Risk was very much off for US stocks on Wednesday. The S&P 500 closed down 1.43 per cent at 1,313. The S&P has lost almost 6 per cent in May, making the month its worst since September (Reuters). The euro fell to its lowest level in nearly two years against the dollar, dropping under $1.24 (Bloomberg). Read more
Some light relief from Wednesday’s ECB mystery. From Bankia’s web site: Read more
That’s the euro, deteriorating further against the dollar late in the day, London time. 1.2380 at pixel. Read more
You know things are tricky when your energy options are Iran, Glencore or blackouts, and then the Iran option is removed.
We’ve known for while that Greece’s reliance on Iranian oil has put it in a difficult situation, at time when banks are pulling letters of credit and Iran sanctions bite. This was an early sign of creditors’ fear of drachma exposure. Read more
So, Bankia is in trouble and no one seems to know what is going on. First, the FT said that:
A Spanish plan to recapitalise Bankia, the troubled lender, by indirectly tapping the European Central Bank for cash, was bluntly rejected as unacceptable by the ECB, European officials said.
Live markets commentary from FT.com
With the news being all eurozone-eurozone-China-eurozone of late (at least, in our world), interactions between the two — who happen to be massive trading partners — have produced some interesting stories. Which are probably best illustrated with cats and animated gifs.
What Chinese officials say they think about the eurozone and Greece’s place therein: Read more
Spain’s government has been left looking increasingly desperate/reckless/ineffective by its plans to rescue Bankia, as today’s FT describes:
Mr Rajoy and his government are facing growing domestic criticism over repeated errors of strategy and communication, which that have given an impression that Madrid has run out of ideas on how to handle its financial and economic crises. Read more
Live markets commentary from FT.com
Nomura’s Richard Koo is kinda with Christine Lagarde when it comes to the Greek tax problem.
But eurozone bonds (aka eurobonds) are not the solution, he says. Firstly, Greece needs to address its mutual distrust problem with Germany, and persuade the Germans that it will get serious about this tax collection thing: Read more
The 10-year has spiked through 6 per cent, btw. Read more
UPDATE: We have a denial or two. This is from the ECB’s twitter account:
Contrary to media reports published today, the European Central Bank (ECB) has not been consulted and has not expressed a position on plans by the Spanish authorities to recapitalise a major Spanish bank. The ECB stands ready to give advice on the development of such plans.
Elsewhere on Wednesday,
– The new stimulant of choice on Wall St is just… weird. Read more
The ECB has rejected Spain’s plan for Bankia, telling Madrid that it would be in danger of breaching an EU ban on “monetary financing”, says the FT, citing two European officials.
A top Obama administration official was dispatched to Europe on Tuesday, reports the WSJ, to press eurozone officials for changes such as broadening the rescue funds and allowing them to directly recapitalise banks. The Treasury Department’s under secretary for international affairs, Lael Brainard, met Greece’s interim finance minister on Tuesday and will be in Frankfurt today. Read more
Asian shares fell on disappointment over Chinese stimulus plans, while concerns grew over Spanish banking problems, says the FT.
The MSCI Asia Pacific index lost 0.7 per cent with Japan’s Nikkei 225 Stock Average off 0.7 per cent, South Korea’s Kospi Composite index down 0.8 per cent and Australia’s S&P/ASX 200 index 1 per cent lower. Read more