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Markets Mixed a Day After Big Rally

October 11, 2011 by Leave a Comment

Monday’s so-called “relief rally” dissipated at the opening bell on Wall Street on Tuesday, with major market indexes off slightly in morning trading after gaining 3 percent the day before.

In Europe, stocks were down slightly, after a rally in Asia, as the European Central Bank’s departing chief warned of an increasing risk of financial contagion from the euro zone debt crisis and officials recommended that Greece receive additional bailout funds from international lenders.

The broad European market was off less than 1 percent in late trading. Jean-Claude Trichet, who is stepping aside from the top E.C.B. post to make way for Mario Draghi, told the European Parliament in Brussels on Tuesday that the financial crisis “has reached a systemic dimension,” Bloomberg News reported.

“Sovereign stress has moved from smaller economies to some of the larger countries,” Mr. Trichet said. “The crisis is systemic and must be tackled decisively.”

Mr. Trichet was speaking in his capacity as head of the European Systemic Risk Board, a body created last year to ensure supervision of the European Union financial system. He steps down as E.C.B. chief on Nov. 1.

In morning trading, the Standard Poor’s 500-stock index and the Dow Jones industrial average were up about 0.1 percent.

Investors both in Europe and on Wall Street were awaiting the outcome of a vote in Bratislava, where Slovakian lawmakers debated Tuesday on whether to back an expansion of the European Financial Stability Facility. The Slovak government is divided on the bailout mechanism, and a rejection could, at the very least, further complicate plans to shore up the euro zone.

On Tuesday afternoon, the so-called troika, made up of teams from the European Commission, the E.C.B. and the International Monetary Fund, announced that it was recommending that Greece receive 8 billion euros, or $10.9 billion, of financial support.

The embattled government in Athens cannot expect to reach its deficit targets for this year, the troika inspectors concluded, but they said it appeared that measures agreed for 2012 made the country’s goals attainable.

“Overall, the authorities continue to make important progress, notably with regard to fiscal consolidation,” the troika’s review found.

On Monday, the European Council president, Herman Van Rompuy, said a European Union summit meeting on the debt crisis would be delayed by a week to Oct. 23 to give the bloc time “to finalize our comprehensive strategy on the euro area sovereign debt crisis covering a number of interrelated issues.”

Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France have promised a plan to recapitalize European banks before a Group of 20 summit meeting on Nov. 3.

“The sense of urgency among European officials that became apparent two weeks ago appears to be gathering steam,” analysts at DBS wrote in a note to clients. “One can’t be unhappy about that.”

In afternoon trading, the Euro Stoxx 50 index, a barometer of euro zone blue chips, was down 0.3 percent, while the FTSE 100 index in London was down a 0.2 percent. Energy companies posted the largest declines as oil prices fell.

“The pressure on euro zone officials has ratcheted higher, and risks of failure are now too significant to jeopardize with half measures,” analysts at Crédit Agricole CIB said. “Weekend promises of banking sector capitalization by Germany and France have helped but will not be enough should such promises prove empty.”

Asian shares were higher across the board. The Tokyo benchmark Nikkei 225 stock average rose 2 percent. The Sydney market index S. P./ASX 200 rose 0.6 percent.

Chinese stocks initially rose a day after the country’s sovereign wealth fund bought shares in China’s four main banks in a show of support , but the Shanghai composite index gave up all but 0.2 percent of the gain by the end of trading.

The Hang Seng index in Hong Kong also pared an early surge of more than 4 percent but ended the day up 2.4 percent.

The dollar was higher against major European currencies. The euro slipped to $1.3597 from $1.3642 late Monday in New York, while the British pound fell to $1.5628 from $1.5668. The dollar climbed to 0.9105 Swiss francs from 0.9037 francs. But the U.S. currency fell to 76.62 yen from 76.68 yen.

American crude oil futures for November delivery fell 0.6 percent to $84.89 a barrel. Comex gold futures fell 0.6 percent to $1,661.60 an ounce.

David Jolly reported from Paris and Sei Chong reported from Hong Kong. Stephen Castle contributed from Brussels.

Article source: http://feeds.nytimes.com/click.phdo?i=bfc0204b4572d738c61a2286993d184b

Filed Under: Business News Tagged With: , ,

European Leaders’ Promises Lift Asian Markets

October 11, 2011 by Leave a Comment

PARIS — Stocks fell modestly in Europe on Tuesday, after a rally in Asia, as the European Central Bank’s departing chief warned of an increasing risk of financial contagion from the euro zone debt crisis.

The broad European market was off less than 1 percent, and trading in index futures suggested Wall Street would start the day marginally weaker.

Jean-Claude Trichet, who is stepping aside from the top E.C.B. post to make way for Mario Draghi, told the European Parliament in Brussels on Tuesday that the financial crisis “has reached a systemic dimension,” Bloomberg News reported.

“Sovereign stress has moved from smaller economies to some of the larger countries,” Mr. Trichet said. “The crisis is systemic and must be tackled decisively.”

Mr. Trichet was speaking in his capacity as head of the European Systemic Risk Board, a body created last year to ensure supervision of the E.U. financial system. He steps down as E.C.B. chief on Nov. 1.

Investors were awaiting the outcome of a vote in Bratislava, where Slovakian lawmakers were scheduled to hold a debate later Tuesday on whether to back the European Financial Stability Facility. The Slovak government is divided on the bailout mechanism, and a failure of the vote could, at the very least, further complicate plans to shore up the euro zone.

On Monday, the European Council president, Herman Van Rompuy, said a European Union summit meeting on the debt crisis would be delayed by a week to Oct. 23 to give the bloc time “to finalize our comprehensive strategy on the euro area sovereign debt crisis covering a number of interrelated issues.”

Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France have promised a plan to recapitalize European banks before a Group of 20 summit meeting on Nov. 3.

“The sense of urgency among European officials that became apparent two weeks ago appears to be gathering steam,” analysts at DBS wrote in a note to clients. “One can’t be unhappy about that.”

In early trading, the Euro Stoxx 50 index, a barometer of euro zone blue chips, fell 0.5 percent, while the FTSE 100 index in London gave up 0.2 percent. Energy companies posted the largest declines as oil prices fell.

Standard Poor’s 500 index futures were down slightly, suggesting the U.S. market would be slightly weaker at the opening bell. The S. P. 500 powered 3.4 percent higher on Monday.

“The pressure on euro zone officials has ratcheted higher, and risks of failure are now too significant to jeopardize with half measures,” analysts at Crédit Agricole CIB said. “Weekend promises of banking sector capitalization by Germany and France have helped but will not be enough should such promises prove empty.”

Asian shares were higher across the board. The Tokyo benchmark Nikkei 225 stock average rose 2 percent. The Sydney market index S. P./ASX 200 rose 0.6 percent.

Chinese stocks initially rose a day after the country’s sovereign wealth fund bought shares in China’s four main banks in a show of support
, but the Shanghai composite index gave up all but 0.2 percent of the gain by the end of trading.

The Hang Seng index in Hong Kong also pared an early surge of more than 4 percent but ended the day up 2.4 percent.

The dollar was higher against other major currencies. The euro slipped to $1.3637 from $1.3642 late Monday in New York, while the British pound fell to $1.5646 from $1.5668. The dollar ticked up to 76.69 yen from 76.68 yen, and to 0.9043 Swiss francs from 0.9037 francs.

U.S. crude oil futures for November delivery fell 1.9 percent to $85.06 a barrel. Comex gold futures rose 2.1 percent to $1,670.80 an ounce.

Sei Chong reported from Hong Kong. Stephen Castle contributed reporting from Brussels.

Article source: http://feeds.nytimes.com/click.phdo?i=bfc0204b4572d738c61a2286993d184b

Filed Under: Business News Tagged With: , ,

Beyond Greece, Europe Fears Financial Contagion in Italy and Spain

July 20, 2011 by Leave a Comment

Hopes that pledges of new austerity would turn sentiment toward Greece around have proved illusory, and more officials are acknowledging that Greece has to cut its debt, meaning losses for those who hold Greek bonds. But the way forward is immensely complicated, partly because European leaders cannot agree on how much pain to inflict on private-sector bond holders, especially big European banks.

Meanwhile, the European Central Bank continues to demand a response that will not be considered by ratings agencies to be the first default among countries that use the euro, which the bank fears could reduce confidence in the currency’s stability.

It amounts to a game of political and financial chicken, and the markets are becoming fed up with the uncertainty. Investors are now demanding sharply higher interest rates to buy the debt of Italy and Spain — the third- and fourth-largest economies in the euro zone. By doing so they are sending a clear message that Europe has to decide how to absorb the losses necessary to slash Greece’s debt.

Otherwise, the analysts warn, continued confusion about the euro will spread to other weak members of the euro zone, including Italy and Spain, which are considered too big to bail out. Italy alone has debts of 120 percent of its annual gross domestic product, and must refinance nearly a quarter of its debt — nearly 400 billion euros — in the next 18 months. That figure alone is larger than all of Greece’s debt of some 340 billion euros, and at suddenly spiking interest rates of 6 percent or so, even Italy could be teetering toward insolvency.

Officials involved in talks on the new Greek rescue package said that in recent days the debate had moved beyond Greece, and that markets were now questioning the very architecture of the euro, a common currency for sovereign nations with diverse economic and fiscal problems.

“For Spain and Italy, you need to provide a solution for Greece, plus a safety net to prevent contagion,” said Antonio Garcia Pascual, chief southern European economist for Barclays Capital. “But the inaction of policy makers is unhelpful. And we don’t have weeks. It’s a matter of days, especially with Italian and Spanish bonds at this level.”

Until recently, the argument was that any Greek restructuring or default would bring a market frenzy aimed at other countries in difficulty. Instead, the failure to cope with the reality of Greek insolvency has had the opposite effect, causing more contagion, many analysts say.

“To see those yields on highly developed countries like Italy jump so fast has really focused minds,” said Simon Tilford, chief economist for the Center for European Reform in London. Chancellor Angela Merkel of Germany has insisted that there is little urgency and that the private sector must be involved in restructuring.

“Merkel is now in a very difficult position,” Mr. Tilford said. “The Germans are now alive to the risk in ways they weren’t before. For all the derision about Silvio Berlusconi, Italy is core Europe and has very strong ties to Germany and France.”

But those pressing for a comprehensive solution may be disappointed, with Mrs. Merkel saying on Tuesday that “a spectacular, single step cannot responsibly be made, including on Thursday.” Instead, she said, “we need a controlled and manageable process of successive steps and measures” for “reducing debt and improving competitiveness.”

European technocrats are reportedly exploring a tax on euro zone banks to cover burden-sharing by the private sector. They are also said to be considering a supposedly voluntary “rollover” of existing bonds for ones with a lower interest rate and a much longer maturity, preserving, at least notionally, the face value of the bond. That idea, originally French, might not be judged a “default” by all ratings agencies.

Steven Erlanger reported from Paris, and Rachel Donadio from Rome.

Article source: http://www.nytimes.com/2011/07/20/world/europe/20europe.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,