Bond dumping and Berlusconi
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BNP Paribas SA and Commerzbank AG (CBK) are unloading sovereign bonds at a loss, leading European lenders in a government-debt flight that threatens to exacerbate the region’s crisis.
BNP Paribas, France’s biggest bank, booked a loss of 812 million euros ($1 billion) in the past four months from reducing its holdings of European sovereign debt, while Commerzbank took losses as it cut its Greek, Irish, Italian, Portuguese and Spanish bonds by 22 percent to 13 billion euros this year.
Banks are selling debt of southern European nations as investors punish companies with large holdings and regulators demand higher reserves to shoulder possible losses. The European Banking Authority is requiring lenders to boost capital by 106 billion euros after marking their government debt to market values. The trend may undermine European leaders’ efforts to lower borrowing costs for countries such as Greece and Italy, while generating larger write downs and capital shortfalls.http://www.bloomberg.com/news/2011-11-08/european-banks-cutting-sovereign-bond-holdings-threatens-to-worsen-crisis.html
European finance ministers pledged to roll out a bulked-up rescue fund next month, leaving Greece and Italy on the front lines until then in the fight against the debt crisis.
Greece was ordered to provide written acceptance of bailout terms in order to win an 8 billion-euro ($11 billion) loan installment by the end of November, while Italy was pressed to turn budget-cut promises into reality.
Greece’s reforms “have to be carried out immediately, we cannot wait until there’s a new government, because that could be in March,” Austrian Finance Minister Maria Fekter told reporters today before the second day of a European finance meeting in Brussels. “We need confirmation in writing from all parties.” http://www.bloomberg.com/news/2011-11-07/eu-to-roll-out-rescue-fund-next-month-keeps-pressure-on-greece-over-terms.html
European stocks rose, with the Stoxx Europe 600 Index rebounding from a two-day decline, as investors awaited a vote on Italy’s budget that will show whether Prime Minister Silvio Berlusconi still has a majority. U.S. index futures advanced, while Asian shares fell.
Vodafone Group Plc (VOD) gained 2.3 percent after increasing its full-year earnings forecast as profit beat analysts’ estimates. Repsol YPF SA (REP) climbed 5.4 percent after raising its prediction for recoverable reserves in Argentina. Banks rallied as Societe Generale SA, France’s second-biggest bank, and Lloyds Banking Group Plc (LLOY), the largest mortgage lender in the U.K., both gained more than 7 percent.
The Stoxx 600 rose 1.4 percent to 241.65 at 11:00 a.m. in London. The benchmark measure has rallied 12 percent since this year’s low on Sept. 22 as investors speculated that the euro area would protect the economies of Italy and Spain from the sovereign-debt crisis. http://www.bloomberg.com/news/2011-11-08/european-stock-index-futures-gain-vodafone-repsol-shares-may-be-active.html
EBay Inc. (EBAY) options traders are paying the most ever to speculate on declines as U.S. consumer confidence at a two-year low threatens holiday sales.
Contracts that pay should the largest online marketplace fall were priced 9.49 points higher than comparable calls on Nov. 4, a record and double the 4.57 median since 2005, implied volatility data compiled by Bloomberg show. The relationship known as skew, based on three-month options 10 percent above and below the stock price, has risen from 4.51 in July.
Consumers grew less confident in October, driving a Conference Board sentiment index to the lowest level since the recession in 2009. Chip Hendon, who helps oversee $14 billion at Huntington Asset Advisors Inc., said options show investors are concerned that San Jose, California-based EBay’s shares will drop with the U.S. jobless rate stuck at or above 9 percent. EBay generates about 46 percent of its business in America.http://www.bloomberg.com/news/2011-11-08/ebay-puts-jump-to-record-high-as-confidence-falls-before-holidays-options.html
The euro fluctuated between gains and losses against the dollar before Italian Prime Minister Silvio Berlusconi faces a budget vote and amid speculation that Greece is close to forming a national government.
The yen advanced as Asian stocks dropped for a second day, increasing demand for haven assets. The franc rose against the euro as Swiss National Bank Vice President Thomas Jordan said the SNB is not weakening the nation’s currency to gain export advantage.Australia’s dollar fell for a third day against the yen after data showed the nation’s trade surplus narrowed more than economists forecast.
“It’s going to be a choppy session for the euro as people in the market monitor risk events in Europe,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London. “The euro is going to be headline-sensitive. Having said that, it has been quite resilient despite what’s going on. That may be partly because of overextended positioning in the market.” http://www.bloomberg.com/news/2011-11-07/euro-weakens-as-turmoil-increases-concern-debt-crisis-may-spread-to-italy.html
The pound approached a one-month high against the euro before Italian Prime Minister Silvio Berlusconi faces a parliamentary vote that will test his leadership, boosting the appeal of British assets as a haven.
Sterling rose for a second day versus the dollar. Today’s vote will show whether the Italian leader has enough support to stay in power and implement austerity measures to trim the region’s second-biggest debt load. Britain’s currency stayed higher as a report showed U.K. manufacturing expanded in September more than economists predicted
“The pound is benefiting from being a safe haven from the fact that it isn’t part of the euro monetary union,” said Shant Movsesian, a strategist in London at 4Cast Ltd. in London. “The economic downturn is very much expected and has been largely priced in, so when you get an upturn in data it is seen as welcome relief.”http://www.bloomberg.com/news/2011-11-08/pound-approaches-one-month-high-against-the-euro-on-berlusconi-vote-test.html
The U.S. is reaping its smallest corn harvest in three years after a drought damaged what was a record crop as recently as July, driving annual prices to an all-time high and curbing an expansion in global food supplies.
The government will forecast production of 314.7 million metric tons tomorrow, 27.4 million tons less than four months ago, the average estimate of 30 analysts surveyed by Bloomberg showed. The cut is equal to output in Argentina, the second- biggest exporter. The U.S. Department of Agriculture already expected a third annual drop in global corn stockpiles and the first in soybean inventories in three years, offset by an expansion in wheat reserves to the largest in a decade.
Corn, used mostly to make livestock feed and ethanol, is the only one of eight members of the Standard & Poor’s GSCI Agriculture Index to gain this year. At a time when global food prices tracked by the United Nations fell 9.1 percent from a record in February, U.S. consumers are paying the most ever for pork chops, ground beef, flour and cheese. World food costs are 68 percent higher than five years ago and combined corn, wheat and soybean stockpiles are dropping to a three-year low.http://www.bloomberg.com/news/2011-11-08/drought-damaged-u-s-corn-crop-pressuring-global-food-supply-commodities.html
Oil rose to the highest price in more than three months in New York on signs of shrinking stockpiles in the U.S. and amid speculation European leaders will make progress in containing the region’s debt crisis.
Futures advanced for a fifth day, gaining as much as 1.1 percent. Crude supplies at Cushing, Oklahoma, fell 4.4 percent in the first three days of the month, data from DigitalGlobe Inc. showed. Prices also gained amid speculation Iran’s nuclear plans may threaten Middle East stability. Greek Prime Minister George Papandreou will resume talks today on forming a government, while Italy’s Silvio Berlusconi faces a vote that will determine if he has the support to stay in power.
“Italy is too big to save, and too big to fail, so whatever happens there will have an impact on sentiment across the board,” said Ole Hansen, senior manager of trading advisory at Saxo Bank A/S in Copenhagen. “Until we have additional news out of Italy on the economic side, it seems technically driven, and also with worries on the supply side.”http://www.bloomberg.com/news/2011-11-08/oil-trades-near-a-three-month-high-on-u-s-supply-european-crisis-outlook.html