Financial Crisis

Financial Crisis

IT Mon, Aug 8
 

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  • 10:17
    Good morning. It looks like being another excitable day on the markets as the ECB begins buying Italian and Spanish bonds and investors react to Standard & Poor's downgrading of the US's credit rating on Friday.

    Asian shares closed sharply lower this morning while most European markets opened in negative territory. European markets rallied briefly as the ECB's purchasing of government bonds got under way with the bond yields on Italian and Spanish 10-year bonds sliding back from the Euro-era highs seen last week. However, most shares have since retreated again.

    We'll be bringing you all the latest news on the turmoil as world leaders seek to avoid a new global recession. Please feel free to send us your comments.
  • 10:18
    The G20 has issued a statement today pledging to take "all necessary measures to support financial stability, growth and liquidity in a coordinated manner.

    "We will remain in close contact through the coming weeks and cooperate as appropriate, ready to take action to ensure financial stability and liquidity in financial markets," the G20 said.
  • 10:30
    Ireland may have hit the headlines late last year due to the country's economic woes but it's something of a bit player now. Nonetheless, what happens overseas will have a major impact on our future prospects. My colleague Simon Carswell has this excellent analysis on how the current turmoil could affect our recovery. Read it here: http://www.irishtimes.com/newspaper/world/2011/0808/1224302025911.html

    Meanwhile, UCD economist Morgan Kelly, the man nicknamed 'Dr Doom' due to his warnings on the Irish economy, was at the Kilkenny Arts Festival at the weekend where he delivered the Hubert Butler Lecture. Miriam Lord was there to hear the professor's dire gospel and her report is here: http://www.irishtimes.com/newspaper/world/2011/0808/1224302024015.html

    The full audio of Kelly's talk is here: http://soundcloud.com/kilkennyartsfestival/hubert-butler-lecture
  • 10:51
    World stocks are racking up more losses today as investors continue to worry about a "double-dip" recession. European share are now down 1.5 per cent after earlier putting in gains on the ECB action to take the heat out of the spreading euro zone debt crisis.
  • 11:14
    The ECB's bond-buying plan seems to have had limited success. In London the FTSE 100 index is down 1.9 per cent, Germany's DAX index is down 2.4 per cent, and France's CAC 40 is down 1.8 per cent. The Iseq is currently down 2.6 per cent or 65.23 points at 2441.25
  • 11:38
    Yields on Irish bonds are lower this morning, with the 10-year yield down to 10.22 per cent. Borrowing costs for Italy and Spain are also falling with the Italian 10-year government bond at 5.35 per cent, from 6.189 per cent on Friday and the Spanish 10-year bond at 5.3 per cent from 6.271 per cent.
  • 11:55
    The Swiss franc has strengthened to a record high against the dollar as concern continues and investors seek safer assets. The franc has advanced 0.9 per cent to 76.08 centimes per dollar and strengthened 0.9 per cent to 1.0836 per euro
  • 12:10
    Following Standard & Poor's credit rating downgrade on Friday, Moody's has today repeated a warning it could downgrade the US before 2013 if the economic outlook weakens significantly. However the agency said it saw the potential for a new deal in Washington to cut the budget deficit before then.
  • 12:18
    Some of Italy's top business leaders have signed a newspaper petition offering to buy domestic government bonds to help the country avoid financial disaster as the euro zone debt crisis spreads. "If Italy needs our help, we're here," said the appeal, signed by the chief executives of some of Italy's biggest companies, including tyre maker Pirelli, oil and gas group Eni and luxury shoemaker Tod's.
  • 12:41
    Markets update: The FTSE 100 is down 1.8 per cent, Germany's DAX is down 2.9 per cent, France's CAC Index has dropped 2.5 per cent, the Dublin market is down 2.4 per cent and the Greek stock market is down 4.5 per cent. Spain's IBEX 35 Index has slipped 0.3 per cent, while Italy's FTSE MIB Index slid 0.6 per cent. Both Spanish and Italian gauges jumped more than 4 per cent earlier today after the ECB's bond-buying plan began.
  • 13:09
    m ward Who funds the ECB? I suspect member countries? G7 Ministers now saying that investors will not be asked to take pain of a 'default ' again? So institutional investors - no pain. Banks all gain . Who pays - ordinary person and banks cant even trade.?? Not until national states regulate banks - ie more specific condition about bank restructuring in nationla economies attached t any bail out deal - mergers of banks and levies on banks so that banks pay their own way out - this is beginnign to hit germany now - and I think angela merkel should have insisted on bank levies and more stringent condition as to bank restructuring before giving them a cent.
  • 13:17
    Minister for Finance Michael Noonan says the ECB's intervention today "seems to be working" as borrowing costs for Italy and Spain have fallen. Speaking on RTÉ radio, Mr Noonan said the Government is monitoring the situation in the markets very closely. He said there was nothing directly the Government can do but said that Ireland was "reasonably well positioned" given the recent interest rate reduction.
  • 13:28
    Italy's opposition has accused prime minister Silvio Berlusconi of surrendering sovereignty to the European Central Bank after he pledged to speed up reforms in return for help in facing a dangerous debt crisis. Antonio Di Pietro, head of the Italia dei Valori (Italy of Values) party, said Berlusconi had been "dragged by the ear by the EU and international economic institutions" to the news conference where the measures were announced on Friday.
  • 14:02
    Oil prices are continuing to fall with Brent Crude down more than $4 a barrel to about $106 due to the current economic uncertainty. Oil is down around 7 per cent this year compared with a rise of 15 per cent last year, swinging between a high of $114.83 a barrel and a low of $82.87, and about 43 per cent lower than the all-time high of $147.27 touched in 2008.
  • 14:39
    Wall Street has just opened and not surprisingly, stocks have tumbled following S&P's downgrade on Friday. The Dow Jones industrial average dropped 227.13 points, or 1.98 per cent at opening to 11,217.48. The Standard & Poor's 500 Index fell 20.65 points, or 1.72 per cent, to 1,178.73 and the Nasdaq Composite Index lost 84.81 points, or 3.35 per cent, to 2,447.60.
  • 15:05
    The price of US 10-year Treasury notes has risen a point as stocks followed indexes around the world lower. The 10-year Treasury note was last trading 1-3/32 higher in price and yielding 2.44 per cent, down from 2.57 per cent late on Friday.
  • 15:34
    And the decline continues on Wall Street...The S&P 500 index is now down 3.2 per cent while the Dow Jones is down 2.67 per cent. The tech heavy Nasdaq is down by 3.4 per cent.
  • 15:39
    Standard & Poors has downgraded 10 of the 12 US Federal Home Loan Banks i.e. Fannie Mae and Freddie Mac from AAA to AA+. Statement says: "The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government."
  • 15:52
    Investors have not been calmed by the overnight moves by the G7 finance ministers and the ECB. The Vix, as the Chicago Board Options Exchange Volatility Index is known, advanced 11 per cent to 35.45 shortly after the US markets opened. Also referred to as the "fear index", the Vix is a measure of the markets expectation of volatility in equities over the next 30 days. Europe's VStoxx Index is up 8.7 per cent to 42.68 and Hong Kong's HSI Volatility Index advanced 6.1 per cent to 35.93; both hitting their highest levels since May last year.
  • 15:56
    European shares continue to suffer acrorss the board although banks are not as badly hit as other stocks. Ireland's Iseq index is now down 3.36 per cent, the FTSE 100 in London has fallen 2.76 per cent and Germany's Dax is down 3.9 per cent.
  • 15:58
    Tobias Blattner, a former European Central Bank economist now at Daiwa Capital Markets Europe in London estimates the ECB will have to buy about €200 billion of Italian bonds and €60 billion of Spanish securities to make an impact, according to a Reuters report.
  • 16:12
    The yield on Ireland's ten year bonds has fallen below 10 per cent for the first time since April - just after the last bank recapitalisation. According to Bloomberg data the yield is now at 9.96 per cent. Has the ECB been buying back Irish debt?
  • 16:31
    President Barack Obama is to make an unscheduled statement at 1pm Washington time - 6pm Irish time. White House not saying what the topic is but I think we can all guess
  • 16:34
    Greek Foreign Minister Stavros Lakrimidis says no new EU summit to reaffirm debt support for Greece is necessary. "One sees the (market) reactions of the last couple of weeks and they are worrying," the foreign minister said. "But the G7 made a very clear statement yesterday that they are...committed to safeguarding the euro area and the world."
  • 17:01
    In contrast with Standard and Poor's, Moody's has reaffirmed the AAA sovereign rating of the US. However Moody's warns it will downgrade the country if its deficit-reduction measures are not "credible."
  • 17:05
    If you are still unclear about the role of credit ratings in the crisis, check out Fiona Reddan's informative Q&A from today's paper http://www.irishtimes.com/newspaper/world/2011/0808/1224302026088.html
  • 17:06
    FrankN The ECB buying Irish bonds at a discount in the market would appear to provide a mechanism to implement the 'burning' of bondholders.
  • 17:06
    Guest Can somebody please tell me will Spain and Italy end up being bailed out by the EU/ECB/IMF (and perhaps G20) or will the ECB/EFSF bond buying prevent that?
  • 17:08
    Guest - the buying of bonds in the secondary market by the ECB is designed to keep yields, or the interest rate investors are willing to lend to the governments at, low enough so that they can continue to fund themselves and not need a bailout
  • 17:16
    Yields on Italian and Spanish bonds have fallen the most since the euro was formed. The yield on 10-year Italian bonds is down 80 basis points to 5.29 per cent while the yield on the bennchmark Spanish securities dropped 88 basis points to 5.17 per cent. Seems ECB has also been buying Irish and Portuguese debt as well.
  • 17:27
    We can now officially call it a bear market. The benchmark Stoxx Europe 600 Index dropped 4.1 per cent to 228.98 at the close in London, its biggest drop since March 2009. The index was down 9.9 per cent last week and has now fallen 21 per cent from this year's high on February 17. A 20 per cent drop in a year meets the technical definition of a so-called bear market.
  • 17:36
    At the close the Iseq index of Irish shares is down 4.42 per cent, the FTSE 100 in London has fallen 3.39 per cent, while Germany's Dax is off by 5.02 per cent. In the US the Dow is down by 2.64 per cent.
  • 17:40
    Ray Kinsella Is this a last ditch effort to save Italy and Spain?
  • 17:41
    Ray - not last ditch just yet. But lack of decisive action by European leaders is also reducing their options. Italy and Spain are "too big to bail"
  • 18:09
    Obama's speech has been put back to 6.30. Will cover the downing of the Navy seal helicopter in Afghanistan as well as the global financial crisis
  • 18:30
    President Obama is about to speak to the press. You can watch it live here http://www.whitehouse.gov/live
  • 18:45
    Investors are fleeing to safe havens; gold has hit a record price above $1,700 an ounce. Meanwhile Wall Street is down about 4 per cent
  • 18:54
    Obama says S&P downgrade was due to political system's failiure to address debt ceiling rather than any lack of ability to pay back debts
  • 18:54
    Obama says threat of default was being used as a bargaining chip
  • 18:55
    "Here's the good news. Our problems are imminently solveable" - Obama. Challenge is taclking debts in the long-tern
  • 18:55
    Two additional steps needed: tax reform and changes to social welfare programmes. Obama
  • 18:58
    Dealing with the long term debt challenge will give the room to deal with economic growth and thus create more jobs - Obama
  • 19:00
    "No matter what some ratings agency will say we will always have a triple A rating" - Obama
  • 19:06
    We're closing the live blog for the night - to concentrate on tomorrow's paper. Charlie Taylor will be back on duty in the morning