January 23, 2020

Cyprus Bailout Wins Easy Approval From Germany

Wolfgang Schäuble, Germany’s finance minister, warned lawmakers ahead of the vote that despite its tiny size, Cyprus could still endanger the broader economy of the European Union if its troubles were ignored.

“We must prevent that the problems in Cyprus become problems for other countries,” Mr. Schäuble said. He added that if Cyprus were allowed to go bankrupt, there was a “significant risk” of contagion to Greece and other vulnerable countries in the euro zone.

As expected, a clear majority of 487 out of 602 lawmakers casting ballots voted in favor of the package, which includes €9 billion, or $11.7 billion, in contributions from European Union members. The International Monetary Fund is to contribute an additional €1 billion.

German law requires parliamentary approval of all financial assistance the country extends to other European Union members.

In a separate vote, the German lawmakers also approved seven-year extensions on loans previously granted to Ireland and Portugal.

Germans were further rattled by news last week that Cyprus would need to raise €13 billion — nearly twice the amount the government initially estimated only a month ago — to keep its debt and deficit from spinning out of control and to meet the terms of the bailout. German taxpayers worry they will be called upon to come up with even more money to aid Cyprus.

Germany had insisted in the bailout negotiations that Cyprus reduce the size of its banking industry, that the European contribution be limited in scope and that depositors and investors in Cypriot banks be forced to share the burden. On Thursday Mr. Schäuble underlined that the European contribution would not be expanded, or made directly available to the struggling Cypriot banks.

Compared with most of its European Union partners, Germany continues to achieve economic growth, even if it has been only slight lately. Officials in Berlin said this week that the export-driven economy and the country’s solid public finances would enable Germany to achieve a budget surplus in 2016 — a sharp contrast to the deficits projected for weaker members in the euro zone. Even by next year, Germany expects to have a balanced budget, according to the annual stability program it plans to submit to the European Commission.

On Thursday, Moody’s maintained Germany’s triple-A credit rating, praising its “advanced, diversified and highly competitive economy and its track record of stability-oriented macroeconomic policies.”

Many Germans have grown weary of providing financial support to their fellow Europeans. A report last week by the European Central Bank suggesting that some of the weaker countries have higher wealth per household than Germany stoked public anger, which Mr. Schäuble sought to ease on Thursday.

“In our country, where we do not feel the euro crisis is our daily life, we have to remember that the people in Ireland, Portugal, Spain and Greece are living through a difficult time,” he said. “There are no viable shortcuts on this path, but for those affected it is difficult.”

Article source: http://www.nytimes.com/2013/04/19/business/global/german-lawmakers-back-cyprus-bailout.html?partner=rss&emc=rss

Stocks and Bonds: Stocks Finish Flat as Investors Await a Greek Debt Deal

Markets ended flat on Monday as few developments affected stocks except investor hopes that Greece would eventually reach a deal with private creditors on lowering its debt.

Greece’s private creditors are being asked to accept longer maturities and lower interest rates on new bonds swapped for their existing ones.

The major Wall Street stock indexes wavered little all day. The Standard Poor’s 500-stock index ended up 0.05 percent, or 0.62 points, to 1,316. The Dow Jones industrial average fell 0.09 percent, or 11.66 points, to 12,708.82. The Nasdaq composite index also lost 0.09 percent, or 2.53 points, to close at 2,784.17.

Greece, which is negotiating alongside fellow members of the euro zone and the International Monetary Fund, wants interest rates as low as 3 percent on the new bonds. But the private creditors believe that is too low, and are aiming for about 4.5 percent.

Both sides said a deal was nevertheless close, heartening investors. The euro was the main beneficiary, climbing 1.3 percent to $1.3033.

Greek officials say negotiations on the private debt write-down are continuing by phone, with no appointment yet for new face-to-face talks.

Greece was to be the main topic of discussion at Monday’s meeting in Brussels of the finance ministers for the 17 European Union members that use the euro.

In Europe, the FTSE 100 index of leading British shares closed up 0.9 percent, while the DAX in Germany rose 0.5 percent. The CAC 40 in France was also 0.5 percent higher.

Optimism that Greece would clinch a deal has brightened market sentiment this year, along with a run of successful European bond auctions and solid economic and corporate news, not least from the United States and China. Many stock indexes have risen to five-month highs, while the euro has headed back toward the $1.30 mark.

Though the Federal Reserve is expected to keep its loose monetary policy unchanged, there will be great interest in the outcome of this week’s rate-setting meeting. It will be the first time the Fed will publish its interest rate forecasts out to 2016, part of a strategy to enhance communication with financial markets.

Investors will be particularly interested to see how long policy makers expect interest rates to remain low. Previously, the Fed said it expected to keep them low until the middle of 2013.

“Most, ourselves included, expect the projections to suggest the Fed sees rates on hold well into 2014,” said Adam Cole, an analyst at RBC Capital Markets.

In the oil markets, traders were watching developments in the Persian Gulf. Iran has threatened to close the Strait of Hormuz if the United States and other countries impose more sanctions on it because of its nuclear program. Many analysts doubt that Iran could set up a blockade for long, but any supply shortages would cause supplies to tighten. Benchmark crude was up $1.25 to $99.58 a barrel on the New York Mercantile Exchange.

The Treasury’s 10-year note fell 9/32, to 99 16/32. The yield was 2.06 percent, up from 2.03 percent late Friday.

Article source: http://feeds.nytimes.com/click.phdo?i=a7ae1bd6b53f32d370b89c7611de0e16

Daily Stock Market Activity

Stocks rose on Friday in the United States and Europe after euro zone leaders reached agreement to tighten fiscal discipline to combat the sovereign debt crisis.

But while stock traders appeared to give a positive response to the announcement, at least for a day, the reaction in the bond market was tepid as many analysts weighed the longer-term prospects for the agreement and whether it would address the fundamental issues in the crisis.

Stocks on Wall Street reversed Thursday’s declines of more than 2 percentand finished the week in positive territory. At 4 p.m., the Dow Jones industrial average was up 1.5 percent, and the Standard Poor’s 500-stock index rose 1.7 percent. The Nasdaq composite index was 1.9 percent higher.

The Dow ended the week about 1.4 percent higher, and the S.P. 500 and the Nasdaq each climbed about 0.8 percent in the period.

Officials from the 17 European Union nations that use the euro agreed to sign a treaty that would require them to enforce stricter financial discipline; they also agreed on Friday to bolster their bailout funds.Guy LeBas,the chief fixed-income strategist at Janney Montgomery Scott, said that the accord simply addressed the underlying tensions among the European Union members rather than the fact that, for example, bond yields were too high in Italy for the country to fund itself. 

“My concern about the E.U. treaty pact is it does not provide much short-term relief for the markets,” he said. “In my view, it is more important to staunch the bleeding.”

Still, he added, the accord “provides a little bit of confidence that policy makers are addressing the issues facing the E.U. But it is not as if there is suddenly some great demand in Italian bonds” in the agreement’s wake.

On Thursday, the European Central Bank reiterated its opposition to increasing its purchases of euro zone government bonds, but cut its main interest rate target to 1 percent, down a quarter-point, to smooth credit market stress.

On Friday, the president of the E.C.B., Mario Draghi, gave his blessing to the euro zone’s arrangement, saying: “It is a very good outcome for euro area members and it’s going to be the basis for a good fiscal compact and more disciplined economic policy in euro area countries.”

But Britain, concerned about the impact on the London financial center, refused to sign on to any treaty changes, meaning the deal’s legal basis is uncertain among the broader, 27-nation European Union. A few other nations also refrained from signing on at first.

The Euro Stoxx 50 index, a barometer of euro zone blue chips, gained 2.4 percent by the end of trading, while the FTSE 100 index in London was up 0.8 percent. The French CAC 40 index rose 2.4 percent and the German DAX was up nearly 2 percent.

On Friday, bond yields rose early for some euro zone nations that were seen as most vulnerable. Late in the day the trend reversed. Italy’s 10-year yield fell 13 basis points to 6.299 percent, while Spain’s fell 7 basis points to 5.680 percent. German 10-year bonds added 13 basis points to 2.142 percent. A basis point is one-hundredth of a percent.

United States 10-year Treasury notes rose 9 basis points to 2.061 percent, but one analyst, Anthony Valeri of LPL Financial, said that the bonds were responding to reports on improved  consumer sentiment released on Friday that exceeded forecasts.

 Quincy Krosby, a market strategist for Prudential Financial, agreed that the accord was a short-term remedy, considering the euro zone’s growth problems, that have placated the markets at least for one day.

“They have clearly bought time with the market reaction this morning,” she said. “The question is, as always, how much time.

“The long term is that it is clear that the evolution of the euro zone is ongoing and will be dictated by the economic prospects of the weaker members,” she said.

Analysts also noted that throughout the crisis, leaders and officials have offered a number of plans that have come and gone but failed to stabilize the markets or solve the root of the debt problems.

Article source: http://www.nytimes.com/2011/12/10/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

Shares Are Bolstered by News From Europe

Some traders say that the market is gaining momentum from its recent gains and have begun pointing to signs that the market’s extreme volatility may be giving way to a calmer period. But with all eyes on Europe, even optimists acknowledge the fragility of the recent confidence.

The Dow Jones industrial average closed up 102.55 points, or 0.9 percent, at 11,518.85. It spent much of the day in positive territory for the year before giving up some of its gains in the last hour.

The index was positive for most of the year before plunging in early August. Since then, stock prices have experienced a series of wrenching ups and downs, closing in positive territory for the year only once.

The index closed on Wednesday 0.5 percent below its level at the beginning of 2011.

The Standard and Poor’s 500-stock index, seen as a more complete barometer of the overall market, was up 11.71 points, or 1 percent, at 1,207.25. It remains down more than 3 percent for the year. The Nasdaq composite index rose 21.70 points, or 0.8 percent, to 2,604.73.

Banks continued to make particularly strong gains. Citigroup gained 4.9 percent, while Wells Fargo’s shares were up 3.5 percent.

The European Commission president, José Manuel Barroso, proposed that Europe’s biggest banks be required to temporarily bolster their protection against losses, as part of a broader plan to restore confidence in the European financial system. He also called on the 17 European Union members that use the euro to maximize the capacity of their bailout fund, a clear hint that he favors leveraging the fund to increase its power.

Slovakia is expected to approve changes to the rescue fund, known as the European Financial Stability Facility, on Thursday or Friday.

Lawmakers there initially rejected the bill shortly after markets in the United States closed on Tuesday. The vote led to the collapse of the country’s coalition government, but the parties in the departing government reached an accord with the main opposition party to permit the bill to pass in exchange for early elections.

The other 16 E.U. members that use the euro have approved the measure, which requires unanimous support.

Analysts said recent turmoil in the markets had effectively forced European leaders to show real progress in addressing problems related to sovereign debt.

“The market has screamed loud enough to make the European authorities stand up and listen,” said Andrew Wilkinson, chief economic strategist for Miller Tabak Company.

Some traders also pointed to the falling level of the VIX, which measures volatility, as a sign that markets could be stabilizing. The VIX, popularly known as the fear index, ended at 31.26, its lowest level since mid-September. In addition to positive signs in Europe, the markets were adjusting to a slightly brighter picture of the domestic economy, said Michael Church, president of Addison Capital. A recent spate of economic data has eased fears among economists that a recession is imminent.

“At some point you had to question that thesis, especially when it had become exceptionally popular,” Mr. Church said.

The minutes from the most recent Federal Open Market Committee meeting were released on Wednesday. They showed that two members had favored more aggressive action to stimulate the economy, essentially putting fears of a further slowdown ahead of inflation concerns.

European markets closed higher Wednesday. The benchmark Euro Stoxx 50 index was up 2.43 percent; the FTSE 100 in London rose 0.85 percent; and the DAX in Frankfurt gained 2.2 percent.

The euro, which has been gaining against the dollar for over a week, rose 1.1 percent to $1.3677.

Yields on United States Treasuries also continue to rise. The yield on the benchmark 10-year note was 2.21 percent, up from 2.16 late Tuesday.

This article has been revised to reflect the following correction:

Correction: October 12, 2011

An earlier version of this article erroneously reported the yield on the 30-year bond —   rather than the 10-year note —   as 2.214 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=83b46f659556953133f08d64b0422e81