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Moody’s Cuts Italy Rating Following S&P
5 October, 2011
Italy’s credit rating was cut by Moody’s Investors Service for the first time in almost two decades on concern the government will struggle to reduce the region’s second-largest debt amid chronically weak growth.
Moody’s lowered Italy’s rating three levels to A2 from Aa2, with a negative outlook, the New York-based company said in a statement today. The action comes after Standard & Poor’s downgraded Italy on Sept. 20 for the first time in five years. Italy was last cut by Moody’s in May 1993.
For article GO HERE
World markets dip despite Bernanke intervention hopes
5 October, 2011
Concern about Greece after politicians delayed a second bailout to the debt-laden nation weighed on equities even as investors drew hope from Federal Reserve chief Ben Bernanke's promise that the US central bank is ready to act to save the world's largest economy.
In Europe, the Stoxx 600 Index closed the day with a 2.8 per cent drop.
Shares of Dexia SA plunged to a record as European finance ministers were considering making banks take bigger losses on Greek debt and postponed a crucial aid payment to Athens until mid-November.
Greek Finance Minister Evangelos Venizelos said the country had enough cash to cope until then and insisted that euro zone ministers were not preparing for a Greek default, despite the ominous delay.
"There is no discussion of default," Venizelos told a news conference on returning to Athens on Tuesday, according to Reuters.
In afternoon trading in New York, the Dow Jones Industrial Average dropped 1.09 per cent and the Standard & Poor's 500 Index fell 0.62 per cent. The Nasdaq Composite Index was up 0.33 per cent.
Fed Chairman Ben Bernanke said the central bank's policy committee was ready to take more measures to boost an economy "that is close to faltering."
"The Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability," Bernanke told the Joint Economic Committee of Congress.
As a result, the euro rose 0.7 per cent to US$1.3267. It gained 1 per cent to 101.99 yen.
"Bernanke did hold out the possibility of further Fed action," Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG in New York, told Bloomberg News.
"It's largely a reiteration of what he's said before, but it'll reaffirm that they're not out of bullets. People are very short the euro and there is some short-covering as well."
The greenback strengthened 0.3 per cent to 76.88 yen. The US currency slipped 0.05 per cent against a basket of major counterparts.
US Treasuries fell as Bernanke's comments raised the spectre of inflation which erodes the value of fixed-income assets. Yields on 30-year bonds rose five basis points to 2.78 per cent at 1.16pm in New York, according to Bloomberg Bond Trader prices.
Further clues on the strength of the economy will come on Friday when the Labor Department releases monthly employment figures. Economists in a Reuters poll forecast a minor gain of 60,000 jobs for September.
Goldman Sachs Group has lowered its global growth forecast for this year and next, forecasting recessions in Germany and France.
Think the Economy's Bad? 'You Haven't Seen Anything'
5 October, 2011
Market pessimism is reaching a fever pitch, fueled by increasing belief that global policymakers either are powerless or inept when it comes to controlling the various headwinds confronting the economy.
With a bloody third quarter coming to an end and hopes that the final three months of the year will live up to their reputation as the market's best, now might be the time when confidence would be on an upswing.
But some of the market's top thinkers are releasing a chorus of dour predictions that, while allowing for the chance of a mild rally as 2011 closes, otherwise believe there is little reason for hope.
Politicians under pressure as fear mounts over second credit crunch
On the eve of another Greek general strike, bank share prices were sent tumbling across Europe
On the eve of another Greek general strike, bank share prices were sent tumbling across Europe
4 October, 2011
Pressure to inject fresh capital into Europe's weakest banks mounted today as the chancellor, George Osborne, and officials in Brussels united in efforts to prevent contagion from the deepening Greek sovereign debt crisis.
Amid fears that €3.4bn (£2.9bn) of exposure to Greek debt would bring down Franco-Belgian bank Dexia, tensions were rising across the banking sector and pressure mounted on the European Central Bank to be more generous in loans to banks to prevent a rerun of the 2007 credit crunch.
The gloom that has lingered over the banking industry since August deepened further as Germany's biggest bank, Deutsche Bank, warned it would miss its profits target and the cost of insuring major US banks against default reached levels last hit in October 2008.
The share prices of many banks were tumbling as the chancellor and Anders Borg, the Swedish finance minister, urged colleagues to prop up banks with public funds, despite fierce resistance from the French who insist Europe is not at risk.
For article GO HERE
Greek crisis: the blood-letting goes on
Financial markets are in a 'vortex of fear' - and the prescribed solution to Europe's debt crisis harks back to the blood-letting performed by doctors of old
Another day, another day of mayhem in the financial markets.
Shares across Europe are taking a thumping, the euro is again under severe downward pressure on the foreign exchanges, investors are once again fleeing to the safe havens of gold and the dollar.
The economic news is not universally weak, with a pickup in vehicle sales in the US suggesting that consumer demand in the world's biggest economy is holding up relatively well. The price of Brent crude looks set to fall below $100 a barrel, reducing the costs of doing business and boosting real incomes. Even so, it's hard to argue with Michael Derks, chief strategist of FxPro, when he says markets are in a "vortex of fear".
Why is that? Well, the trigger for today's sell-off was the deepening crisis at the Franco-Belgian bank Dexia, which is in so much trouble that a major restructuring now looks inevitable. The fear is that it may not be the last bank to run into problems over the coming months as Europe's sovereign debt crisis unfolds.
There is, though, more to it than that. At last month's annual meeting of the International Monetary Fund in Washington, eurozone policymakers came under significant pressure from the US, the UK and the big emerging countries to sort out the debt crisis without delay. George Osborne talked of there being six weeks to save the euro.
But if markets were expecting this week's conclave of eurozone finance ministers to display a real sense of urgency, they were seriously mistaken. The decision on whether Greece will get the next tranche of its bailout money has been delayed until mid-November so that the troika of the European Union, the European Central Bank and the IMF can decide whether Athens has met the conditions for receiving financial help. Not for the first time, Europe's politicians are one or two steps behind the markets.
An optimist might say that a short delay will help Europe to put together a plan to boost the firepower of the European Financial Stability Facility, the €440bn (£387bn) fund agreed at the July summit of EU leaders, but which is already seen as inadequate to cope with a problem that has spread and intensified over the past three months. The time will also be used to prepare the markets for an even bigger writedown in Greece's debts, which will need to be well in excess of 50% to make the country's debts viable.
A pessimist would say that the real reason the markets are tanking is because the solution to Greece's problems is proving counter-productive. Austerity is killing growth, adding to the deficit, raising concerns about a messy default, and prompting fears of a domino effect across southern Europe.
Charles Dumas, of Lombard Street Research, put it well when he described the approach as akin to the blood-letting prescribed by doctors in days of old. It is an entirely appropriate image. The specialists from Washington, Brussels and Frankfurt arrive in Athens. They see a patient who looks decidedly sickly. They go into a huddle and decide that the ill humours can only be dispelled by the removal of a sufficient quantity of blood. When the treatment doesn't work, they repeat it.
Medical science has moved on. Economics, it would appear, has not.
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