The FT’s markets round-up: “Global stocks extended their biggest rally of the year as China cut interest rates for the first time since 2008, but US Federal Reserve chairman Ben Bernanke took the edge off the day’s gains with cautious remarks to Congress. Amid rising hopes of further market-boosting stimulus measures by policy makers around the world, the FTSE All World index rose 1 per cent after Wednesday’s biggest jump since December.” (Financial Times) Read more
We will claim a direct hit on this one.
Sequana, the French paper manufacturer that takes in Arjowiggins, has announced a rescue rights issue aimed at raising €150m — equivalent to its existing market cap. Read more
Banking in Europe boomed upon the creation of the euro and the global expansion of credit in the 2000s. In the US, banks were also riding high on strong assets growth and accompanying increases in market capitalisation. Cross-border claims also climbed as banks sought to grab an even bigger share outside their domestic markets.
Things have since changed. Read more
Fitch has just cut Spain’s rating to ‘BBB’ from ‘A’… Outlook Negative. (That’s the same rating as Kazakhstan, for those keeping score).
And, in a seperate report also just released, Fitch estimated that the Spanish banking system will need require additional capital of between €50bn and €60bn to cover potential stress losses on their domestic loan portfolios. Under a more extreme scenario, based on what occurred in Ireland, these amounts rise to between €90bn and €100bn. Read more
At the risk of mangling metaphors, we should share this chart…
Happening now — click here to watch it live and see if he drops any further clues about QE3 (we’re betting no), and we’ve pasted the text of his opening statement below.
—– Read more
First, in a sign that Chinese woes are definitely rising and that authorities are now sufficiently concerned, we bring you news that China cut rates on Thursday (via Bloomberg):
China cut interest rates for the first time since 2008, stepping up efforts to combat a deepening economic slowdown as Europe’s worsening debt crisis threatens global growth. The one-year deposit rate will drop to 3.25 percent from 3.5 percent effective tomorrow, the People’s Bank of China said on its website today. The one-year lending rate will fall to 6.31 percent from 6.56 percent. Banks can offer a 20 percent discount to the benchmark lending rate, the PBOC said, widening from a previous 10 percent.
First things first, Switzerland is the new China. It is busy manipulating its currency’s value via an explicit floor — essentially, it will step in and buy as many euros as it has to keep the franc at a level above SFr1.20 per euro — and is accumulating awkward assets as it goes.
Second things second, such a mantle is expensive to wear… and getting more expensive. According to the Swiss National Bank their foreign exchange reserves increased from SFr238bn in April to a record high of SFr304bn in May: Read more
Think you’re well-versed in the eurozone sovereign crisis? How about ETFs? Seasonality in US economic indicators? Or Greece’s credit event?
On the evening of Thursday, June 21st we invite you to come prove it
and drink a bit too much for a school night when FT Alphaville hosts its first ever pub quiz! Read more
Presenting an economic journey in felt, looking at whether the system’s ails have more to do with an abundance of goods than a shortage of credit because of the system’s technological advances and efficiencies. Move ahead to slide 20 for a snapshot of where we *think* we are today.
1) The water source. Read more
Spain sold bonds today, and the auction happened without any drama. Here’s a recap from the Reuters wire:
Spain sells 2.1 bln euros in bonds. It sold 638 million euros worth of bonds maturing Oct. 31, 2014 with a 3.3 percent coupon, and 825 million euros worth of bonds maturing Oct.31, 2016, with a 4.25 percent coupon. It also sold 611 million euros of a bond maturing Jan. 31, 2022 with a 5.85 percent coupon. The Treasury had expected to sell between 1 billion and 2 billioneuros of the debt.
Live markets commentary from FT.com
This argument is brought to you by Deutsche Bank. Their analysts don’t much like inflation targeting, which essentially entails the central bank aiming to minimise the output gap. They argue that it has led to excessive credit growth which eventually bred financial instability.
More specifically (emphasis ours): Read more
Elsewhere on Thursday,
– Janet Yellen spoke on the perspectives of monetary policy. Read more
US markets closed higher and Asian stocks rose for a third day on growing hopes stimulus measures will be deployed, reports Bloomberg, along with news of bailout discussions for Spain’s banks and better than expected Australian employment data.
European officials are discussing a bailout programme for Spanish banks involving “very limited conditionality”, with few new austerity measures unlike bailouts provided to Greece, Portugal and Ireland, says the FT. Citing people familiar with the plans, the report says “EU support would instead be contingent on increased external oversight and accelerated restructuring of the Spanish financial sector”. Read more
Australian stocks received a boost after better than expected May employment data, says the WSJ, in which 38,900 jobs were created, though the unemployment rate also edged higher. The S&P ASX 200 climbed 1.4% and the Australian dollar also edged back towards to the parity with the greenback, at 99.56. The US dollar also weakened against the South Korean won, falling as low as 1,168, the dollar’s lowest level against the South Korean currency for two weeks, before climbing back to 1,170.
Japan’s Nikkei was up 1.1%, Hong Kong’s Hang Seng Index was 1.7% higher, and Singapore’s Straits Times Index gained 0.3%. Korea’s Kospi soared 2.6%, as the index played catch up after closing for a public holiday on Wednesday. Read more