IN THE WEEK AHEAD: Investors will have only a few U.S. economic reports to distract them from the events in Europe. Factory orders and an update from the service sector will be followed by monthly updates on consumer credit and sentiment. Investors will focus on the European summit in Brussels at the end of the week. Yes, we are still talking about Europe. Fiscal union and tighter controls will be the main topics, as the wealthier nations (read: Germany) try to extract a pound of flesh in exchange for a full-fledged bailout of weaker nations. Economists have been saying that to solve the European crisis, Germany would have to come down from its moral high horse and admit it has far too much to lose if the EU were to implode. Last week, Merkel's comments, along with the central bank action, were seen as positive developments towards that end. To wit, stocks were up 7 percent, the strongest weekly performance since 2009. German government bonds, which until recently had been a haven from turmoil in the rest of the euro zone, are losing their allure as the sovereign-debt crisis roils Europe. For most of the two years since Greece's budget woes set off a spiral of selling in the bond markets of some euro-zone countries, German bonds, known as bounds, have benefited from a flight to safety along with Treasury bonds and U.K. gilts. But that relationship started to crack a few weeks ago when Germany had its worst 10-year bond auction in history, which sparked one of the biggest sell offs in some time. Despite the brouhaha about the U.S. jobs report (more on that below), the stock market-moving news last week was all about Europe and the coordinated central bank action to attack one of the symptoms of the European contagion --liquidity for European banks. Sure, the action could be called a "band-aid," but it could also be seen as the necessary preparation for the major procedure that is required to treat the ailing patient.
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Sunday, December 4, 2011
IN THE WEEK AHEAD
IN THE WEEK AHEAD: Investors will have only a few U.S. economic reports to distract them from the events in Europe. Factory orders and an update from the service sector will be followed by monthly updates on consumer credit and sentiment. Investors will focus on the European summit in Brussels at the end of the week. Yes, we are still talking about Europe. Fiscal union and tighter controls will be the main topics, as the wealthier nations (read: Germany) try to extract a pound of flesh in exchange for a full-fledged bailout of weaker nations. Economists have been saying that to solve the European crisis, Germany would have to come down from its moral high horse and admit it has far too much to lose if the EU were to implode. Last week, Merkel's comments, along with the central bank action, were seen as positive developments towards that end. To wit, stocks were up 7 percent, the strongest weekly performance since 2009. German government bonds, which until recently had been a haven from turmoil in the rest of the euro zone, are losing their allure as the sovereign-debt crisis roils Europe. For most of the two years since Greece's budget woes set off a spiral of selling in the bond markets of some euro-zone countries, German bonds, known as bounds, have benefited from a flight to safety along with Treasury bonds and U.K. gilts. But that relationship started to crack a few weeks ago when Germany had its worst 10-year bond auction in history, which sparked one of the biggest sell offs in some time. Despite the brouhaha about the U.S. jobs report (more on that below), the stock market-moving news last week was all about Europe and the coordinated central bank action to attack one of the symptoms of the European contagion --liquidity for European banks. Sure, the action could be called a "band-aid," but it could also be seen as the necessary preparation for the major procedure that is required to treat the ailing patient.
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NEW YORK -(Dow Jones)- Speculators increased by more than half their bets that the dollar will strengthen last week, piling on net wagers worth $17.8 billion as of Nov. 29. That represented the largest net position in favor of the dollar since June 2010, data from the Commodity Futures Trading Commission's weekly report on the commitments of traders showed Friday.
The 54% jump in optimistic bets on the dollar's rise comes during a period of high global tension over the fate of the euro and Europe's economy.
Investors have abandoned the common currency as fears about European countries' fiscal woes have taken hold. Last week the market held net wagers that the euro will fall worth $17.4 billion, or 104,302 contracts, up 21% from the previous week, the CFTC's data showed. That was the largest net bet against the euro since May 2010.
"The acceleration in shorting of euro has increased," says Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
Sutton said that investors are worried about ongoing volatility as the euro zone lurches towards a resolution of its debt crisis. Some investors are even thinking about a breakup in the euro, she said: "I think there's an increasing number of questions about what impact that would have."
Traders maintained their views on the yen's prospects, holding 7% fewer bets that the yen will rise, or a net $6.5 billion. Net contracts on the yen's strengthening totaled 40,547.
The Swiss franc, which has benefited from a strong show of support by the Swiss National Bank, suffered from a sharp downshift in investor sentiment. Traders bet a net $1.3 billion, up 58% from last week, that the franc will decline, or 9,327 contracts.
More investors also thought the Canadian dollar and British pound will decline. The market held a net $2.6 billion in bets against the Canadian dollar, up 22%, and a net $4.5 billion in bets against the pound, up 27%.
Investors were also considerably less optimistic about the Australian and New Zealand dollars. The market's bets were down 29% in favor of the Australian dollar and 52% for the New Zealand dollar.
The CFTC's report measures major currencies held against the dollar. It shows market positioning as of the previous Tuesday.
-By Chana R. Schoenberger, Dow Jones Newswires; 212-416-4803; chana.schoenberger@dowjones.com; @djfxtrader
The European Parliament approved funding of €879 million to Greece, but the amount would be channelled to cover the deficit, instead of investment.
The EU Task Force operating in Greece seeks a solution to major delays in National Strategic Reference Framework, as funds are available, but they do not reach to entrepreneurs, unemployed and beneficiaries of projects.
On Thursday, the European Parliament approved the increase of the EU contribution to projects from 85% to 95%. So, the Greek State will pay less for projects, while it will receive additional €879 million due to the difference in participation of the period 2007-2011.
In case Greece the funds in 2011, then the government will have another way to cover the gap in deficit, in order to close to 9% of GDP.
The rationale of institutions is to increase liquidity in Greece to be invested in projects, which focus on growth and employment, such as retraining employees, creating business clusters or investing in transport infrastructure.
However, the funds decrease instead of increasing, according to the new budget plan. The official justification is that the EU funds cannot be absorbed.
In a period of unprecedented credit crunch with the rate of loan flow to the private sector at -2.2%, there are billions of euros available but not channelled to the market.
In a period of unprecedented credit crunch with the flow of loans to the private sector to -2.2% in October, according to the BoG, there are billions of euros not entering the market.
The government blames the crisis; however, a report of the Governor of the BoG, the EU Task Force and business representatives speaks of long delays.
PARIS -(Dow Jones)- French largest bank by market value BNP Paribas SA (BNP.FR) on Friday said Jean-Laurent Bonnafe has taken over as chief executive officer, replacing Baudouin Prot as scheduled.
The bank's board appointed Prot as chairman as Michel Pebereau has stepped down after leading the bank for 18 years, BNP Paribas said in a statement.
The change was announced in May. BNP Paribas' board also confirmed Georges Chodron de Courcel as chief operating officer and appointed Philippe Bordenave and Francois Villeroy de Galhau as co-chief operating officers.
Futures were bolstered by the Labor Department's nonfarm payrolls report--the most closely watched barometer of U.S. employment--which said payrolls rose 120,000 last month. The unemployment rate, obtained from a separate survey, fell to 8.6% from 9% the previous month, marking the first time the jobless rate had fallen below 9% since March 2009.
"I don't think it would be out of the ordinary to see that thing under 8% in the next three months," said Carl Larry, president of the trading advisory firm Oil Outlook and Opinions.
Oil traders have been closely watching the pace of the U.S. recovery because economic activity is closely correlated with demand for crude. The stubbornly high unemployment rate in the U.S. has been a drag on demand for gasoline this year, as fewer people drive to work or take vacations.
Friday's data is offering hope that unemployment is on a downward course. Crude futures rose as high as $101.56 a barrel shortly after the report's release. But a strengthening dollar eroded those gains as the trading session unfolded. A stronger greenback tends to curb the price of oil by making the dollar-denominated commodity more expensive for holders of other currencies.
At one point, prices even dipped below $100 a barrel, falling as low as $99.76, before snapping back later in the session
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