Financial Crisis

Financial Crisis

IT Fri, Aug 19

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  • 09:00
    After yesterday's market bloodbath, we’re heading for another day of turmoil.
  • 09:00
    Yesterday, markets plummeted around the world with the Stoxx Europe 600 Index down 4.8 per cent in London and the Iseq down 4 per cent and back below the 2,500 mark.
  • 09:02
    The FTSE 100 Index slid 4.5 per cent in London. The Standard and Poor’s 500 slumped 4.5 per cent to 1,140.65 in New York, and the Dow Jones Industrial Average was down more than 400 points for the fourth time this month.
  • 09:04
    The cause of all the turmoil? Fears that the US and euro zone are heading back into recession.
  • 09:06
    Morgan Stanley yesterday published a research note that cut global growth forecasts and criticised policymakers. It warned that the US and euro zone was "dangerously close" to recession.

    The note said: “Recent policy errors – especially Europe’s slow and insufficient response to the sovereign crisis and the drama around lifting the US debt ceiling – have weighed down on financial markets and eroded business and consumer confidence.”
  • 09:07
    And in addition to that, two Federal Reserve officials said the central bank should not act to protect stock investors, and Swedish regulators warned that lenders are unprepared for a freeze in money markets.
  • 09:09
    Where are things this morning? Investors are heading towards core government bonds and gold.
  • 09:10
    European shares are extending losses. The FTSEurofirst index is down 1.25 per cent, the MSCI world equity index is down 1 per cent and the Iseq is already 2.5 per cent down at 2391.34
  • 09:12
    German bund yields are approaching a record low this morning.
  • 09:13
    Some reaction:

    Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London says: "Where we are at the moment, it's clear that the fear factor isn't going away. No one is holding the bonds for reward but to try and escape the risk associated with other assets."
  • 09:15
    The current state of play across Europe: At 8.59am in London, the MSCI All-Country World Index was down 1.5 per cent, the Stoxx Europe 600 Index had already lost 2.5 per cent, on top of yesterday's 4.8 per cent plunge, and S&P 500 Index futures were down 1.6 per cent.
  • 09:16
    Safe haven gold has topped $1,850 an ounce for the first time.
  • 09:17
    Turkish stocks have slumped for a second day, with the main ISE National 100 index down 3.8 per cent to 49,992.88 at 10.56am in Istanbul. All 100 shares on the index have fallen.
  • 09:20
    In Stockholm this morning, Swedish central bank deputy governor Lars Nyberg has been talking about the future of the euro zone.

    He thinks there is a great risk that European leaders won't be able to stem the crisis.

    Some quotes from him:

    "There is still a great risk of this process failing. If it's so difficult to solve small problems, because Greece is economically a very small problem in Europe, what will happen if they have to solve problems in Spain or in Italy? I think that's a fair question from the market."

    ""The debt crisis I think is largely political and I see no credible solutions."
  • 09:25
    On the Irish market, the Iseq has pulled back to a decline of 1.9 per cent, rising to 2407.73.

    Currently, there are only two stocks showing gains: Irish Life & Permanent, at 3.2 cent, or 6.7 per cent higher; and Bank of Ireland, which is trading at 9.2 cent, a 1 per cent gain for the stock.
  • 09:26
    At the other end of the scale, Kingspan is currently down 5.3 per cent, trading at €5.55, with United Drug, Smurfit Kappa and Aryzta all more than 3 per cent lower this morning.
  • 09:27
    AIB has lost 1.5 per cent so far this morning, trading at 6 cent
  • 09:29
    In London, Lloyds Banking Group is down 7.7 per cent, the worst performer on the FTSE 100. Barclays and Royal Bank of Scotland are down 5.9 per cent and 6.2 per cent, respectively.
  • 09:31
    In Hong Kong, short-selling stayed at a high level, at more than 11 per cent of total turnover by midday.

    The Hang Seng Index closed down 3.08 per cent for the day. It's down 1.1 per cent on the week at 19,399.92.

    The China Enterprises Index finished 4.12 per cent lower on the day, and and 1.7 per cent down on the week at 10,277.38.

    The Shanghai Composite Index lost 0.98 per cent on the day and 2.3 per cent on the week at 2,534.36. That is the index's fifth weekly loss in a row.
  • 09:46
    The Topix Core 30 Index, which is a measure of Japan's biggest companies, hit a record low today. A stronger yen and concern over weakening economic growth are being blamed for the slump.

    Japan's largest brokerage, Nomura Holdings, plunged to a 36-year low, losing 3.7 per cent.

    Electronics firm Panasonic declined 1.6 per cent to 782 yen, its lowest level since 1980.

    Rival Sony hit its lowest price since February 2009, slumping 3.2 per cent to
    1,594 yen.
  • 09:52
    Oil prices are down this morning. Brent crude was trading at $105.75 a barrel by 9.29, but had hit a session low of $105.06.
  • 09:55
    Spain is planning to unveil some austerity measures later today, with savings of around €5 billion expected. The country's debt risk premium on 10-year bonds against German bunds was around 293 bps today; it has fallen from euro-era highs over 400 basis points this month as the ECB bought up its bonds.
  • 09:57
    The Iseq is currently at 2411.25, a 1.8 per cent fall over the session.

    Irish banks are leading the way, with Irish Life & Permanent AIB and Bank of Ireland all trading higher.
  • 10:00
    IL&P is up 10 per cent at 3.3 cent, AIB was up 4.54 per cent to 6.9 cent and Bank of Ireland rose 1.1 per cent to 9.2 cent
  • 10:01
    Biggest losers at the moment are Petroceltic, down 9.8 per cent, and Kingspan, down 4.1 per cent
  • 10:06
    Tthe FTSEurofirst index is down 2 per cent this morning, giving some evidence the short selling ban imposed on some of the region's stock markets last week has had little impact
  • 10:27
    The cost of protecting European financial debt has surged to a record today, with the Markit iTraxx Financial Index of credit-default swaps linked to senior debt of 25 banks and insurers increasing as much as 12 basis points to 243.

    By 10am, it was trading at 240 basis points
  • 10:31
    Meanwhile, Russian stocks are headed for the lowest close in 11 months. The Micex Index fell 2.8 per cent to 1,412.2 by 12.04pm in Moscow, nearing its lowest level since September 28th.
  • 10:32
    Julian Rimmer, director of emerging-market sales at CF Global Trading in London says:

    "SOS calls from markets have fallen on deaf ears at central banks in Europe and the US who, to be fair, have a limited range of options at their disposal."
  • 10:37
    A quick update on the Iseq: the market has slipped 2.5 per cent, to 2402.92.
  • 10:38
    Top gainer is IL&P, which is 10 per cent higher at 3.3 cent.
  • 10:38
    That's followed by AIB at 6.9 cent, or 4.5 per cent higher.
  • 10:41
    Bank of Ireland is trading at 9.3 cent, or 2.2 per cent up on the session.

    There's still a lot of red at the opposite end of the market though. CRH, Kingspan, Greencore and Elan are all lower.
  • 10:44
    Around Europe,, the MSCI All-Country World Index was down 1.2 per cent at
    10.28am in London. The Stoxx Europe 600 Index lost 1.9 per cent, after declining as much as 3.6 per cent in the session. Standard and Poor's 500 Index futures slipped 1.3 per cent.

    Oil is down 2 per cent. Gold topped $1,850 an ounce for the first time.
  • 10:47
    A note from NCB Research says growth will slow, but shouldn't collapse.

    "As we have said numerous times over the last number of weeks, the focus on fiscal consolidation in a large number of advanced economies is a policy error which would drive growth lower. Furthermore, with no long term viable solution in place for the Euro area problems, we noted that the rally in risky assets would not be sustained. The absolute level of risk free yields is likely to grind lower in this environment.

    "This is not 2008 and should not become 2008. Growth is set to slow, but it should not collapse. It is worth noting that credit spreads are widening and funding pressures are increasing. A financial collapse would be needed to drive us to anywhere near the 2008 outcome. This should not happen and the Euro area policymakers need to be on alert. Conditions can deteriorate quickly."
  • 11:10
    Stocks are still declining. The Stoxx 600 fell 2.7 per cent to 220.69 at 10.52am in London, on course for the lowest close since July 2009. The gauge has lost 24 per cent from this year's peak in February
  • 11:32
    Options gauges are climbing too. The VStoxx Index, which measures the cost of Euro Stoxx 50 Index options, has surged 6.8 per cent to 50.38, the highest level on a closing basis since January 2009. Hong Kong's HSI Volatility Index jumped 31 per cent to 40.18.

    The India VIX, which gauges the cost of buying protection against losses in the S&P CNX Nifty Index, advanced 9.5 per cent to 30.07.

    Sebastien Krol, a director at Mariana Capital Markets had this to say:

    "There were lots of buyers of put protection. That's really a measure of fear in the
    market. If the market goes down and people are buying puts, that's going to increase the downside volatility and that suggests there is some panic."
  • 12:03
    Time for another update: The Stoxx 600 was down 2.7 per cent to 220.48 at 11.42am in London. The Iseq is 2.3 per cent down at 2396.32.
  • 12:05
    At the moment, there are only three stocks showing any gains on the Duiblin market - IL&P, AIB and Bank of Ireland. The rest are either flat or off betwen 0.2 per cent and 33.3 per cent. Balmoral International Land is currently languishing at the bottom of the index.
  • 12:10
    The FTSE100 is currently down 2.75 per cent, while the DAX is 3.89 per cent off.
  • 12:14
    Futures for the S&P 500, the Dow Jones and the Nasdaq 100 are all down too, by between 1.4 and 1.5 per cent.
  • 12:15
    Guest I must say, I am quite enjoying this. I know many people will give me the usual bleeding heart capitalist "but this is all our pensions"...."how will we fund our public sectors if we have no money" but the anarchist in me is delighted. A policy of measuring wealth on borrowed money and then market shocks when the line of credit is over is not a system. David Williams had an excellent piece about this in which he describes it as nothing more than gambling. The real market is the value of things and the sooner we get back to that the more propping up. Finland and Germany should not be giving money to the Irish unemployed and the public sector. No deficiti = no borrowing. The sooner the reset button is pressed, the calmer the markets will be
  • 12:23
    European bank shares have been knocked to two-year lows but bargain hunters are not biting yet. Investors and analysts are warning that with regulators tightening up the rules, bank profits may not recover to pre-crisis levels anytime soon.

    Reuters is quoting an unnamed fund manager on the topic:

    "You might say banks were good value now, but they might still be (at that level) in five to 10 years time..

      "That visibility is what investors are lacking in order to get excited about the sector because they cannot see what the upside trigger is."
  • 12:25
    A note from Leigh Goodwin, Citi analyst, on bank shares:

    "Current prices suggest that the market is discounting much more than a moderate, medium-term earnings downgrade driven by weaker revenues.

    "The market now fears widespread, enforced and dilutive recapitalisations lie ahead for the banks sector."
  • 12:55
    Austria has come up with a plan to defuse tensions over Finland's attempts to secure cash backing on loans it makes to Greece. Austria, the Netherlands and Slovakia have said they also want collateral on their loans, but the move could undermine the bailout deal agreed for Greece.

    The plan, proposed by finance minister Maria Fekter, would link collateral demands to how much protection each country's financial sector will secure in a parallel private sector bailout for Athens. Austria, whose banks and insurers have low exposure to Greece, would get collateral on its sovereign loans while heavily exposed countries like Germany and France would not. 

    Ms Fekter said:

    "What Finland negotiated means that all of us have to pay more so that Finland gets collateral.

    "I know that if everyone demands collateral then (the rescue package for Greece) cannot be financed. That is why I proposed... that we combine the private sector involvement - the protection of the private sector - with the protection via collateral."
  • 12:57
    The European Commission, meanwhile,  has said it will be up to euro zone states to decide if the deal granting Finland collateral on loans to Greece conforms with conditions of the region's bailout for Athens.
  • 13:00
    The FTSE just briefly broke through the 5000 mark. It's back down to 4996 now, a 1.9 per cent  fall over the session.
  • 13:06
    The Iseq has pulled itself back to 2414.46, a 1.6 per cent decline over the session.

    Irish banking shares are still the top gainers - IL&P is up 3.33 per cent to 3.2 per cent, giving up some of its earlier gains. Bank of Ireland has gained 3.3 per cent to 9.4 cent, on high volumes. AIB is up 3 per cent to 6.8 cent.

    A few other shares have joined the gainers this afternoon: Providence is trading 2 per cent higher at €2.55, while Elan has chaken off its earlier losses to trade at €7.07, up almost 0.9 per cent. Kenmare, Total Produce, Paddy Power and Glanbia are also trading slightly higher.
  • 13:09
    FTSE 100 is now at 5002.98.
  • 13:10
    The DAX, meanwhile, is at 5421.90, 3.2 per cent lower, and the CAC is at 3,031.91.
  • 13:14
    US 30-year Treasury bonds have fallen by a point. It's likely due to investors taking profits profits following yesterday's dramatic rally. The bonds were last down 26/32 in price to yield 3.46 per cent, up from 3.42 per cent late yesterday.
  • 13:31
    We welcxome your comments on the current market crisis.
  • 13:32
    Or "welcome" even.
  • 13:34
    Things are looking slightly more positive for the FTSE 100 at the moment. It's climbed further above 5000, and is currently at  5020.58
  • 13:35
    The DAX is still 2.55 per cent down at 5459.17.

    In Dublin, the Iseq is at 2421.64, a 1.3 per cent decline over the session.
  • 13:40
    The European Commission has had something to say on the notion of euro bonds. A spokesman said it was studying the feasibility of euro zone bonds and any proposed legislation on common debt for the single currency area would
     only come later, if at all.
  • 13:40
    Kieran Magennis Are we witnessing the end of theoretical assets?
  • 13:40
    Ronan With the SEC wondering whether to investigate S&P owing to ratings it allocated to subprime lenders during the original crisis, what happens when (not if) the Ratings Agencies lose their credibility?
  • 13:49
    Kieran Magennis Who would you accept an IOU from now? (including paper money). Seems everyone is hunting for save havens, but then realising that the scale of counterparty risk and currency debasement means that the only truly safe haven is to take physical possession of assets such as gold.
  • 13:51
    It seems many investors are thinking the same way on safe havens. Gold has jumped 1.3 per cent to $1,846.30 an ounce. 

    Oil is down in New York, falling below $80 a barrel for the first time in more than a week. Brent crude traded at a record premium to US prices.
  • 14:06
    Attention is turning to the US markets now.

    US stock futures resumed declines after trimming losses earlier.  S&P 500 futures expiring in September dropped 1.5 per cent to 1,126.9 at 8.46am in New York after earlier slumping as much as 2.3 per cent. Dow Jones Industrial Average futures retreated 151 points, or 1.4 per cent, to 10,867 today.   

    Crude oil futures declined as floor trading began in New York. Crude for September delivery fell 45 cents, or 0.5 percent, to $81.93 a barrel at 9.01am on the New York Mercantile Exchange.
  • 14:07
    Erik Ogard, director of multi-strategy investments at Russell Investments, which oversees $163.4 billion, had this to say on Bloomberg Television:

    "We have a fear-based, emotional-based market right now. There are real economic things to be worried about. However, it's the degree of the reaction that we think might just be a little overdone."
  • 14:26
    According to Bloomberg, the  Federal Reserve Bank of Cleveland president Sandra Pianalto has said weak economic growth warrants a pledge to hold interest rates near zero until mid-2013.    

    "With my diminished outlook for economic growth, and my outlook for inflation to soon fall back to 2 per cent, I was in favour of providing additional support to the recovery at last week's FOMC meeting. Under the circumstances, I think it made sense to take the unprecedented step of including that conditional guidance in our press statement," he said. 

    Pianalto  was speaking at the Community Bankers Association of Ohio
     Annual Convention.
  • 14:28
    And the dollar has extended declines against the Swiss franc. It dropped 1 per cent in early New York trade as investors seek out safe havens. 

    The dollar fell as low as 0.78540 Swiss franc on trading platform EBS and last traded at 0.7861. Broad weakness in the dollar helped push the euro to a session high of $1.44250 on EBS.
  • 14:34
    Spain is also due to release the details of its new austerity measures. It's a tightrope walk for the government. On one hand it has to show it means business to calm market fears that it may need a bailout; on the other, it has to keep voters happy at a time when  prime minister Jose Luis Rodriguez Zapatero's PSOE party is dragging in the polls, shunned by voters suffering the effects of last year's austerity drive which included wage cuts.
  • 14:36
    Finance minister Elena Salgado has said the government wouldn't have scrapped a tax on assets in 2008 if it had know how deep the crisis was going to be. But apparently the cabinet didn't discuss bringing the levy back at its meeting today.    

    "If we had known about the depth of the crisis we would not have eliminated the wealth tax when we did. In any case, it mainly affected the middle classes which meant it doesn't  serve the purposes for which it was designed."
  • 14:45
    As expected, US stocks opened lower. The S&P 500 Index was down 8.72 points, or 0.76 per cent, at 1,131.93.
  • 14:47
    The Dow Jones industrial average last traded at 10,944.94, a fall of 0.39 per cent. 
  • 15:05
    The S&P 500 slumped 0.8 per cent to 1,132.09 at 9.51am in New York. The benchmark has fallen 4 per cent since August 12th. If it keeps going like this, it will be heading for the fourth straight week of losses.

  • 15:36
    US stocks have reversed earlier losses as the dollar slips to a record low against the yen. THE Dow Jones is now up 0.10 per cent, the S&P 500 up 0.43 per cent and the Nasdaq up 0.76 per cent. It's not much of a bounce but the rally will still be welcomed
  • 15:39
    Japan's top currency policy bureaucrat said today the country does not plan to intervene much in the foreign exchange market but said there was no reason for investors to treat the yen as a "flight-to-safety" currency.

    In an interview with the 'Wall Street Journal', Takehiko Nakao, vice finance minister for international affairs, said the yen's sharp rise did not reflect economic fundamentals and blamed "an element of speculation" for its strength.
  • 15:46
    Eamon Maybe this is a warning to us all (particularly bankers, speculators etc.) that we all need to revise down our expectations about how much money we actually make or can make off our world. If those who make millions revised down profit margins etc. it might help the markets to stabilise. We cannot continue to expect record profits every month of every year!!!
  • 15:49
    More bad news for homeowners in Ireland with the news that EBS is to increase its Standard Variable Rate by 0.25% from 4.68% to 4.93% from October
  • 16:00
    European markets haven't followed US stocks higher. In London, the FTSE 100 is currently down 0.14 per cent while in Germany and France the DAx and CAC 40 are down 1.17 per cent and 0.86 per cent respectively. In Dublin, the Iseq index of leading shares is down 0.6 per cent.
  • 16:04
    Here's a scary thought...US tech firm Apple is now worth as much as the 32 biggest euro zone banks following the sharp fall in banking shares and the steady rise in Apple's valuation.
  • 17:35
    In Dublin the Iseq has closed 1.4 per cent lower. Elsewhere, The FTSE 100 lost over 1 per cent while in Germany and Frane the Dax and the CAC fell by 2.1 per cent and 1.9 per cent respectively