October 3, 2024

World Markets Boosted by China, German Exports

LONDON (AP) — European markets were steady Monday ahead of a meeting between the leaders of France and Germany on how to restore confidence in the euro, while Chinese shares surged after the country’s monetary authorities pledged to increase bank lending to entrepreneurs.

Investors will likely focus this week on Europe’s efforts to deal with its debt market turmoil. The meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel is their first of the year and investors will want to see how the “fiscal compact” agreed in December is being fleshed out.

All EU countries but Britain agreed at the time to consider a new treaty to enforce tougher budget controls by March this year.

“This is set to be the first of a number of meetings between the two leaders over the coming days and weeks, and markets will be hoping that the one eyed insistence on budget discipline by Angela Merkel also gives way to looking at practical measures to stimulate growth in Europe,” said Michael Hewson, markets analyst at CMC Markets.

Mounting evidence that the eurozone is heading for a recession has weighed on European markets over the past days. On Monday, the latest data showed German industrial production fell in November, suggesting even the richer countries are feeling the pinch.

Fears of default have already pushed Greece, Ireland and Portugal to need bailouts are now threatening much-bigger Spain and Italy. The yield on Italy’s benchmark ten-year bonds on Monday continued to hover around the 7 percent mark, widely considered to be unsustainable in the long-run.

After a perky start to the year, market sentiment has deteriorated again due to concerns about Europe’s ability to solve its debt problems.

On Monday, Germany’s DAX was down 0.2 percent at 6,044 while the CAC-40 in France rose 0.2 percent to 3,142. The FTSE 100 index of leading British shares was flat at 5,649.

The euro, which last week took a battering on fears over both the debt crisis and the likelihood that the eurozone economy is heading toward recession, recovered some ground, trading 0.8 percent higher at $1.2780. Earlier, during Asian trading hours, it had fallen to a 16-month low of $1.2676.

Wall Street was poised for a subdued opening after a lackluster response to strong U.S. jobs numbers last Friday. Dow futures were up 0.1 percent at 12,319 while the broader Standard Poor’s 500 futures were flat at 1,274.

Earlier in Asia, Chinese shares in Hong Kong and the mainland jumped sharply following a weekend government planning conference during which Premier Wen Jiabao promised to channel lending to entrepreneurs who have been battered by weak global demand.

China tightened lending and investment curbs last year to cool its overheated economy but has reversed course in recent months following a slump in global demand that has hurt exporters and led to job losses.

Hong Kong’s Hang Seng index jumped 1.5 percent at 18,865.72. The benchmark Shanghai Composite Index gained 2.9 percent to 2,225.89, while the Shenzhen Composite Index gained 3.7 percent. Elsewhere, South Korea’s Kospi fell 0.9 percent to 1,826.49. In Japan, financial markets were closed for a public holiday.

Trading in the oil markets was fairly subdued, with benchmark crude for February delivery down 36 cents at $101.23 a barrel in electronic trading on the New York Mercantile Exchange.

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Pamela Sampson in Bangkok contributed to this report.

Article source: http://feeds.nytimes.com/click.phdo?i=08b94c20c94b74849c888c73d5ede0a3

Stocks Rally on Greek Relief, Shrug Off UBS Woes

Those hopes were raised by the outcome of a teleconference Wednesday between the leaders of France, Germany and Greece, who attempted to quash speculation that a Greek default was imminent and reaffirmed their belief that Greece remained an “integral part” of the eurozone.

German Chancellor Angela Merkel and French President Nicolas Sarkozy stressed to Greek Prime Minister George Papandreou that his debt-crippled country needs to honor its commitments on making savings and enacting reforms. Papandreou renewed his pledge ahead of Thursday’s Greek cabinet meeting where the reform program will top the agenda.

Although the three leaders’ comments about their talks were minimal, investors appear to be relieved that Greece wasn’t being set up for a default or a possible exit from the eurozone, which could wreak havoc in markets.

A review of Greek financial progress from the so-called troika — the European Commission, the European Central Bank and the International Monetary Fund — is due to resume in coming days.

“Markets are still speculating on Greece’s bankruptcy, although short-term the troika is expected to release funds for Greece,” said Benoit de Broissia at KBL Richelieu.

In Europe, all stock markets were higher, while the euro pushed back up above the $1.38 mark for the first time this week.

UBS shares were down 7 percent on the news that the Swiss bank had a rogue trader who caused it an estimated loss of $2 billion, and police in London arrested a 31-year-old man in the case.

Germany’s DAX was up 2.2 percent at 5,459 while France’s CAC-40 rose 2.1 percent to 3,012. The FTSE 100 index of leading British shares was up 1.6 percent too at 5,310.

Wall Street was poised for further modest gains after its first three-year rally since the end of August — Dow futures were up 0.4 percent at 11,223 while the broader Standard Poor’s 500 futures rose 0.5 percent to 1,188.

Despite the relief rally, investors are fully aware that Greece has not delivered all its promised over the past year and a half since it was granted it’s first euro110 billion ($151 billion) bailout package.

Also, concerns over the passing of key anti-crisis measures across European capitals remain, especially after Austria indicated it wouldn’t be able to fast-track the plans announced in July by eurozone leaders.

And investors want to see Europe come up with a more credible plan of action than the one it has pursued. A meeting of eurozone finance ministers in Poland over the coming days, which will also include U.S. Treasury Secretary Timothy Geithner, will be monitored in that context.

Germany, in particular, as Europe’s richest economy, is also under pressure to do more.

Merkel said Thursday it is “completely clear” that Germany, the continent’s biggest economy, has a “duty and responsibility to make its contribution to securing the euro’s future.”

However, she appeared to again reject calls for the introduction of a eurobond, whereby the eurozone would pool together to issue debt. Stabilizing the currency union will be a step-by-step process and “won’t happen overnight or with any one-time thunderbolt,” she said.

Greece’s debts stands at about 150 percent of GDP and the markets are increasingly of the view that with the Greek economy shrinking, the banks will have to accept they’re not going to be paid back all that they are owed. The main market debate is what sort of writedown — the so-called haircut — financial institutions, who lent Greece the money, will have to accept.

“It still seems a little early to stop making back of envelope calculations about how deep the haircuts would need to be to bring Greece’s debt back to what most would see as being a more sustainable level, say 60 percent of GDP or less,” said Simon Derrick, an analyst at Bank of New York Mellon.

Earlier stocks in Asia were buoyed by the Greek developments. Standouts were Japan’s Nikkei 225 index, which rose 1.7 percent to 8,668.86 while South Korea’s Kospi advanced 1.4 percent to 1,774.08. Hong Kong’s Hang Seng ended 0.7 percent higher at 19,181.50 but China’s main index in Shanghai fell 0.2 percent to 2,479.05.

Oil prices rose modestly alongside the better tone in stock markets — benchmark oil for October delivery was up 14 cents $89.05 per barrel in electronic trading on the New York Mercantile Exchange.

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Kelvin Chan in Hong Kong contributed to this report.

Article source: http://feeds.nytimes.com/click.phdo?i=03ba336f0e17a33341f4290732463088

Merkel Clears Way for Draghi to Lead E.C.B.

Mr. Draghi, the governor of the Bank of Italy and an American-trained economist, is well regarded by economists and foreign leaders, and his appointment should reassure them that the E.C.B. will continue to have a strong leader at a time when the euro is in crisis.

Ms. Merkel told the weekly newspaper Die Zeit, in an interview published Wednesday, that Mr. Draghi embodies German ideas about economic stability and that the government could support his candidacy. Ms. Merkel’s office confirmed that the report was accurate.

“He is very much in line with our ideas about stability and economic solidity,” Ms. Merkel said.

European heads of state are likely to formalize Mr. Draghi’s nomination at a meeting on June 24. He will replace Jean-Claude Trichet, whose term expires at the end of October.

Though top-ranking German officials have said privately that they admired Mr. Draghi, Ms. Merkel had avoided making a public statement of support for him. She may have feared that an Italian at the helm of the bank would not be acceptable to the German public.

But after other leaders like French President Nicolas Sarkozy said in recent weeks that they support Mr. Draghi, the pressure was on Ms. Merkel to take a stand.

Mr. Draghi is regarded as slightly less hard-line on inflation than Axel Weber, the former president of the German Bundesbank, who had been the front runner as next E.C.B. president until he unexpectedly withdrew earlier this year.

But Mr. Draghi, 63, who earned a doctorate in economics at the Massachusetts Institute of Technology, is certain to maintain the E.C.B.’s relentless focus on price stability. He also enjoys an international reputation, in part because of his work as chairman of a panel that has been asked by the Group of 20 nations to find ways to avoid future financial crises.

Like Mr. Trichet, Mr. Draghi has the gravitas, stature and political savvy needed to interact on equal terms with European leaders. The crisis caused by debt problems in Greece, Portugal and Ireland has put extreme pressure on E.C.B. policy makers, who have often taken the lead in managing the crisis because of the difficulty that European Union leaders have in agreeing on fast action.

Article source: http://feeds.nytimes.com/click.phdo?i=d9408cde9a11bf5a03807a5c07a42954