Good morning, New York…
Moody’s downgrade: The rating agency repositioned the ratings of 15 banks and securities firms with global capital markets operations on Thursday. Joseph’s post has the full list.
Some bank analysts didn’t like the downgrade: Joseph writes that Moody’s downgrade might have implications for structured finance, collateral and margin calls. Societe Generale’s Jean-David Cirotteau isn’t pleased with the action, saying that AAA is unreachable for financial institutions and that rating agencies are generating additional pro-cyclicality.
The New York Federal Reserve announced its new head of the markets desk: Cardiff writes that Simon Potter, until now executive vice president and co-head of the Research and Statistics Group, is to replace Brian Sack on June 30, 2012. Among his responsibilities will be to manage the System Open Market Account (SOMA) and Operation Twist.
The world’s savers would rather buy Treasuries than global goods: Izzy writes that it’s time to stop worrying about savings, and start spending to close the output gaps. Especially as Germany, Japan and the OPEC oil exporters continue hoarding their surpluses instead of spending them.
A fund allegedly invested based on lunar strategies: Cardiff’s post has the SEC statement. For example, Persaud made numerous misrepresentations and omissions to investors, foremost among them failing to disclose his trading strategies were based on lunar cycles and the gravitational pull between Earth and the moon.
The IMF has challenged Berlin’s game plan for pulling the eurozone out of its crisis by advocating a series of short-term fixes that the German government has resisted, the FT reports. These include the resumption of bond buying by the European Central Bank and pumping bailout money directly into teetering banks.
Spain has sought to ease investors’ fears that it needs a full-scale international bailout of its economy by publishing two “stress tests” showing that Spanish banks need between €16bn and €62bn in new capital, reports the FT. The amount is well within the sum of up to €100bn that Spain requested for its financial system from its eurozone partners this month.
The ECB is expected to give Spanish banks a much-needed boost with a significant loosening of rules on collateral required to obtain its liquidity, which could be followed by steps to reduce the role of credit-rating agencies in its operations, the FT says. The concession, which could be announced as early as Friday, would allow Spanish banks to make greater use of asset-backed securities when drawing ECB funds.
Leaders of Germany, France, Italy and Spain are meeting in Rome on Friday to discuss the path to fiscal and banking union in advance of a summit in Brussels next week, according to Reuters.
Hopes of launching the eurozone’s permanent rescue fund in the first days of July suffered a blow on Thursday when one of Germany’s opposition parties said it would ask the country’s highest court to suspend ratification while deciding whether it complied with the constitution, the FT says.
Markets: The week’s foul cocktail of global growth fears, financial system worries, central bank disappointment and lingering eurozone fiscal angst is souring investors’ risk appetite. The FTSE All-World equity index is down 0.6 per cent after Asian stocks lost 1.3 per cent and the FTSE Eurofirst sheds 0.6 per cent, according to the FT’s Global Market Overview. Futures on the S&P 500 are signalling for a positive open in US markets, after the index closed 2.2 per cent down on the day on Thursday, reports Bloomberg.