The bond market in Greece and Portugal is now rumored to now be shut down for the day due to total chaos, not to mention potential imminent revolution in Athens. We expect the US to "decouple."
Today's rating action reflects the recent deterioration of Portugal's public finances as well as the economy's long-term growth challenges. "The review for possible downgrade will consider a repositioning of Portugal's ratings to reflect the potentially lasting deterioration in the government's debt metrics," says Anthony Thomas, Vice President-Senior Analyst in Moody's Sovereign Risk Group. "In the context of a small and slow-growing economy, such debt metrics may no longer be consistent with a Aa2 rating."
The weakening of Portugal's public finance position reflects the failure of successive administrations to consistently limit government budget deficits since Portugal joined the eurozone at its inception. "More recently, however, the government's has reiterated its objective to achieve or even surpass the deficit reduction targets published in its latest Stability and Growth Programme," says Mr. Thomas. "The well-structured debt profile means that refinancing risks are modest."
Greek Attempt To Storm Parliament Rebuffed, 3 People Dead At Greek Bank Fire - The Revolution will Be WebcastSubmitted by Tyler Durden on 05/05/2010 - 08:18
For those without access to CNN or BBC, you can watch the attempted storming of the Greek parliament live at this webcast. After confrontations got heated earlier with tear gas hot potatoes being thrown between citizens and riot police, things have moderated somewhat now, although riot police has still completely encircled the parliament building. Full link here. In the meantime, we are seeing confirmed reports that 3 people have died after a firebomb went off at a Marfin bank branch.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 05/05/10
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The oil markets were hammered on Tuesday as investors liquidated equities and commodities aggressively. From a purely technical perspective, looking only at crude oil, prices failed to break out above $87.09, getting only as high as $87.15 before turning back down. That can be seen as a technical failure.
Adding to yesterday’s heavy liquidation, though, was widespread selling in equities. The DJIA was down more than 230 points at noon and, shortly after that, crude touched the $3.00/bbl lower mark. Gold prices were down $7/ounce and the euro was down 150 points. The focal point Tuesday morning was the Greek bailout and its possible failure, which many thought could lead to chaos or panic.
The oil spill in the Gulf of Mexico from a collapsed offshore drilling rig could affect White House plans to extend offshore drilling, press secretary Robert Gibbs acknowledged as the oil slick threatened onshore sites from the Louisiana wetlands to the Sarasota beaches and disrupted fishing and energy industries. As oil giant BP mobilized resources to try to stop the leak and to mitigate its damage, President Barack Obama called the spill “potentially unprecedented environmental disaster.” However, some critics charged that the administration’s slow response to the rig accident and Obama’s decision to take part in the humorous proceedings at the White House Correspondents Dinner as the disaster unfolded has been as bad as the Bush administration’s sluggish response to Hurricane Katrina and the subsequent flooding of New Orleans.
Max Keiser is in his prime discussing Goldman and Bill Clinton's hypocrisy in defending Goldman. Which is not all that surprising considering Clinton's son-in-law Marc Mezvinsky is a Goldman Investment banker. Anyway, in addition to the usual scathing observations on the life, universe and everything, Max goes head to head with Senate hopeful Peter Schiff. Good clean fun ensues, with Alan Greenspan's invitation to the Keiser show pending.
Just because Goldman tends to get a pretty good look at all counterparty books, we will surely take their word on this one. Or not- as we reported recently, DTCC indicated that Spain has seen massive synthetic derisking over the past 2 weeks. We contend that Goldman's prop desk has been a major participant in the recent derisking action. We would be happy to be proven wrong: if Messrs. van Praag and Canaday would but disclose the firm's prop positions which refute this claim, we will immediately issue a retraction. Also, the latest DTCC data will be updated when it becomesavailable tomorrow morning European Caffeinated Time: we expect Spain to be among the top recipients of market suspicion in the past week. In other news, we expect Spanish CDS spreads to blow out shortly, and the Spanish curve to invert within two weeks, even as Goldman sets everyone at hypnotic ease.
A quick look at these charts says that unless this is yet another fake H&S which will get squeezed in no volume tomorrow, we have more to go. The previous times though we had divergence as we were triggering the patterns: not this time. Clean H&S break on the Nikkei future and Nasdaq future. Similar pattern on the S&P (though downward sloping neckline) and the Elliott Wave count indicates that whether this is a full bearish impulse from the highs or just an A-B-C correction, the 3/ or C wave is not completed for sure. Looking closely at the sub-structure for AUDUSD confirm our impressions. We see intermediary target at 1,934 for the Nasdaq future and 1,143 for the S&P future, but the key medium term support for the S&P future is currently at 1,114. - Nic Lenoir
1) Stupid, 2) Serrated, 3) Suicidal, 4) Sycho? We won't even start with the P. After 9 20 points S&P swings in the index in the past two weeks, the quants and the momos are both waving flags of surrender, just in time for the carry traders to be carted off trading desks in body bags. For a market that has no volatility, this is the most volatile market in recent history. No need to discuss how volume performed on today's plunge, which was the biggest in several months as it finally became painfully clear to the market that the IMF and the ECB have nothing up their sleeve when it comes to preventing the Greek spillover from impacting the rest of the PIIGS and then head to the core of the European death star.
IMF CHIEF SAYS EUROPEAN LOAN SHOULD HAVE BEEN AT IMF RATE
Because, you know, it is so usurious and greedy of US taxpayers to demand a 5% rate for a 3 year loan to a bankrupt country. As we get more on this preamble into QE2, we will post it. Presumbly someone is transcribing the monologue by Mrs. Dominique Genghis-Khan, aka Shalom of the Old Country.
The EURUSD broke through 1.3000 to 1.2996 and the BIS (yes, that BIS) immediately stepped up its buying to prevent a full blown rout of the Euro, or so the rumor goes. Check to you, Viceroy of the West Indies Bernanke. We have the QE2 press release all, pardon the pun, queued up, for your approval.
If only the Greeks were as passionate about maintaining the debt of their economy at a reasonably insane level, as opposed to the "full retard" reserved for banana republics such as the UK and the US, as they are about striking when it comes to preserving their entitlements, Europe would have a budget surplus of several quintillion. Today, and tomorrow, and likely everyday thereafter, Greece will be shut down as billions in non-taxable economic output is eliminated, trade is shuttered, and the tourism industry is dead. And since hospitals are also on strike, tourism may be the least of the casualties. Bloomberg reports: "Greek government workers shut down schools and hospitals and disrupted flights as demonstrators occupied the Acropolis in an escalation of protests against 30 billion euros ($40 billion) of additional wage cuts and tax increases unveiled this week." And no, there is no hope: "“Protests will increase,” said Spyros Papaspyros, the head of ADEDY. “Opting for the easy path of cutting wages and pensions can’t be accepted.” In essence, the Greek people would rather see their country bankrupt, the EMU destroyed and their nation locked out of the funding market for the next decade than have to retired at age 63. But at least they gave us democracy.... The same democracy that will see the Supreme Court soon side with the Federal Reserve over 300+ million US citizens.
Well, it must be a funding crisis. For all those who have been talking about rate hikes, here is a little reality check: we are on the verge of a full blown funding crisis at the sovereign level and central banks have just only started withdrawing liquidity. To be sure two factors are at play: the explosion of sovereign CDS's or in other words sovereign credit spreads, and the withdrawing of liquidity. - Nic Lenoir, ICAP