On Wednesday US equities experienced a decline during last trading hour as Fitch Ratings reported that US banking industry is exposed to contagion form Euro region debt crisis. S&P 500 dropped 1.7% or 21 points, Dow Jones industrial average lost 1.6% or 191 points, while Nasdaq composit slipped 1.7% or 47 points. During the day investors attempted dump bonds of most European countries except Germany.
According to Fitch, US banks are strongly exposed to Europe default if region's crisis accumulates and expands beyond Greece, Italy, Ireland Portugal, and Spain (GIIPS). If the solution for Eurozone debt turmoil is not well timed and properly solved, then financial outlook for US banking industry might worsen, said Fitch. Currently six biggest US banks hold $50 bn in risky assets linked to GIIPS.
On Thursday Asia equities erased most of losses linked with European debt crisis, as investors faced optimistic company valuations. Hong Kong's Hang Seng Index outweighted early losses, however, still traded down 0.9 whereas China's Shanghai Composite index closed flat. Korea's Kospi added 0.2%, Australia's S&P/ASX 200 index gained 0.5% and Japan's Nikkei Stock Average advanced 0.3%.
At recent APEC summit US president has accused China of undervaluing its currency to be more price competitive. China's Ministry of Commerce refuted these allegations as being unjustified. Many analysts claimed yuan is adequately priced and exchange rate of China's currency is not a cause for trade imbalance between US and China.
Inflation rate in the Eurozone unchanged in October and remained 3%. However, the rate still do not meet target of 2% set by European Central Bank. Analysts claim the rate would go down in a couple of months. The lowest inflation is in France 2.5% and the highest-in UK 5%. The major reason for inflation being above target was increase in energy costs as
China's shift to more environmentally friendly industries might add 10.58 million job places by 2015. However, the country will have to spend more than 5.77 trillion yuan to decrease pollution and use energy more efficiently. The measure will pay off by increase in China's GDP growth by 8.08 trillion yuan by 2015.
Francois Baroin, France's Finance Minister claimed that poor growth and volatile markets would not contaminate nation's stable economic position. FM emphasized that France still has AAA credit rating despite euro area crisis. At the beginning of the month Sarkozy's government approved austerity measures accumulating €7 bn and downgraded France's growth rate for year 2012 from 2.25% to 1%.
President Obama is performing poorly in New Hampshire on economic slowdown. Obama lags behind Republican president candidate, Mitt Romney 10 percentage points among general electors. Independent New Hampshire voters have turned even more sharply against Obama as Romney would triumph Obama advancing 15 percentage points in hypothetical elections.
Deloitte LLP predicts that Christmas sales in UK will not be higher than $57 bn earned last year. 2011 can be the first year without growth in retail business since 2008. Ian Geddes, Deloitte's retail partner pointed out that only strong online bargains are expected to expand as customers will search for best offers in WEB. Deloitte suggests that UK retail business might be sluggish until
In order to implement international liquidity rules, the Reserve Bank of Australia (RBA) decided to charge 15 bp for financial companies who would want access standby funds. RBA also claimed that it is going to broaden margin applied to repurchase agreements for long term assets released by organizations other than Australian government.
Worldwide demand for US equities, bonds, and other securities surged in September as investors relied on Treasury assets amid Europe debt crisis. In September net purchases of long term stocks, bonds and notes made $68.6 bn compared to $58 bn in August. Treasuries extended largest quarterly gain since 2008, indicating that investors appreciate their safety.
On Wednesday 17-nation currency dropped against US dollar reaching five week low as European Commission President Jose Barroso claimed euro area is facing total crisis. In New York pre-trading session Euro lost 0.3% reaching $1.3498. Currently the pair is trading at 1.3471. According to Barroso, there will be no solution to crisis without economic growth.
As China was ranked one of the world largest investors, China's banks also plan to expand overseas. Financial difficulties in developed economies increase potential for China's banks to be successful in overseas markets. The debt crisis in Europe made it difficult for businesses to raise finance and it seems promising option for strong China's banks to embrace this segment.
Bank of Japan feared that Japan's economic growth might be impacted by Eurozone economic difficulties and strong Yen. Recent figures show Japan's economic growth is 1.5% in Q3. BOJ also announced no change in interest rates to stimulate growth. Current interest rate is between zero and 0.1%.
Gold futures COMEX Division of New York Mercantile Exchange went up on Tuesday as investors confidence in European markets remains low stimulating demand for precious metals. Gold contracts for December hit USD 1,782.2 an ounce increasing by 0.2%. Other precious metals also added value on European woes. Silver futures for December went up by 1.3% to USD 34.456 an ounce; platinum prices for January delivery
The Bank of England announced that UK economy might continue stagnation for at least half a year more. The bank decreased its growth forecast for the next two years to 1%. The inflation in the UK is about 5%, the highest among EU countries. However, analysts predict a sharp fall in UK inflation rate. Unemployment also is rising as number of unemployed grew by
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.