October 26, 2020

Wall Street Rises After Europe Rally

The Standard Poor’s 500-stock index closed up 1.8 percent, while the Dow Jones industrial average gained 1.7 percent. The Nasdaq composite index was 1.9 percent higher.

Weekly jobless claims in the United States rose to 401,000, from a revised level of 395,000 last week. The four-week moving average was 414,000, which was lower than the previous month and slightly better than analysts’ expectations.

But the action was mostly in Europe. The central bank moved to help European banks that are having trouble raising short-term cash, while the Bank of England decided to resume its bond purchases to help support a slowing British economy. Both central banks left their key benchmark rates unchanged, at 1.5 percent for the euro area covered by the European Central Bank and 0.5 percent for Britain.

While most economists did not expect the E.C.B. to cut rates, some said they were disappointed with the bank’s actions, particularly because this was the last policy meeting to be headed by Jean-Claude Trichet, who will be replaced by Mario Draghi, governor of the Bank of Italy, on Nov. 1. Mr. Draghi will face pressure not to cut rates immediately in order to establish his credentials as an inflation fighter, analysts said.

But the Bank of England’s resumption of its bond buying program was a surprise, said Mark McCormick, a currency strategist at Brown Brothers Harriman, a boutique banking firm in New York.

“Bank of England exceeded the markets’ expectations, the E.C.B., I would say, disappointed. But they’re both trying to ease financial conditions and in turn support economic growth from a monetary perspective,” he said.

French lenders posted solid gains, leading European indexes upward, after the financial daily Le Figaro reported that the French government was prepared to act to help “two or three banks.” The Figaro report did not identify the source of its information, and news agencies cited French officials as denying that such a plan was in the cards.

BNP Paribas rose 7.5 percent, Société Générale rose 3.16 percent and Crédit Agricole gained 3 percent. Dexia, the failing bank that the French and Belgian governments this week said they would guarantee, began the day higher but by afternoon was 17.2 percent lower.

The Euro Stoxx 50 index, a barometer of euro zone blue chips, closed up 3.2 percent, while the FTSE 100 index in London rose 3.7 percent. The DAX in Frankfurt gained 3.2 percent and the CAC 40 in Paris increased 3.4 percent.

Longer term, however, the picture remained as murky as ever, and financial markets continued to face what strategists at HSBC, in their latest quarterly assessment, called “an unbearable degree of uncertainty.”

“After falling 22 percent from their April highs, global equities are likely to remain tricky,” Garry Evans, head of global equity strategy at HSBC in Hong Kong, wrote. “There are few signs of a bold solution to Europe’s sovereign debt issues, and the 23 November deadline for U.S. debt negotiations looms.”

Moreover, he added, economic growth prospects have not bottomed. Although the jury is still out on whether the world will actually tip into another recession, markets will continue to fret that it might, he said.

Asian shares rallied. The Tokyo benchmark Nikkei 225 stock average rose 1.66 percent. In Hong Kong, the Hang Seng index rose 5.67 percent.

Crude oil futures for November delivery rose .57 percent to $80.20 a barrel. Comex gold futures slipped 0.2 percent to $1,637.60 an ounce.

The dollar was mixed against other major currencies. The euro rose to $1.3384 from $1.3348 late Wednesday in New York, while the British pound rose to $1.5697 from $1.5460. The dollar rose to 76.86 yen from 76.79 yen, but fell to 0.9225 Swiss francs from 0.9232 francs.

Yields on the government bonds that investors see as the safest assets rose, as money flowed into stocks. The yield on the 10-year United States Treasury rose 5 basis points to 1.958 percent, while the yield on the comparable German security rose 5 basis points to 1.88 percent.

David Jolly reported from Paris. Bettina Wassener contributed from Hong Kong.

Article source: http://www.nytimes.com/2011/10/07/business/daily-stock-market-activity.html?partner=rss&emc=rss

European Markets Stumble on Worries of Debt Crisis Contagion

LONDON — Stocks fell more than 1 percent Monday in Europe in the wake of the publication late Friday of the results of stress tests on European banks. The euro weakened and the bond yields of indebted nations climbed as investors worried about the degree of political will to overcome the region’s debt crisis.

On Wall Street, however, stocks were down less than 1 percent at the opening, with the Dow Jones industrial average off 94.08 points to 12,386.26 and the Standard Poor’s 500-stock index losing 7.34, to 1,308.80.

In Europe, the market jitters marked the start of an important week for the European Union as its leaders attempt to stem full-blown market contagion.

The leaders will hold a special summit meeting Thursday, but there appears to be no agreement yet over the terms of a second bailout for Greece, especially on the nature of a private sector contribution.

The lack of clarity along with recent investor sales of Italian and Spanish bonds have led analysts to become increasingly pessimistic.

“The euro zone crisis has recently worsened significantly, exacerbated by disagreements between the E.U.’s key politicians,” said Ruth Lea, an economic adviser to the Arbuthnot Banking Group in London. “It is becoming increasingly clear that there will have to be major steps towards fiscal union or the euro zone will begin to disintegrate.”

She added that the “debt crisis can fairly be described as having morphed into a political crisis.”

Further complicating the latest Greek rescue, the European Central Bank’s president, Jean-Claude Trichet, reiterated during an interview with The Financial Times Deutschland published Monday that the E.C.B. would not accept bonds from any defaulting country as collateral. That could leave Greek banks without financing if credit agencies deem a restructuring, even a voluntary one, to be a default.

The Euro Stoxx 50, a benchmark index of blue chips stocks in the region was down 1.28 percent in late afternoon trading, and the CAC 40 in Paris lost 1.38 percent. The euro weakened to $1.4052 from $1.4157 late Friday.

Perceived as a haven, the Swiss franc surged to a record high against both the euro and the dollar Monday. The euro declined to 1.14848 francs and the dollar dropped to 0.8177 francs. The price of gold for August delivery also touched a new nominal high, rising above $1,600 a troy ounce, as investors sought safer assets.

Further clouding the picture were the stress tests carried out by regulators on the region’s banks. The results were released after markets closed Friday. The threshold to pass the test was set at a core Tier 1 capital ratio, which encompasses safe assets, at 5 percent.

Of the 90 banks, eight failed, with an aggregate capital shortfall 2.5 billion euros. But the exercise left unanswered many questions about how many healthier lenders would survive a deepening of the debt crisis, given their exposure to Greek, Italian and Spanish bonds. A sovereign default case was excluded from the tests.

Eleonore Lamberty, a credit analyst at ING, said the pass mark of 5 percent was too low in view of the future capital requirements that banks would require under the so-called Basel accords.

“Once more the capital shortfall and the number of banks which failed seems, like last year, on the low side, especially the number of Greek banks,” she wrote in a research note. She added that a 50 percent write-down on Greek sovereign debt “would practically wipe out the regulatory capital bases of all Greek banks.”

She recommended “caution” toward banks which passed with a core Tier 1 result below 6 percent, which covers 16 banks; those with an outcome below 7 percent came to an additional 17 banks.

She also said that “certain national champions” did not perform very well, notably Société Générale of France, Deutsche Bank of Germany, UniCredit of Italy and Royal Bank of Scotland.

Shares in Société Générale were down 4.3 percent at midafternoon and Commerzbank of Germany had slid 4.2 percent.

Meantime, yields on riskier Italian 10-year bonds pushed higher — up 0.23 percentage point, at 5.975 percent, — alongside rising yields on Spanish, Portuguese and Greek equivalents.

Last week, Italy accelerated a deficit-cutting plan, aware that investors had been selling its debt fearing it might need outside support.

Investors also remained wary about events in the United States, where President Barack Obama is trying to get lawmakers to agree to a deficit-reducing package before an Aug. 2 deadline for increasing the debt ceiling.

Article source: http://feeds.nytimes.com/click.phdo?i=ea5b7e4d71b574cb9cbd0a624532c306

DealBook: Ex-Bundesbank Chief to Become UBS Chairman

Axel A. WeberKai Pfaffenbach/ReutersAxel A. Weber, the former German central bank president, was selected to join UBS’s board as vice chairman in 2012, then chairman a year later.

8:16 p.m. | Updated

UBS, the Swiss bank, said Friday that it had asked Axel A. Weber, the former German central bank president, to join its board next year, and that it planned to appoint him chairman in 2013.

Mr. Weber will join UBS’s board as nonindependent vice chairman, subject to approval by the bank’s shareholders in 2012. If elected, he would then be nominated to succeed Kaspar Villiger as chairman of the board the following year.

“I am pleased that I can present a board member and future chairman who is an internationally renowned personality with an outstanding reputation,” Mr. Villiger said in a statement. “His appointment will guarantee a smooth leadership transition and stability.”

Mr. Weber was a candidate to replace Jean-Claude Trichet as president of the European Central Bank before he withdrew from consideration in February after making some controversial comments about monetary policy. He also resigned from the Bundesbank, the German central bank, saying he would return to academia. Before becoming a central banker, Mr. Weber was an economics professor at universities in Germany.

“Being able to help shape the bank’s future is an attractive prospect,” he said in the statement.

Mr. Weber, 54, was also seen as a potential candidate to take the top job at Deutsche Bank, once the contract of the current chief executive, Josef Ackermann, ran out in 2013.

UBS’s chief executive, Oswald J. Grübel, is still trying to repair a bank that was one of the hardest hit in Europe during the financial crisis. Its role in a recent legal case over tax evasion by some of its American clients had also hurt the reputation of its wealth management operation.

Some analysts have said it is unclear how long Mr. Grübel will stay at UBS. Mr. Grübel, a 67-year old former chief executive of Credit Suisse, came out of retirement to help turn UBS around in 2009.

Mr. Grübel cut jobs, shrank the balance sheet and strengthened the private banking operations, but he said earlier this year that the investment banking unit’s performance was still not satisfactory.

Article source: http://feeds.nytimes.com/click.phdo?i=e4a3ebf857f57cef4194d48f09a25d01

German Paper Finds Draghi Not So Bad After All

FRANKFURT — Bild, a racy German daily that is easy to ridicule but hard to ignore, on Friday improved Mario Draghi’s chances of becoming the next president of the European Central Bank by dropping a campaign that depicted him as a feckless Italian who can’t be trusted with money.

“On second thought,” the newspaper said in its Friday edition, after noting how it had ridiculed Mr. Draghi in the past, “he is actually rather German, even Prussian.” The newspaper conferred honorary citizenship on Mr. Draghi, who is president of the Bank of Italy, and ran a doctored photo of him wearing a spiked helmet. “It looks good on him,” the caption said.

The newspaper’s faux naturalization of Mr. Draghi may have real political significance, as it gives Chancellor Angela Merkel more space to endorse Mr. Draghi without worrying about a public backlash stoked by the country’s most widely read newspaper.

Despite its focus on sex, scandal and football, Bild — which in apparent deference to the royal wedding did not run its usual Page 1 photo of a bare-breasted woman Friday — is taken seriously in political circles. Political leaders often grant exclusive interviews to the newspaper, which is based in Berlin but distributed nationally, when they have something to say to the German people.

Quoting unidentified sources, Bild also reported that Mrs. Merkel had decided to support Mr. Draghi as successor to Jean-Claude Trichet, whose term ends in October. The chancellor’s office denied Friday that she had made a decision. But Mr. Draghi’s candidacy looks increasingly inevitable after he won the backing of President Nicolas Sarkozy of France this week.

Bild’s clout is often overestimated, said Gero Neugebauer, a political scientist at the Free University of Berlin. “Ordinary people have absolutely no interest in who will be the next president of the E.C.B.,” Mr. Neugebauer said.

Still, Bild’s turnaround means “it’s easier for Mrs. Merkel to support this candidate,” Mr. Neugebauer said. “She won’t have any resistance from this important newspaper.”

German leaders had expected that Axel A. Weber, the Bundesbank president, would become the next E.C.B. president. But he unexpectedly took himself out of the running this year and resigned his Bundesbank post. Coincidentally, Friday was his last day in the job.

Top officials in Berlin had been careful not to criticize Mr. Draghi but seemed to still harbor hopes that they could find another German candidate. But there appeared to be no one else with the stature and experience needed to steer the euro zone through the crisis created by debt problems in Greece, Portugal and Ireland.

In revising its opinion about Mr. Draghi, Bild noted that he is a graduate of the Massachusetts Institute of Technology and has often clashed with Silvio Berlusconi, the Italian prime minister facing charges that he paid an underage girl for sex.

Bild described Mr. Draghi as strict, down to earth, determined and loyal. “As Italy’s top banker, he has since 2006 preached economic reforms, debt reduction and spending discipline,” the paper said. “Bild therefore grants him honorary citizenship.”

Article source: http://www.nytimes.com/2011/04/30/business/global/30draghi.html?partner=rss&emc=rss