If banks in the US are still failing, why not in Europe ?
Standard & Poor's Ratings Services on Friday lowered ratings of 34 Italy-based financial institutions, including UniCredit SpA Intesa Sanpaolo SpA and Banca IMI SpA. The move comes after the ratings agency downgraded Italy's sovereign rating to BBB+ in January. The lower ratings also reflect the revision of S&P's Banking Industry Country Risk Assessment (BICRA) for Italy to group 4 from group 3. A BICRA is scored on a scale from 1 to 10, with group 1 categorized as lowest-risk banking systems to group 10 which is viewed as the highest risk.
Charter National Bank and Trust of Hoffman Estates, Ill., and SCB Bank of Shelbyville, Ind., were closed by regulators Friday, the Federal Deposit Insurance Corp. said. Barrington Bank & Trust Co. of Barrington, Ill., will assume all the deposits and purchase the assets of Charter National Bank, and First Merchants Bank of Muncie, Ind., will do the same for the deposits and assets of SCB Bank. Charter National Bank had $93.9 million in total assets and $89.5 million in total deposits, while SCB Bank had $182.6 million in assets and $171.6 million in deposits. The combined hit to the FDIC's deposit-insurance fund will be $51.3 million. The two failures are the eighth and ninth banks to go bust so far in 2012.
US MARKETS
The Dow Jones Industrial Average closed Friday at 12,801.23,
down 89.23 points, or 0.7% to tally a weekly decline of 0.5%.
The S&P 500 lost 9.31 points, or 0.7%, to 1,342.64 for a week-
on-week decline of 0.2%, while the Nasdaq Composite shed
23.35 points, or 0.8%, to end at 2,903.88, down 0.1% from a week earlier.| “The highs are going to be high and the lows are going to be low, and the drug of choice — debt — isn’t going away or being managed. 2012 has provided a killer ‘high’ but it’s time to sober up.” |
U.S. investors will be looking for more signs of economic recovery in data due next week, hints from Federal Reserve officials on the interest rate outlook, and quarterly results from the likes of Zynga Inc. and General Motors Co. as they continue to keep an eye on Greek efforts to avoid default.
The market will focus on “comments by Federal Reserve officials to determine if the current policy is viable given the strong recent jobs reports,” said Michael Yoshikami, chief executive officer at YCMNET Advisors. “Many Fed watchers are skeptical that the current stated policy to keep interest rates low until 2014 will in fact come to pass.”
Separate speeches Tuesday by Philadelphia Fed President Charles Plosser and Atlanta Fed President Dennis Lockhart may “give clues if there is any concern within the Federal Reserve about stated policy,” he said.
The Federal Open Market
Committee also releases minutes
of its Jan. 26 meeting on
Wednesday, and Fed Chairman
Ben Bernanke will speak at the
Federal Deposit Insurance Corp.
conference on community banking
Thursday. Retail sales figures are due
Tuesday, housing starts and
Philadelphia Fed index data
Thursday and consumer price index
figures Friday.
EUROPEAN MARKETS
European stock markets ended lower on Friday, with banks
driving losses as uncertainty over Greece intensified after
euro-zone finance ministers held off on approving Greece’s
second bailout late the previous day.The Stoxx Europe 600 index closed down 0.9% at 261.24, ending the week 1.3% lower. The Athens General Index sank 3.2% to 797.35, with National Bank of Greece tumbling 9.5%. European stocks took another leg lower in afternoon trading after media reports said a Greek junior coalition party leader announced his party will vote against new austerity measures, expected to reach parliament by Sunday. Euro-zone finance ministers demanded late Thursday that the Greek parliament ratify austerity measures before they approve another aid tranche needed to prevent a default in March. Among other demands, the finance ministers want political leaders of the coalition to provide details of €325 million in additional cuts.
“Markets were overbought and there are concerns over the resistance towards Greece from the euro-zone finance ministers,” said Mike Lenhoff, chief strategist at Brewin Dolphin.
“They don’t trust Greece. Agreeing is one thing, but implementing is another and they want assurance that Greece will live up to the agreement,” said Lenhoff. “If the parliament refuses to approve the measures, Greece will have to leave the euro zone, because they’ll default.”
The negative mood on European bourses was further boosted after a preliminary reading of a gauge of consumer sentiment in the U.S. unexpectedly fell to 72.5 in February from 75 in January. Separately, U.S. data showed that the trade deficit in December widened to a six-month high.
The German DAC 30 index down 1.4% to 6,692.96. The German index closed Thursday at its 2012 high.
Losses accelerated for the French CAC 40 index through Friday, declining 1.5% to close at 3,373.14 as its big banks tumbled. Societe Generale SA sank 7.5%, BNP Paribas was down 4.1% and Credit Agricole SA shed almost 5%.
ASIAN MARKETS
Asian investors are expected to focus on the Japanese economy in the week ahead, with gross domestic product data due and a policy meeting scheduled at the Bank of Japan
Japanese GDP data are slated for Monday, and economists are expecting the figures will show the economy shrank 0.3% in the fourth quarter of last year, according to a Reuters poll, hit by a rising yen and flooding from Thailand that disrupted supply chains.
That would represent a turnaround from the third quarter, when the economy rebounded strongly, helped by reconstruction efforts following last year’s devastating earthquake.
GDP data for Japan will be followed the next day by a Bank of Japan policy decision.
Although the bank has said that it won’t touch interest rates until prices stabilize, it has room to maneuver on offering stimulus to an economy struggling with a strong currency.
Australia will release unemployment figures on Thursday, which will likely be scrutinized closely, given that the Reserve Bank of Australia unexpectedly kept interest rates unchanged last week.
Economists had widely been expecting a quarter-point interest rate cut from the bank, given the weak consumer-confidence backdrop and the country’s relatively high level of interest rates compared to other advanced economies.
Most Asia markets closed lowed Friday after Greece approved a long-awaited austerity agreement, but international backers called for ratification of the reforms before more bailout funds would be released.
South Korea’s Kospi fell 1% and Australia’s S&P/ASX 200 lost 0.8%, while Hong Kong’s Hang Seng Index fell 1.1%, and Japan’s Nikkei Stock Average shed 0.6%. China’s Shanghai Composite added 0.1%
China’s trade surplus widened more than expected in January amid a sharp drop in imports, although analysts cautioned against alarm, saying the data may reflect holiday-related distortions rather than deterioration in underlying economic trends
Currencies
US DOLLAR
The dollar rose against the euro, the British pound and the Japanese yen..
.
EURO-STERLING
On Thursday Euro/Dollar increased with almost 100 pips on Greek debt talks conclusion. The European currency appreciated from 1.3226 to 1.3322 yesterday, matching the positive Interbank sentiment projection at nearly +20%, closing the day at 1.3284. This morning the Euro is trading quietly, moving within yesterday's range for now. On the 1 hour chart the upward channel is still making renewal attempts, while on the 3 hour the upward channel has resumed. Break above the nearest resistance and yesterday's top at 1.3322 may trigger further strengthening of the Euro. Going bellow yesterday's bottom and first support at 1.3226, however, would confirm continuation of the bearish trend, towards next objective downwards 1.3115.
Today's focus is on Germany CPI and HICP, and France and Italy Industrial production, at 7, 7:45 and 9 GMT respectively. Quotes are moving just bellow the close 20 and 50 EMA on the 1 hour chart, indicating slim bearish pressure.
The value of the RSI indicator is negative and calm, MACD is neutral and calm, while CCI has thinly crossed down the 100 line on the 1 hour chart, giving overall all neutral to light short signals.
Technical resistance levels: 1.3322 1.3440 1.3564
Technical support levels: 1.3226 1.3115 1.3000
After some temporary attention to the US, the focus certainly returned to Athens in a very busy week, that left the greenback almost unchanged. Apart from Greek news, we have GDP in the euro-zone and Japan, employment figures in the UK and Australia, and the FOMC Meeting Minutes as the main events lined up this week. Here is an outlook on the major market-movers coming our way.
Last week ECB president Mario Draghi’s remark at the ECS press conference provided a loop hole to contribute to the Greek bailout, by suggesting to distribute profits from Greek bonds to Greece. Meantime Greece is in a vicious cycle while the austerity measures posed by the EU paralyze market activity lowering consumption which in turn produces less tax revenues to cover its growing debt. Will Draghi’s suggestion help the struggling nation?
The dollar firmed against most of the world's major currencies on Friday after European officials rejected disbursing a bailout package to Greece, claiming the debt-ridden country must agree to further spending cuts it wants assistance.
The British pound traded at $1.5734, up from $1.5825 Thursday.
ASIAN CURRENCIES
The dollar bought 77.61 Japanese yen, down from ¥77.67 in the previous session.
The Australian dollar fell to $1.0657 from $1.0791.
The Australian dollar was “capped by dovish headlines related to the [Reserve Bank of Australia’s] quarterly monetary policy statement” and by Australia & New Zealand Bank Ltd.’s decision to hike its variable mortgage rate independently of the central bank, said Sue Trinh, currency strategist at RBC Capital Markets in Hong Kong.
The Aussie traded to a low of USD 1.0740 in our session yesterday, to open at USD 1.0785 this morning with markets buoyed as Greek political leaders appeared to have come to an agreement on terms for the country's bailout.
Chinese CPI has rebounded to 4.5% for January vs a 4.1% the previous month. Due largely to Chinese new year festival effects, this read is significantly higher than market expectations of 4.0%. A read like this could see the PBoC more cautious in its policy easing and could delay a cut to the reserve requirement ratio expected in 2012 for China.
Chinese Trade data is due for release today with Chinese New Year holidays likely to affect figures with export and imports expected to have declined by 6.1% y/y and 8.1% y/y in January.
In Australia the key focus will be the release of the RBA's Quarterly Statement on Monetary Policy at 11:30am today. Focus will be on risks to unemployment along with Fair Value for the Australian Dollar and the further understand Tuesdays no move on interest rates
Commodities
Metals & Energy
Gold futures declined Friday as they tracked other commodities and stock markets lower, and as the U.S. dollar and U.S. bonds caught safe-haven flows from jitters about Greece's deal. Gold for April delivery retreated $15.90, or 0.9%, to $1,725.30 an ounce on the Comex division of the New York Mercantile Exchange. On the week, gold lost 0.9% as well. Doubts surfaced about the deal Greece struck with political parties as European finance ministers demanded a vote on the agreed-upon austerity measures before shipping off any more financial aid to Athens. Greeks started a strike and clashed on the streets in Athens ahead of the vote, expected Sunday
Crude Oil declined Friday after the International Energy Agency cut its outlook for global oil demand, and investors turned jittery yet again on Greece and its debt crisis.
Crude oil for March delivery fell $1.17, or 1.2%, to $98.67 a barrel on the New York Mercantile Exchange. That ended a three-session winning streak for oil, which was enough to secure weekly gains of 0.8%.Earlier Friday, the IEA cut its 2012 estimate for global oil demand to 800,000 barrels a day, versus a prior forecast of 1.1 million barrels a day, citing lower global growth projections. It noted global GDP growth is now forecast at 3.3% for 2012, from the 4% level assumed since September.
“A two-speed outlook prevails — with robust oil demand growth envisaged in the (non-Organization for Economic Cooperation and Development countries) while demand continues to fall across most of the OECD,” the IEA said in its monthly oil market report. OECD member countries are mostly developed nations.
Earlier in the week, the Organization of the Petroleum Exporting Countries also cut its 2012 world oil demand expectations, to 940,000 barrels per day, or 120,000 barrels per day less than its forecast last month, pinning the decision on “recent economic setbacks.”
Sovereign Bond Auctions ( new weekly feature )
Feb 13 10:10 Italy BOT auction
Feb 13 10:10 Norway T-bill auction
Feb 13 10:30 Germany Eur 4.0bn Aug 2012 Bubill
Feb 13 12:00 Norway Details bond auction on Feb 20
Feb 14 09:30 Netherlands Eur 3.0bn-4.0bn Jan 2017 DSL
Feb 14 09:30 Spain 12 & 18M T-bill auction
Feb 14 10:10 Greece 3M T-bill auction
Feb 14 10:10 Italy BTP/CCTeu auction
Feb 14 10:30 Belgium Auctions 3 & 12M T-bills
Feb 15 10:10 Sweden Auctions T-bills
Feb 15 10:30 Portugal Eur 1.5-1.75bn May & Aug T-bills
Feb 16 09:30 Spain Obligacion auction
Feb 16 10.30 UK Auctions 4.5% 2034 conventional Gilt
Feb 16 10:50 France BTA/OATi auction
Feb 16 16:00 US
Announces auctions of 2Y Notes on Feb 21, 5Y Notes on Feb
22 & 7Y Notes on Feb 23
Feb 16 18:00 US Auctions 30Y TIPS
