Daily Market Reviews by UWCFX

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USA: news from EU summit a little damped an ardor of bears

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

On Thursday, June 28, the stock market of the United States finished the trading session in the negative territory in view of quite weak macroeconomic statistics, as well as on appeared information that losses of JP Morgan Chase can reach $9 billion.

Accordingly to the data published yesterday, the number of primary requests for unemployment benefits made 386 thousands whereas analysts expected 385 thousands. Besides, the previous value was reconsidered towards increase from 387 thousands to 392 thousands. Meanwhile, the index of business activity in the industry of FRB of Kansas was reduced in June from 17 points month earlier to 12 points, and GDP, according to final data, increased in the first quarter by 1,9 %, as expected, having coincided with the previous reading.

Towards the end of trading session the American indexes could restore a part of losses due to the news which have arrived from the EU summit, which begun yesterday in Brussels. So, it became known that for urgent measures for stimulation of economic growth and employment the European Union will mobilize about 120 billion euro ($149 billion) what the president of the European Union X. van Rompey officially declared during the press conference. According to him, credit possibilities of the European investment bank will be increased by 60 billion euro and other 60 billion euro will be collected at the expense of not used EU structural funds to which means will be added funds from the pilot program of the European bonds calculated on specific projects fewer than 5 billion.

Following the results of the trading session the indicator of "blue counters" the index of Dow Jones decreased by 0,196 % to value 12602,26 points, the index of the wide market S&P 500 left in a minus for 0,211 % to level 1329,04 points, and the index of the hi-tech companies Nasdaq reached level of 2849,49 points.

Oil prices are still pointing up. Brent is is traded on a level of 92.951$.

Copyright: United World Capital

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BOND SUPPORT FOR SPAIN AND ITALY LIKELY OUTCOME OF EU-SUMMIT (29/06/2012)

WEEKLY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

It has been mixed week in global markets dominated once again by the sovereign debt crisis in Western Europe and banks striving for survival. Brussels and the EU-summit at the end of the week has been the focus for attention with low expectations for a final breakthrough.
The fate of Euro is hanging in the air. Strong contradictions between the leading German economy and countries in the European periphery have led to new question marks. Germany has demonstrated no willingness to share the debt burden with countries like Greece, Spain, Portugal, Italy and now last Cyprus. Why should Germany contribute to mistakes and failures of states, which have not kept their house in order?

The outcome of the Euro crisis seems again to be some kind of a compromise most probably intended to stop the spiraling costs on Spain and Italy's bonds. Global markets see a glimmer of hope in these developments. Might be, that there is a light at the end of the tunnel after all?
The new European "iron lady", Angela Merkel, has all through the increased and bitter rhetoric being steadfast in her demands: There is no quick fix on the sovereign debt crisis. Short term measures to help lower Spanish and Italian borrowing costs, are likely the outcome of the summit. However, as Merkel has been stressing such quick remedies are eyewash and fake solutions. They do not solve the fundamental questions.

However, markets and investors with big money bags are waiting on the sideline happy; to jump on whatever seems better than no decision at all. When Merkel postponed an announced press conference on Thursday night, markets saw this as a positive token and as an expression that Germany as the key player, was still considering some temporary solutions. This led to a mini rally at the end of the session in New York. In addition, this morning, Asia is clinging to the postponement as a sign that something, in spite of all down plaid expectations are happening behind the closed doors. It has even created some excitement among currency traders. Might it be some hope for the Euro after all?

Over the week, markets have been clinging to the smallest tokens of positive movements. US-housing sales had analysts once again to jump on the expected American growth wagon. The enthusiasm lasted 36 hours until the jobless claims number Thursday night poured cold water in the head of optimists.

A reduction on 6000 in the jobless claims, do not create a spring. Add to the global misery that Cyprus, one of the smallest economies inside the Euro, had to ask for Emergency assistance for its banks. In the midst of the crisis, their banks gambled on the high interests’ rates on Greek treasury bills, and private Greek customer’s appetite for loans, which no others were willing to give them. Now they want that Europe shall share with them and pay the price.

For bankers, it has in general been a miserable week. Barclays bank was fined record $ 450 million fby English regulators for manipulating with the Libor interest rate set by the Central banks as basis rate or private banks lending to borrowers. Barclay has possibly colluded in their fraudulent action with other leading international banks. Such facts does not increase the credibility of bankers, which over the crisis years have been known more for their greed than clever investments and managing of clients funds.

Copyright: United World Capital

[UWCNeeraj]

Once again a one day rally?

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Asian stocks rose for a fourth day in row with the composite Asian stock index rising 0,48 %, confirming Friday’s positive sentiment from the rallies in Europe and United States following the EU-summit. The Euro/USD is falling back from its Friday peak trading at 1.2626. Brent crude is at 97,00 and Gold 1591.

Stocks ended the first half year of 2012 with a bang after the EU summit contrary to expectations, seems to have taken steps towards solving the 30 months debt crisis. European leaders agreed to stabilize the region’s troubled banks. Under pressure to avoid a catastrophic breakup of the Euro, it was reached agreement to inject funds directly into stricken banks and to intervene to drive bond interest rates down. During the last week, interest rates on Spanish and Italian bonds passed the 7 % threshold, which is seen as crucial.

A single banking supervision system for the Euro-zone banks around the European Central Bank (ECB) is seen as the first step towards a European banking union. Member states that comply with the austerity measures would be supported by the already created rescue mechanisms, the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF). With regards to the content of concrete measures, all eyes will the week be on the ECB.

At first glance it seems that the big winners from Europe’s latest euro-saving summit are the leaders of France, Italy and Spain with Germany’s Angela Merkel forced on the defensive. This is probably an over simplification. Merkel’s biggest concession seems to be that she has given the permanent rescue fund, ESM power to inject aid directly into stricken banks. Merkel signalized, however, willingness to adopt this step days before the summit, but preferred of tactical reasons to keep it low key.

The big question this week is whether the boost of optimism after the summit shall develop into something more permanent than a one-day rally. New industrial production figures for China are again down, and markets are neither optimistic in front of the release of US job figures Friday.

Copyright: United World Capital

[UWCNeeraj]

EURO slide may continue

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Asian shares rose for the fifth consecutive days with the MSCI index up 0,78 %. Simultaneously the US manufacturing production index (MPI) surprisingly dropped. US manufacturing contracted for the first time in nearly three years resulting in immediate drops in US stock market.
Markets, however, rebound during the session on renewed expectations of monetary easing. The protracted euro zone debt crisis has a devastating effect on the global markets. The sluggish manufacturing data, however, gave investors hopes that major central banks will take further steps to support the fragile economy.

The EURO got a welcomed boost after the EU-summit with 1,7 % rally to 1,27. Euro fall back to 1,2570 yesterday, but has recovered to 1.2599 in morning trade. But there are still political uncertainties and doubts regarding the European Central Bank’s following up. Two Northern European member states, Finland and Netherlands, expressed yesterday strong hesitations as to the financial impact the summit decisions would have on their own economies. Leading economists see the initiatives to support Spanish and Italian banks and measures to dampen upward bond interest rates as just temporary. It might have saved the common currency for now, but the Euro’s downward slide is with great likelihood going to continue.

The Australian dollar gets a boost this morning. Oil prices are up on EU sanctions against Iranian oil and Norwegian oil strike. Gold has again broken through the 1600 threshold trading at 1604. Silver is also stronger. USD/JPY is trading at 79,695.

The English Barclay’s boss, Bob Diamond, is under continued pressure to resign after a market rigging labor scandal. Barclay was given a 450 million Euro fee. The scandal which most probably also involve other major international banks have created an uproar and demands for criminal fraud cases against the bosses involved. Before meetings in the British Parliament today, Barclay has countered indicating that regulators as well were involved. In the US one of the biggest pharmaceutical companies in the world, British GlaxoSmithKline has settled a health fraud case for USD 3 Billion.

Copyright: United World Capital

[UWCNeeraj]

Rate rigging hits banking system

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Barclays Bank’s rate rigging scandal has strongly hit the international banking community, and is threatening to affect several reputed banks. J. P. Morgan, UBS and Citibank are among those rumored to be next in line. Excessive salaries and bonuses have for long put question marks with the healthiness of a banking sector more known for its greediness than the quality of their business. Barclays Chief Executive, Bob Diamond, quit his position yesterday, and is today facing a grilling session with and under committee of the British House of Commons.

As part of an offensive defense, Barclays yesterday released a 2008 internal memo implicating the deputy governor of the Bank of England in the scandal. The Deputy Governor, Paul Tucker, had according to the to the memo implicitly encouraged Barclays to massage the interest rates figures lower during the peak of the financial crisis. In order to present a better picture of the bank’s financial position. Tucker had in his turn received calls from senior government officials.

Libor, which is the interest rate set for inter bank transactions involve up to USD 500 trillion in daily trades, and is seen a reliable and trustworthy barometer. The manipulations now revealed might have a devastating effect on the banking system and seriously undermine its trustworthiness.

The rally in the markets, which started last week with EUs decisions to support ailing banks in Spain and Italy, continue. Asia is up for the sixth day, and experiences its longest lasting rally since last December.
Investors are betting that the decreased manufacturing data from US and China along with other gloomy macro and micro economic figures on top of the crisis in Europe, will force central banks into actions.
Monetary easing is expected and encourages the market rally. US stocks rose before taking half day off for Fourth of July celebrations. Oil prices are up. Brent has been trading above the critical USD 100 barrel level for the last 24 hours. NYMEX is above 84. Currencies are stabile waiting for central bankers decisions. Euro/USD is at 1.2592.

Copyright: United World Capital

[UWCNeeraj]

Despite cuts shares falling

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Both the European (ECB) and the Chinese Central Banks yesterday cut their interest rates to encourage economic growth, but to no avail. Both European and American markets reacted by sending stocks down. Asian stocks also slipped despite the new stimulus steps taken by the central banks. The Bank of England kept its interest rate at the low 0,25 % as an indication that there are limited tools left in the central banks arsenal for further monetary actions.

The Chinese interest cut is the second in one month, increasing investors fear that the Chinese economy is sinking faster than earlier expected. The non-farm payrolls numbers that the US Labor Department is expected to release today, is neither giving raise to market optimism. US employers have most likely hired more labor last month, but not enough to allay worries that Europe’s debt crisis is shifting the global economy into low gear.

ECB’s decision to cut interest rate with 25 basis points to 0,75 immediately led to new pressure on the Euro, which is trading at 1.2384. The American dollar is strengthened against many currencies. A decision from the Swedish Central Bank to keep the interest rate at the same level, led to a rally in Swedish krones at the expense of the EURO.

While commodities and precious metals are trading down; gold is at 1605, Brent crude is continuing to trade above the critical 100-dollar level pr. Barrel. In addition to implementation of EU sanctions on oil import from Iran, the US has increased its military presence in the straits of Hormuz, which Iran has threatened to mine to block oil transports from the Middle East, if further sanctions were executed.

Copyright: United World Capital

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Cyprus tries to play hard ball (06/07/2012)

WEEKLY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

As the fifth country inside the euro zone, Cyprus, which this month also took over the chairmanship of the European Union, has asked for a bail out for its debt stricken banks.

At a press conference together with the Head of the European Commission, Jose Manuel Barroso on Friday, the island’s president Demetris Christofias, again plaid the Russian card and stressed that Russia is still a candidate for stepping in and bail out his country.

With the “mother land” Greece’s misery in fresh memory, Christofias, don’t want “Greek austerities” to be impressed upon Cyprus. He has continuously stressed that Cyprus is facing a banking and not a sovereign crisis. Therefore, Cyprus feels free to ask whatever country for help. And then why not Russia which generously have helped out before; as they did two years ago. Then the loan was on 2,1 Billion Euro. This time the price tag has increased to 6,1 Billion Euro to save Cypriot banks which have acted irresponsible.

Christofias is playing hard ball logic, but that does not stand up to European orthodoxy. Cyprus is member of the European family, and EU-countries inside the Euro zone are treated equally with regards to bail-outs. Why should Cyprus be given better loan terms and conditions by going outside the zone and ask a third country for help? Barosso then gave Christofias a frosty answer. That Christofias is the only communist leader in the European Union does not help either.

For European bureaucrats principles are more important than practical realities. The medicines ordained for Greece, Spain, Ireland and Portugal have to be the same for Cyprus. To ask for better terms and conditions in Russia, represent a serious break with the EU code of conduct and their “solidarity”.

Barosso was tiff lipped. Neither did it make any impression when Minister of Finance, Vassos Shiarly, stressed that Cyprus had been forced to take extremely big losses on the Euro zone’s haircuts for Greece. Cyprus creditors had a 80 % loss equal to 4,2 Billion Euro, a quarter of Cyprus’ GDP. Cyprus demonstrated disproportionate European solidarity then so why not a little generosity now?

But this kind of logic does simply not work in relation to a striving periphery in Southern Europe. Striving member countries in the outskirts start to awaken to the harsh reality that the EU and the EURO are something quite different from the European dream they had before entry.

Copyright: United World Capital

[UWCNeeraj]

EURO LOWEST IN TWO YEARS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Growth worries after sluggish US job data, took the Euro/USD to its lowest level in two years. The Euro dropped to 1.2225 in early Asiantrade to recover somewhat. It is now trading at 1.2292. Asian shares fall. The MCXI index is down 1,50 %. Cooling inflation numbers from China deepened worries about slower economic growth. The Euro fell as deep as to 1,2225 in early trade in Asia. The US dollar vexes muscles and is gaining towards all currencies. Oil prices are relatively strong with Brent trading at 98,89.

Commodity linked currencies as the Australian and New Zealand dollars, which is a good barometer on the risk appetite in the market, hit one-week lows. The British pound, GBP, is trading below 1,55 towards the USD. Commodity prices continue to fall as do precious metals. Gold is at 1580. Silver just above 27.

Euro zone finance ministers are meeting in Brussels today in an effort to follow up the EU summit decisions a week ago. On the top of the agenda is a rescue plan for Europe’s struggling banks. Bailout requests from Spain and Cyprus shall be considered. The new Greek government has signaled renegotiations in an effort to obtain better terms and conditions to sugar its austerity measures towards a critical public.

The earnings season in the US start with quarterly report cards from blue chip stocks as Alcoa and J. P. Morgan next week. There is no big optimism. Europe’s crisis continues to draw much attention, but with little clarity as to how the euro zone’s debt and banking problems will be fixed. That in spite of numerous meetings as the Finance ministers coming up today.

Copyright: United World Capital

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Euro 30 billion for Spanish bail-out

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The Euro zone ministers of finance yesterday night decided to transfer Euro 30 Billion as a bail out of the striving Spanish banks. The first tranche shall be released in August. By injecting the bail-out funds directly into the banks, this is a banking and not a sovereign state bail out as is the case with Greece. The ministers simultaneously are considering a similar bail-out of Euro 6,1 Billion to the striving Cypriot banks. This is eventually going to be executed in September.

The bail-out of the Spanish banks are a direct following up of decisions taken by the EU-summit ten days ago. It came after the interest rate on Spanish bonds yesterday again went through the critical 7 % level. The initiative of the finance ministers helped to stabilize the Euro, which during early trading on Monday hit its lowest level in 2 years. Euro/USD is trading at 1.2300. The USD has weakened marginally over the last 24 hours. The Japanese Yen has strengthened. USD/JPY is at 79,495. Oil prices have fallen. Brent is at 98,65. Gold and silver stabile with an upward trend.

Stock exchanges in Europe, US and Asia continues to fall. The giant alloy producer, Alcoa, started the quarterly season by reporting better than expected results due to new orders from the car and airplane industry. Chinese numbers for import and export in June show weaker domestic demand, which seems to indicate that the GDP shall fall below 8 % when figures are released in a week. Import figures rose with 6 % much below experts forecasts. Export rose 11 %, higher than forecasts, but lower than May’s 14 %. China has once again a record surplus on its trading balance.

The Finance ministers’ decision has calmed markets somewhat, but there are increasing signs that Europe’s economic and monetary union may be fragmenting faster than policy makers can repair. Spanish, Greek and Italian banks have seen a deposit flight gaining pace. Whether a euro zone agreement to lend Madrid Euro 30 of the 100 Billion requested, will reverse these flows, is still an open question. It is expected that national bond rates and the Euro shall come under renewed pressure during the week.

Copyright: United World Capital

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Grim sentiments impact markets

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Asian and Australian stocks dropped for the fifth day in row Wednesday as concerns over Italy’s debt, profit warnings and US corporate earnings damaged regional sentiment. Dow Jones Industrial average closed down 0,78 % on fear that the global economic slowdown will erode corporate earnings.

The EURO/USD fall yesterday, but has recovered trading at 1.2257 in Asia. The Japanese yen continues to strengthen: USD/JPY at 79,3227. The strong yen put pressure on Japanese exports and the Nikkei. Gold dropped from 1600 yesterday, trading at 1573. Oil prices are slightly down. Brent at 98,35. There are no major changes in the overall currencies picture.

Europe returned to the forefront of investors concerns when Italian Prime Minister, Mario Monti, indicated that he will ask European governments to permit that the bailout fund to buy Italian bonds. Monti insisted, however, that Italy do not need a bailout in the scale of Greece. His comments come, however, just weeks after claims that Italy would not ask its European partners to buy Italian debts.

US experienced a new broker scandal when the Iowa-based PFGBest was the latest future broker to collapse. Regulators accused PFG and its owner for over the last two years misappropriating customer funds. In England, new aspects of The Barclays scandal are revealed, portraying a banking culture of greed and mutual accusations.

Copyright: United World Capital