I can’t be alone in doing a bit of head scratching were Italy’s involvement in the proposed IMF lending is concerned, it’s reminiscent of the scene in Donnie Brasco were Jonny Depp gives the gangster Lefty, played by Al Pacino, money as a Christmas gift and Lefty gives the same in return, but takes some off.
Out of the €150 billion committed to the IMF bailout fund so far (still a bit shy of the estimated €3 trillion required to back stop all the debt) France will stump up €31.4 billion, and Italy will need to provide €23.5 billion, presumably Ireland will simply kiss the Blarney Stone..
In Beijing the IMF’s former managing director, Dominique Strauss-Kahn, castigated the euro area’s leaders for their poor leadership and said the zone had only a few weeks to provide solutions. He’s quite right in pointing out what many market commentators have focused on for months, it’s “rollover time” early in the New Year, but unlike the lottery rollovers there’s no jackpot in sight the lucky winners in this game…
Yet another crisis summit has already been pencilled in for late told the European parliament’s economic committee that €230bn of bank bonds, up to €300bn of sovereign bonds and more than €200bn of collateralised debt obligations will all become due in the first three months of 2012.
Now the nationalistic tub thumping, regarding the UK prime minister’s unilateral veto, has evaporated the reality begins to bite from several angles. Perhaps Cameron woke up and smelt the coffee this morning in the Downing Street kitchen re-modelled at £35k tax payer expense. Several leading ‘world-class’ businessmen, (a title not on the unelected premier’s c.v.) suggest that up to 3 million jobs could be at risk if Britain does not stay at the heart of Europe.
In a letter to the Telegraph, (ironically the Tory newspaper in the UK), a group of 20 businessmen urged the government to seize opportunities to “re-engage in the decision-making process” in the European Union, arguing that Europe’s future was vital to Britain’s economic interests. Signatories include Virgin boss Sir Richard Branson, British Telecom chairman Sir Mike Rake, and Sir Martin Sorrell, chief executive of advertising group WPP. Roland Rudd, the chairman of Business for New Europe, former EU trade commissioner Lord Brittan, and Sir Stephen Wall, Tony Blair’s former adviser on Europe, have also signed the letter.
A fascinating document was doing the rounds within the more iconoclastic realms of the investment community over the past few days illustrating the depth of the UK’s overall debt. When every last of the splendid English pound debt is added up, including brushed under the carpet, off the two ply double strength quilted balance sheet, the debt versus GDP ratio is worse than the previous worse information available. At close on 1000% the UK is all alone as the gold medal winning sovereign basket case. The fact that France was quite right that the UK deserves a downgrade was spot on, however, make no mistake, these are some very scary numbers. Here’s a link to the PDF document, the UK tale of the tape is illustrated on figure 4. So the UK isn’t going to chip in for a bail out, strange that when you consider that the UK is the elephant in the room in Europe whilst the USA still remains as the caged mammoth in the cellar..
http://oversight.house.gov/images/stories/Testimony/12-15-11_TARP_Sanders_Testimony.pdf
Rumours also persist that the USA may have to consider bequeathing (lend sounds so temporary) up to $1 trillion to the IMF in order to prevent the European banking system from a disorderly collapse. That may be a difficult ‘sell’ in the USA congress and to the general public with an election this year and the USA experiencing its own austerity measures.
Source: FX Central Clearing Ltd, (FXCC BLOG)
http://blog.fxcc.com/the-word-contagion-re-appears-in-the-lexicon-of-the-technocrats-as-does-dominic-strauss-kahn/
Market Commentary by FXCC - Confidence Is Contagious. So Is Lack Of Confidence
German business confidence rose marginally for the second month in a row in December, perhaps suggesting that Europe’s largest economy may be weathering the region’s debt crisis.
The Ifo institute’s business climate index rose to 107.2 from 106.6 in November, the Munich-based institute has reported this morning. Economists anticipated a small drop to 106, the median forecast of 36 economists in a Bloomberg survey predicted. However, a half percent increase in such numbers is often regarded by statisticians as statistically irrelevant.
Today’s reading possibly illustrates that Germany is shielded from the worst impact of Europe’s debt crisis as gauges of manufacturing and services activity also increased. German consumer confidence will hold its gains in January as unemployment at a two-decade low boosts the economic outlook, market research company GfK SE reported today.
However, Germany and its companies won’t escape the continual crisis unscathed. The German economy will grow at the slowest pace in three years in 2012 as the turmoil in Europe will hurt demand in the area’s largest market, the Bundesbank said yesterday. The Bundesbank has forecast that economic growth will slow to 0.6 percent in 2012 from 3 percent this year before recovering to 1.8 percent in 2013. The ECB has cut its 2012 euro-area wide growth forecast this month to 0.3 percent.
Market Overview
Futures in the Standard & Poor’s 500 Index climbed 0.85% percent at 10 a.m. in London. The Stoxx Europe 600 Index rose 0.6 percent after earlier dropping 0.5 percent. Spain’s government bonds stayed higher as the nation sold 5.64 billion euros of Treasury bills. The yield on the 10-year U.S. Treasury note advanced five basis points to 1.86 percent, with the dollar weakening against all but one of its 16 most- traded peers. Oil advanced 1.3 percent and the GSCI index of 24 commodities gained for a second day.
Spain’s 10-year bond yields were six basis points lower at 5.11 percent and two-year note yields were seven basis points lower at 3.31 percent. The nation sold 5.64 billion euros of three-month and six-month bills, compared with a maximum target of 4.5 billion euros the Treasury had set for the sale. Information is not available as to whether or not the ECB bought.
Oil for January delivery climbed up by as much as 1.4 percent, up to $95.15 a barrel. U.S. crude inventories dropped 2 million barrels last week, according to the median of seven analyst estimates before today’s weekly Energy Department report.
Gold climbed, finally trimming its first quarterly decline since 2008, as the euro advanced after European finance ministers boosted their anti-crisis efforts by pledging extra funding to the International Monetary Fund. Immediate-delivery bullion rose 0.5 percent $1,602.45 an ounce by 9:39 a.m. in London. The February-delivery contract climbed 0.4 percent to $1,603.10 on the Comex in New York.
Bullion fell 6.6 percent last week as the dollar rallied against the euro. Spot gold tumbled to $1,560.97 on Dec. 15, the lowest price since Sept. 26, and 19 percent below the Sept. 6 record of $1,921.15. While it is 13 percent higher this year, the metal has lost 1.2 percent this quarter.
Market snapshot at 10:45 am GMT (UK time)
Asia Pacific markets bounced back slightly in early morning trade. The Nikkei closed up 0.49% the Hang Seng closed up 0.06% and the CSI closed down 0.31%. The ASX 200 closed down 0.18%. European indices are positive, the successful Spanish bond yield and increased business confidence in Germany helping to fuel the mood of overall optimism in the morning session. The STOXX 50 is up 0.92%, the UK FTSE is flat, the CAC is up 0.89% and the DAX is up 0.8%. The SPX equity index future is up circa 0.85%.
Source: FX Central Clearing Ltd, (FXCC BLOG)
http://blog.fxcc.com/confidence-is-contagious-so-is-lack-of-confidence/
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