rate now to reduce to 29% only (from the earlier reduction to 28%); and e) significant changes to the tax shields on previous investments (including the option of the starting base for project investments at book value or market value on 1 May 2010 at election of tax payer).
BHP Billiton has said that it is “encouraged” by the tax changes. Rio Tinto has said that the MRRT proposal is an improvement on the RSPT. Xstrata has announced that the Ernst Henry copper expansion project, which had been put on hold, has been reinstated. In a joint statement, the three companies have stated that “the proposal presented by the government represents very significant progress towards a mineral taxation regime that satisfies the industry’s core principles”.

Company / Equity News

•There were press reports yesterday afternoon that there are at least 7 diffferent bidders for AIB’s 705% stake in Bank Zachodni which are reported as follows: Unicredit Group, Nordea, BNP Paribas, HSBC, Sberbank, Poland’s PKO Bank Polski and Bank Pekao which is positive news for AIB’s capital raising plans. The Irish Times reports this morning that EBS Building Society is expected to receive bids from 3 potential suitors including Irish Life & Permanent and Cardinal Asset Management.
•Dana announced yesterday (July 1st) that it has received a preliminary approach that may or may not lead to an offer being made for the company. In a short statement, Dana said that discussions are at a very early stage and that there can be no certainty as to whether an offer will be made, or at what level such an offer might be. Austria’s OMV had been suggested earlier this week as a possible suitor, but has since said that it is not interested in buying Dana. Bloomberg News suggests South Korea’s National Oil Company (KNOC) as the potential bidder, with a bid level of up to £18 per share, a 50% premium to the current share price. KNOC has declined to comment. Davy’s comment that “Dana has a strong position in the mature North Sea, as well as interests in North Africa (Egypt, Morocco, Mauritania and Guinea). It offers bidders incremental production, development projects and exploration acreage including an entry into the West African region through its Guinea acreage. The news should be taken as a positive for the sector, particularly for smaller stocks which may benefit from the reinvestment of deal proceeds” The stock is up some 19% today Fellow industry stocks Tullow Oil (who host a site visit for analysts in Ghana yesterday) and Cairn Energy are up 3.5% & 4.9% respectively.
•Genmab soared 50% today after the Danish biotechnology company whose chief executive unexpectedly resigned last month amended its agreement with Glaxo on its Arzerra drug. In exchange for lower milestone payments and royalties, Genmab will get an upfront payment of £90 million and will spend less to develop the antibody, which it plans to use as a treatment cancer and autoimmune diseases.
•Automakers posted the biggest gain among 19 industry groups in the Stoxx 600 after Daimler and BMW reported increased U.S. sales.
Daimler is up 1.7% after its Mercedes-Benz unit reported a 25 percent jump in June car sales to 18,997 compared with a year earlier. BMW rose 1.1% as the biggest maker of luxury cars reported that it sold 23,331 vehicles in the U.S. in June, a 12% increase compared with the same month of 2009.
•English cricket sponsors Brit Insurance is better by 4.3% Friday after the Lloyd’s of London insurer rejected an increased offer of £824 million from a private equity firm. Brit, which is based in Amsterdam, said that Apollo Global Management needed to increase its bid before it would begin talks. Brit rejected Apollo’s first offer of £785 million on June 11.
•Deutsche Boerse , the operator of the Frankfurt stock exchange, has gained 3% after Morgan Stanley upgraded the stock to “overweight” from “equal weight,” saying in a research note that exchanges are “starting to look more attractive given lower balance sheet risks compared with banks and strong, volatility-driven volumes.” And ThyssenKrupp has out on 2.3% on a broker upgrade from Goldman Sachs whose analysts upgraded Germany’s largest steelmaker to “buy” from “neutral”.
•Travis Perkins, a builders’ merchant and home improvement retailer in the UK and peer of Grafton group, today issued a trading update for the six months since 31 December 2009. It has reported a strong rebound in trading following a slow start in the first two months of the year and now expects to report a result for the six months to 30 June 2010 ahead of management expectations. Group revenue for the six months ended 30 June 2010 was up by 4.7%, with like-for-like sales up 3.4%. In terms of outlook, current trading continues be ahead of management expectations and the group now has the confidence to contemplate recommencing paying dividends.
•Enel announced last night that it has agreed to sell its Endesa Spanish power grid to Red Electrica for EUR 1,478m. This looks like a decent price, especially given the ongoing Spanish regulatory uncertainty, and proceeds will be used for debt reduction. Enel still needs to sell the Spanish gas grid and a stake in Enel Green Power in order to achieve its €45bn debt target, but this has been re- confirmed in the press release, implying that these two other sales are still scheduled for this year. Sovereign issues aside I still like Enel as a credit, and see the best way to benefit from current wide spreads as being through CDS pair trades, against other Italian names such as Atlantia and Edison.


Worth a read SULTANS OF SWAP: BP Collapse Potentially More Devastating than Lehman!

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