April 28, 2010
‘‘It can really be summed up in one word -- contagion,’’ said CMC Markets analyst Michael Hewson.
The markets fell after Standard & Poor’s, a leading international ratings agency, downgraded Greek sovereign debt to junk status and cut Portugal’s long-term credit score by two notches.
The London stock market dived 2.61 per cent, the Frankfurt DAX sank 2.73 per cent and the CAC 40 in Paris plunged by 3.82 per cent.
The Lisbon stock market sank by 5.36 per cent and Athens plunged 6 per cent.
Wall Street was also sharply lower, with the Dow Jones industrial shedding 213.04 points, or 1.9 per cent, to close at 10,991.99. The Standard & Poor's 500 Index lost 28.34 points, or 2.34 per cent, to finish at 1183.71. The Nasdaq Composite Index fell 51.48 points, or 2.04 per cent, to wind up at at 2471.47.
Austock Securities senior client adviser and strategist Michael Heffernan said the lead from Wall Street and Europe was driving the losses, but Europe’s sovereign debt issues had minimal impact on Australian shares.
‘‘Its totally unsurprising we’re down given the lead from overseas,’’ he said.
‘‘The debt issues have absolutely zero effect here, frankly.
‘‘These ratings agencies are about six months behind the curve... so the fact that markets go down simply because credit ratings agencies have downgraded Greece and Portugal’s ratings is absolutely no reason at all why our banks and major resources should be down.’’
Wilson HTM head of private wealth management Derek Growns said that the jitters flowing out of Europe aren’t surprising because they’ve been coming for a while.
The issues surrounding sovereign debt will ultimately be sorted out in Europe. ‘‘But the countries involved - particularly Greek residents - are going to have to face up to the fact they have to cut spending and raise taxes.’’
http://www.brisbanetimes.com.au/business/markets/australian-stocks-in-tailspin-on-global-debt-fears-20100428-tqaj.html
Showing posts with label Portugal. Show all posts
Showing posts with label Portugal. Show all posts
Wednesday, 28 April 2010
Saturday, 6 February 2010
Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal
Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal
The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words.
By Ambrose Evans-Pritchard
Published: 7:29PM GMT 04 Feb 2010
Julian Callow from Barclays Capital said the EU may to need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. “If not contained, this could result in a `Lehman-style’ tsunami spreading across much of the EU.”
Credit default swaps (CDS) measuring bankruptcy risk on Portuguese debt surged 28 basis points on Thursday to a record 222 on reports that Jose Socrates was about to resign as prime minister after failing to secure enough votes in parliament to carry out austerity measures.
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Parliament minister Jorge Lacao said the political dispute has raised fears that the country is no longer governable. “What is at stake is the credibility of the Portuguese state,” he said.
Portugal has been in political crisis since the Maoist-Trotskyist Bloco won 10pc of the vote last year. This is rapidly turning into a market crisis as well as investors digest a revised budget deficit of 9.3pc of GDP for 2009, much higher than thought. A €500m debt auction failed on Wednesday. The yield spread on 10-year Portuguese bonds has risen to 155 basis points over German bunds.
Daniel Gross from the Centre for European Policy Studies said Portgual and Greece need to cut consumption by 10pc to clean house, but such draconian measures risk street protests. “This is what is making the markets so nervous,” he said.
In Spain, default insurance surged 16 basis points after Nobel economist Paul Krugman said that “the biggest trouble spot isn’t Greece, it’s Spain”. He blamed EMU’s one-size-fits-all monetary system, which has left the country with no defence against an adverse shock. The Madrid’s IBEX index fell 6pc.
Finance minister Elena Salgado said Professor Krugman did not “understand” the eurozone, but reserved her full wrath for the EU economics commissioner, Joaquin Almunia, who helped trigger the panic flight from Iberian debt by blurting out that Spain and Portugal were in much the same mess as Greece.
Mrs Salgado called the comparison simplistic and imprudent. “In Spain we have time for measures to overcome the crisis,” she said. It is precisely this assumption that is now in doubt. The budget deficit exploded to 11.4pc last year, yet the economy is still contracting.
Jacques Cailloux, Europe economist at RBS, said markets want the EU to spell out exactly how it is going to shore up Club Med states. “They are working on a different time-horizon from the EU. They don’t think words are enough: they want action now. They are basically testing the solidarity of monetary union. That is why contagion risk is growing,” he said.
“In my view they underestimate the political cohesion of the EMU Project. What the Commission did this week in calling for surveillance of Greece has never been done before,” he said.
Mr Callow of Barclays said EU leaders will come to the rescue in the end, but Germany has yet to blink in this game of “brinkmanship”. The core issue is that EMU’s credit bubble has left southern Europe with huge foreign liabilities: Spain at 91pc of GDP (€950bn); Portugal 108pc (€177bn). This compares with 87pc for Greece (€208bn). By this gauge, Iberian imbalances are worse than those of Greece, and the sums are far greater. The danger is that foreign creditors will cut off funding, setting off an internal EMU version of the Asian financial crisis in 1998.
Jean-Claude Trichet, head of the European Central Bank, gave no hint yesterday that Frankfurt will bend to help these countries, either through loans or a more subtle form of bail-out through looser monetary policy or lax rules on collateral. The ultra-hawkish ECB has instead let the M3 money supply contract over recent months.
Mr Trichet said euro members drew down their benefits in advance -- "ex ante" -- when they joined EMU and enjoyed "very easy financing" for their current account deficits. They cannot expect "ex post" help if they get into trouble later. These are the rules of the club.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7159456/Fears-of-Lehman-style-tsunami-as-crisis-hits-Spain-and-Portugal.html
Acronym: PIGS = Portugal, Ireland, Greece and Spain
The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words.
By Ambrose Evans-Pritchard
Published: 7:29PM GMT 04 Feb 2010
Julian Callow from Barclays Capital said the EU may to need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. “If not contained, this could result in a `Lehman-style’ tsunami spreading across much of the EU.”
Credit default swaps (CDS) measuring bankruptcy risk on Portuguese debt surged 28 basis points on Thursday to a record 222 on reports that Jose Socrates was about to resign as prime minister after failing to secure enough votes in parliament to carry out austerity measures.
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*
Global stock market shakeout spreads to Asia
*
US jobs report 'disappointing in virtually all respects'
*
Garry White: This crisis is a buying opportunity for gold
*
Greece rattled by 'hidden debt' controversy
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Should Germany bail out Club Med or leave the euro altogether?
Parliament minister Jorge Lacao said the political dispute has raised fears that the country is no longer governable. “What is at stake is the credibility of the Portuguese state,” he said.
Portugal has been in political crisis since the Maoist-Trotskyist Bloco won 10pc of the vote last year. This is rapidly turning into a market crisis as well as investors digest a revised budget deficit of 9.3pc of GDP for 2009, much higher than thought. A €500m debt auction failed on Wednesday. The yield spread on 10-year Portuguese bonds has risen to 155 basis points over German bunds.
Daniel Gross from the Centre for European Policy Studies said Portgual and Greece need to cut consumption by 10pc to clean house, but such draconian measures risk street protests. “This is what is making the markets so nervous,” he said.
In Spain, default insurance surged 16 basis points after Nobel economist Paul Krugman said that “the biggest trouble spot isn’t Greece, it’s Spain”. He blamed EMU’s one-size-fits-all monetary system, which has left the country with no defence against an adverse shock. The Madrid’s IBEX index fell 6pc.
Finance minister Elena Salgado said Professor Krugman did not “understand” the eurozone, but reserved her full wrath for the EU economics commissioner, Joaquin Almunia, who helped trigger the panic flight from Iberian debt by blurting out that Spain and Portugal were in much the same mess as Greece.
Mrs Salgado called the comparison simplistic and imprudent. “In Spain we have time for measures to overcome the crisis,” she said. It is precisely this assumption that is now in doubt. The budget deficit exploded to 11.4pc last year, yet the economy is still contracting.
Jacques Cailloux, Europe economist at RBS, said markets want the EU to spell out exactly how it is going to shore up Club Med states. “They are working on a different time-horizon from the EU. They don’t think words are enough: they want action now. They are basically testing the solidarity of monetary union. That is why contagion risk is growing,” he said.
“In my view they underestimate the political cohesion of the EMU Project. What the Commission did this week in calling for surveillance of Greece has never been done before,” he said.
Mr Callow of Barclays said EU leaders will come to the rescue in the end, but Germany has yet to blink in this game of “brinkmanship”. The core issue is that EMU’s credit bubble has left southern Europe with huge foreign liabilities: Spain at 91pc of GDP (€950bn); Portugal 108pc (€177bn). This compares with 87pc for Greece (€208bn). By this gauge, Iberian imbalances are worse than those of Greece, and the sums are far greater. The danger is that foreign creditors will cut off funding, setting off an internal EMU version of the Asian financial crisis in 1998.
Jean-Claude Trichet, head of the European Central Bank, gave no hint yesterday that Frankfurt will bend to help these countries, either through loans or a more subtle form of bail-out through looser monetary policy or lax rules on collateral. The ultra-hawkish ECB has instead let the M3 money supply contract over recent months.
Mr Trichet said euro members drew down their benefits in advance -- "ex ante" -- when they joined EMU and enjoyed "very easy financing" for their current account deficits. They cannot expect "ex post" help if they get into trouble later. These are the rules of the club.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7159456/Fears-of-Lehman-style-tsunami-as-crisis-hits-Spain-and-Portugal.html
Acronym: PIGS = Portugal, Ireland, Greece and Spain
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