Goldman Sachs Group Inc. and JPMorgan Chase & Co, two of world's leaders in credit derivative trading, said they own bonds worth $5 trillion worldwide. Nevertheless banks refused to disclose what proportion of particular debt is issued by Spain, Italy, Greece, Portugal and Ireland. Therefore, investors do not know to what extent US banks are exposed to default of these countries.
US bank Citigroup Inc. is expected to reduce around 3000 jobs as CEO Vikram Pandit attempts to cut costs. Among the jobs squeezed, 900 might be from investment and trading operations. The decrease equal to approximately 1% of total Citigroup's staff is not certain and may change. Citigroup Inc. is the third biggest US bank in terms of assets and employees about 267 000
Sergio Ermotti, the new CEO of UBS AG, has to persuade investors that company's fifth restructuring in last six years will be successful. Tomorrow in New York meeting Ermotti will outline UBS AG's new strategy to investors. Analysts expect Ermotti to propose further asset cuts, reductions in jobs, particularly in fixed-income field as new capital requirements are hurting profitability.
On Wednesday European equities advanced on positive earnings reports and improved situation in bond markets. In morning trading session Stoxx Europe 600 index added 0.7% reaching 238.8. Randstad, Adecco and Michael Page were major contributors to Stoxx 600. France's CAC-40 gained 1% to 3,080 while U.K.'s FTSE 100 index climbed 0.2% to 5,530.4 and Germany's DAX 30 edged up 0.9% attaining 5,986.9.
Goldman Sachs and JPMorgan Chase, as the world's biggest credit derivatives traders, disclosed the amount of sold debt protection on 5T USD worldwide to their shareholders, without announcing how much from that figure was issued by Portugal, Italy, Ireland, Greece and Spain, or the PIIGS.
On Tuesday EU revealed a plan to strengthen regulation on credit-rating agencies to preclude them from boosting market volatility. Michel Barnier, Internal Market and Service's Commissioner suggested the rating agencies have strong impact on markets and thereby on the sentiment of European inhabitants. Thus, stricter control should be applied to cut exaggerated reliance on credit-ratings and develop the rating quality.
On Tuesday US stocks advanced as several US economic indicators including retail sales beat the forecasts and offset concerns about euro-region debt crisis. Dow Jones industrial average gained 0.1% or 17 points reaching 12,096. S&P 500 added 0.5% or 6 points and closed at 1,258, while Nasdaq advanced 1.1% or 29 points to 2,686. On Tuesday morning stocks opened lower on Europe news, however, erased losses
Edward J. DeMarco, Federal Housing Finance Agency's acting director is planning to reduce compensations and bonuses at Fannie Mae and Freddie Mac – state owned housing-finance firms. DeMarco, who also is a chief regulator for both banks, plots gradual reductions in executives' salaries especially when they leave the company. In 2009 two CEOs of Freddie Mac and Fannie Mae received $17 m in their two year award packages.
Lucas Papademos, the new Greek PM today faces confidence vote on 3-month mandate to secure financing needed to save Greece from default and keep it in Euro. Papademos is expected to implement budget provisions and guarantee a bailout package consisting of €130 bn. According to, Evangelos Venizelos, upcoming vote is the last chance for Greece to overcome crisis.
Lloyd C. Blankfein, CEO of Goldman Sachs Group Inc. claims that economic recovery will come as a surprise and retrieval will be faster than expected. Nevertheless, Blankfein admitted he does not know when the recovery will begin. In October Goldman Sachs, the 5th biggest US bank reported loss second quarter in a row, however, Blankfein suggests no radical operation changes are needed.
Mario Monti, prospective Italian PM said he is self-assured that Italy can tackle current crisis. On Wednesday Monti will meet President Giorgio Napolitano to present the new government. According to Monti, talks with political parties, employers and unions were productive and useful. All parties engaged in agreement, made their contribution to positive outcome.
Bank of Japan (BOJ) has reduced its economic evaluation as worldwide slowdown hurts exports increasing Japan's vulnerability to Eurozone's debt crisis. Masaaki Shirakawa BOJ's Governor announced that central bank has decided to leave repo rate unchanged at 0.1% as well as to stick to asset purchase fund of ВҐ20 trillion ($260 bn). Fixed-rate lending package remained also untouched to stimulate commercial banks to increase lending.
On Wednesday Asian equities experienced a drop and were trading with small volumes. Hang Seng Index fell 1.9%, Shanghai Composite traded down 1.7%, while Nikkei Stock Average lost 0.6%. South Korea's Kospi declined 0.6% and Australia's S&P/ASX 200 gave up 0.4%. Ben Collett Louis Capital Markets' manager suggests, currently Asian long-term investors are risk averse pushing trading volumes down.
Canadian national currency depreciated against its US peer on anxiety that debt turmoil in Europe is strengthening. Canada's dollar dropped for two consecutive days almost reaching 2-months low as yields for French and Spanish bonds surged. On Tuesday currency fell 0.6% attaining $0.9790 per Canadian dollar in Toronto morning trading session.
China has spent on R&D even more than Japan this year ranking 2nd biggest spender after US. China plans to invest in R&D 2.2% of GDP in R&D by 2015. The number of applications for protecting IPR has also increased indicating substantial growth of innovation in the country.
According to data released, UK inflation in October eased more than expected reaching 5% or 0.1% percentage point below forecast. Mervyn King, Governor of Bank of England said that inflation is likely to keep slowing down in upcoming months, however, its pace and extent is hard to predict. King pointed out that Bank of England purchases bonds for a second month in a row to
In October retail sales in US increased by 0.5% or 0.2 percentage points more than predicted. The main contribution to growth came from demand for motor vehicles and iPhones. In electronics industry purchases experienced most rapid growth since 2009. According to Millan Mulraine, TD Securities senior strategist in New York, an increase in retail sales is indicating that consumers do not expect economy to fall
On Tuesday Italian 10-year domestic bonds dropped sharply, pushing yields above 7% level. According to FactSet Research, the yield hit 7.01% or 43 basis points up compared to Monday. Borrowing rate of 7% is perceived as psychologically important as it indicated the point, where Greece and Portugal were locked out of money markets. Italy's 10-year borrowing cost surged above 7% also last week on political
On Monday US equities slipped as Italian borrowing costs surged, pressing euro down and rising investors' concerns about further expansion of Eurozone debt crisis. S&P 500 Index lost 1% or 12.06 points reaching 1,251.79, Dow Jones Industrial Average decreased 0.6% or 74.7 points to 12,078.98 while Nasdaq Composite dropped 0.8% or 21.53 points to 2,657.22.
Spanish 10-year national bond yield peaked back breaking 6% first time in 3 months, reaching 6.07%. Premium required by investors to provide financing for Spain exceeds price demanded from Germany by 4.25 percentage points. According to Nick Stamenkovic, RIA Capital in Edinburgh, economist, it seems, investors are changing their direction towards Spain.
US Supreme Court decided to consider the legality of President Obama's health care law. The judges will assess whether Congress surpassed its rights by forcing people either to purchase insurance even in case they are ready to pay for health services themselves or to pay penalty. The court is likely to have major impact on presidential campaign as the verdict will be announced in June,
Moody's Investors Service is considering downgrading Credit Suisse Group AG's credit rating as the bank reported loss and revenue at the wealth management dropped. Moody's set Credit Suisse's Aa1 and Aa2 ratings on assessment for a reduction. On November 1 Credit Suisse announced it will reduce nearly 1500 jobs and review its securities after reporting quarterly loss.
On Tuesday representatives of IMF warned China that its banking system is exposed to serious risk. IMF named uncertain national banks' asset quality, credit boom accompanied by rising property prices and lending outside prescribed banking sector as the main threats to Chinese financial intermediaries. According to IMF, Chinese banking system is likely to be seriously affected if several risks create difficulties simultaneously.
Interim PM of Greece insisted on Greece staying in the Eurozone as it is the only option to struggle with crisis. He also stressed the necessity of activating bailout package as soon as possible. Making decisions and implementing policies in line with these decisions is of paramount importance for government, added Papademos.