The U.S. shares fell today as a Standard & Poor’s 500 this fall is the fifth of six sessions. Reason for the deletion of the initial rise on Wall Street were concerns about the fiscal stability of Spain. The S & P 500 lost 0.8 percent to 1,047 points, Dow Jones Industrial Average fell 0.7 percent to 9986 points, and Nasdaq Composite – by 1.1 percent to 2119 points. Spanish newspaper El Economista reported that a Spanish court has ruled that some of the methods the government to collect taxes are illegal, leading to speculation that the country will have difficulty in reducing its deficit. After the court decision may be delayed collection of several hundred million “tax. The decline in U.S. shares and contribute the communication branch of the Federal Reserve in Kansas City to slow production in the region in August. Investors are expected and planned for this Friday speech by Fed Chairman Ben Bernanke, who recently set the economic conditions as “unusually uncertain.” Earlier in the day shares moved in positive territory after data larger than expected drop in initial claims for unemployment benefits.
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In the event that stress testing of banks in Europe were made based on examination of the entire portfolio of government bonds to banks, 24 financial institutions it would not be able to withstand successfully. Such is the opinion of analysts of U.S. bank Citigroup. Such a scenario would have shown that the financial institutions need to raise capital amounting to 15 billion euros to be stable at any shock to the system, reported Financial Times. The problem with stress testing, which was attended by 91 banks, is that called were tested. commercial paper, rather than purchased in order to hold to maturity government bonds. The difference between them is that first used for commerce in the short and medium term, while others show real risk that government securities carry. Analysts say the U.S. Spanish bank financial institutions had the greatest benefit from such testing in this way. The reason is that they have significant positions in the Portuguese and Spanish government bonds, many of which fall under the heading hold to maturity, the newspaper added.
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The Stock indexes in Europe suffered the biggest decline since the beginning of this month after fears of slowing world economy decreased demand for riskier assets such as shares. Extractive companies and banks led the sale of European exchanges after seven consecutive sessions of their growth. Data on the weaker growth of Chinese economy, in line with the weaker outlook for the Federal Reserve this year worsened the economic mindset of investors. They ignored the successful auction of government securities of Spain and the Green Wave on the Athens Stock Exchange, caused by the French intention of Piraeus Bank to buy stakes in two competing Greek banks, announced Bloomberg based on comments from top forex brokers. The common European Stoxx 600 index lost 1.2 percent to 252.97 points, which is his biggest decline since 1 July. The index, which combines stock companies from 18 European countries rose by 8.1 percent in the previous seven sessions, but still 7 percent below its highest point this year, celebrated on April 15. In Spain, the main stock market index IBEX 35 fell 1.2 percent to 10 160.20 points, although the country’s government successfully sold all the new 15-year bonds for 3 billion. Demand from investors was about 2.6 times higher compared to the value of securities offered. According to latest requirements of EC, the forex broker reviews of activities should be made weekly, because of the risk of high speculations. This reflected hardly to indexes and the national benchmarks fell in 15 of the 18 Caucasian monitored exchanges. In Switzerland, the Swiss Market fell 0.7% to 6 291.07 points, after it became clear that investors’ assessment of the state of the Swiss economy has fallen to its lowest level last year. UK’s FTSE 100 lost 0.8% to 5 211.29 points. In Paris the CAC 40 slid 1.4 percent to 3 581.8 points while the stock exchange in Frankfurt DAX fell 1% to 6 149.36 points.
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Swaps provide protection against non-payment of Russian bonds rose 52 basis points to 194 points over last quarter – the biggest growth since the end of 2008. Thus, five-year contracts worth more than providing protection on the bonds of Turkey (190 points), Indonesia (178 points) and Philippines (168 points), although all three countries have lower rates of Russia as Standard & Poor’s. Turkey and Indonesia are rated BB and BB-Philippines have. For the last Russian swap were cheap on May 18. 100 basis points in these instruments are equal to 1%. This is the annual premium on the nominal value of bonds, against which the swap will provide appropriate compensation in case of failure to pay the debt. Contracts are used for speculation credit-ability with the issuer. According to Russian Finance Minister Alexei Kudrin Russia’s largest energy exporter in the world deserves a higher rating of this BBB, awarded by Standard & Poor’s. The big jump in insurance costs of government bonds in Russia shows that investors do not agree with that. Kudrin claims of a higher rating based on the fact that the country has the lowest level of debt among the G-20. The IMF estimates that in 2010 Russian debt will be a level of 7.7 percent of GDP on average 80% for the group. Turkey’s debt is expected to reach 50% of GDP this year.
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Stock trading on the Old Continent was marked Tuesday with its biggest daily drop in more than a month. Indexes saw strong reductions amid concerns about the stability of economies in the U.S. and China and the European banking sector. Pan-European Stoxx Europe 600 indicator collapsed by 3% and reached a level of 243.82 points, dragged down by companies connected in some way with China. The reason lies in the dramatic revision of the business organization of the Conference Board’s leading indicator for China’s April, and the reported drop in U.S. consumer confidence for June, which also impacted negatively news – and in Europe and the U.S. While the stock is still ongoing decline in the U.S. market, so there was in Germany, where the main DAX index lost 3.33 percent to 5952 points, and with France’s CAC 40 to drop from 4.01 percent to 143.46 points . In Britain’s FTSE 100 retreated by 3.11 percent to 4914 points. Among the losers ran bank securities, especially shares of financial institutions in Spain. At BBVA’s position was reported a decline of over 7 per cent decrease in Intesa Sanpoalo was by 7.76%, as had an impact here and downward revision of financial institution ratings of Credit Suisse.
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The European indexes suffered a decline for the third straight session Thursday after the U.S. Federal Reserve presented a less optimistic forecast for growth of U.S. economy and debt problems in the eurozone, writes MarketWatch. Stoxx Europe 600 lost 1.83 percent to 250 points, after having suffered a decline of 1.5 percent over the last two session. “Bad data from the real estate market in the U.S. and fears about debt problems and budget deficits are fixed, the mood of investors,” said an analyst at RBC Capital Markets. The Federal Reserve announced Wednesday that the problems around The debt crisis in Europe reflect negatively on the economic recovery in the U.S. and interest rates remain historically low levels, predicts that interest rates will remain unchanged for some time. In a statement made after two days-long meeting of government experts, the Fed lowered its forecast for U.S. economy, declaring that the recovery continues “instead that” strengthens “, as noted in April. European banks are major creditors of European governments, suffered losses. Among the losers were the French BNP Paribas and Spain’s Santander. Focus around the Debt Crisis in Europe adversely affect Greece, the Greek insurance on debt has made new record highs on Thursday.
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The Commission will send 35 individual requests to 20 Member States of the European Union with a request to fully implement other aspects of Community legislation to create a single market for gas and electricity, said Europe’s energy portal. Legislation in this area tends to increase the capacity and transparency of gas markets and electricity. Effective and fully functioning single European energy market will give consumers a choice between different companies supply gas and electricity, and will provide access to all suppliers, especially smaller ones and those who invest in renewable sources. It will also help the EU to recover from the economic crisis, said Monday. Countries to which the EC has decided to send applications are Austria, Belgium, Bulgaria, Czech Republic, Germany, Spain, France, Greece, Hungary, Ireland, Italy, Luxembourg, Netherlands, Poland Portugal, Romania, Slovenia, Slovakia, Sweden and UK. States have two months to respond. According to the Commission this can avoid cartelization and monopolism, which is the basic afraid of the new governments in the years of crisis.
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The large budget deficit of Greece drew the attention of investors worldwide to high debt levels in many developed countries and cause a strong earthquake in global financial markets in May, which affected most stock exchanges in Eastern Europe. Unprecedented levels of debt in countries such as Spain, Ireland, Portugal, Britain and the U.S. and the eurozone’s inability to respond adequately to its fiscal difficulties led to an outflow of investors from the euro and the securities markets worldwide. Most, however, suffered exchanges in Eastern Europe, led by Ukraine and Greece, and that in Romania. Expected main Greek ASE stock index was one of the losers in the world, has lost 17 percent in May and increased its loss this year to just over 29%. In early May, Greece have access to a rescue fund of 110 billion euros, but worries that this will only increase the indebtedness of the country without resolve its economic problems prevailed. Sharp decreases in the Athens Stock Exchange led the country’s financial regulator to ban for two months short sales of shares in late April. Shortly thereafter Germany surprise ban on short sales of shares of the largest banks and insurance companies in the country until March 31 next year. The unexpected move of the country, which was not consistent with its EU partners, has provoked a wave of sales of stock exchanges worldwide. Greece’s budget deficit amounted to 13.6 percent of its gross domestic product (GDP) in 2009 and the government develop a program for reducing it to 4.9% in 2013. In Estonia, which also carried harsh fiscal reforms to reduce its budget deficit, the main stock index OMX Tallinn decreased by 10.4 percent in May, but is still 35% above its level of last December.
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The global credit rating agency Fitch lowered the Spanish one degree to “AA +”, indicating that economic recovering the country will be slower than predicted by the government, because the measures adopted to reduce the budget deficit, says CNBC. “Decrease the rating of the country reflects the assessment of Fitch, that the adaptation process with a contraction in private sector and external debt, significantly reducing the growth of the Spanish economy in the medium term,” said a statement from the agency. Fitch reduced rating of Spain to “AA +” from “AAA.” The prospect of the new rating is stable. “The situation with the rating itself is not surprising,” said Thanos Papasavas exchange director at Investec Asset Management. “It is interesting that the fall of the Spanish rating can be considered as a” test “of whether the investors and the markets have already factored in the bad news that their trade last month. According Papasavas if the EUR traded under $ 1.22 at the end of the session on Wall Street, then you can assume that bad news has not been calculated, which will mean that we will have more falls next week.
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What makes markets nervous, according to managing director of Pimco Paul McKali is uncertainty about next steps on the euro and the European Union – or the end of the single currency, or movement towards fiscal federalism on the continent. McKali, who heads the trade in short-term bonds in the largest bond fund in the world hastened to clarify that it is not necessarily a breakdown of the euro area, forward CNBC. He said the crisis in Europe is a matter of confrontation between the Nordic countries, led by Germany and south, which they help. This may not be long-term solution. “It’s like a loan unemployed relative,” he explains. “I do not particularly want you to help him, but if you do, it will cause in you.” McKali believe that eventually North will be tired of pouring money into the southern countries, which could lead to structuring of the South. He added that Pimco is not currently buying U.S. government bonds since there is enough. According to Tony Kresenzi, senior vice president at Pimco, government bonds may be good for investors in insurance stocks. Chuck Lahr, manager of the new department equity investment company expects to trade variable summer. According to European stock markets currently trade at a discount of 30%, offer opportunities for investors.
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