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S&P plans threaten banks with downgrades
January 6, 2011--Half the world’s largest banks could see their credit ratings downgraded under proposals from Standard & Poor’s to significantly revise the way it rates the sector.
The credit rating agency on Thursday published proposals aimed at making its ratings more transparent and shifting its analysis of a bank’s earnings to focus on their ability to protect bank capital and cover losses.
Storage seen as challenge for non-gold commods ETFs
January 5, 2011--Exchange-traded funds (ETFs) backed by physical commodities other than gold are an "utterly crazy idea", Goldman Sachs (NYSE: GS - news) analyst Jeffrey Currie said on Wednesday.
"The key to why it works in gold but won't work in beef or soybeans is that gold is very easy to store," he said at the Oxford Farming Conference.
ETFs backed by physical gold have attracted investment of up to $8.1 billion. UK-based ETF Securities last month listed products backed by copper, nickel and tin on the London Stock Exchange and plans to launch aluminium, zinc and lead this quarter.
FAO economist: Grain prices could go much higher
January 5, 2011--Prices of corn, wheat and other grains can go much higher and current weather patterns are of concern, the United Nations’ food agency economist said after its food price index hit a record high in December.
"We are concerned, the real reason for concern is the unpredictability,” the Food and Agriculture Organisation’s economist Abdolreza Abbassian told Reuters in an interview on Wednesday. “There is still room for prices to go up much higher, if for example the dry conditions in Argentina tend to become a drought, and if we start having problems with winterkill in the northern hemisphere for the wheat crops,” he said. Winterkill occurs when cold attacks plants seeded, generally in the autumn, for harvesting the following year. Abbassian added that despite high prices, many factors that triggered food riots in 2007/08, such as weak production in poor countries and a sudden surge in crude oil prices, were not currently present, reducing the risk of more turmoil.
A Barrel of Oil or a Bottle of Wine: How Do Global Growth Dynamics Affect Commodity Prices? IMF Working paper
January 4, 2011--Summary: This paper investigates the causes of extreme fluctuations in commodity prices from 1990 to 2010. Analyzing two very distinct commodities-crude oil and fine wine, we find that macroeconomic factors are the main determinants of commodity prices. Although supply constraints have the expected effect, aggregate demand growth is the key factor.
The empirical results show that while advanced economies account for more than half of global consumption, emerging economies make up the bulk of the incremental change in demand, thereby having a greater weight in commodity price formation. The results also show that the shift in the composition of aggregate commodity demand is a recent phenomenon.
BATS Global Markets Sets Numerous Europe Records In December
New BYX Exchange Continues Growth In U.S. - Sets Records In Five European Indice - Reports 9.5% US Equities Market Share
January 4, 2011--January 4, 2011 – BATS Global Markets (BATS) today reported volume numbers for the month of December, including the following:
BATS Europe reported new consolidated monthly market share records in the Swiss SMI (9.1%), Copenhagen’s OMXC20 (7.1%), Brussels’ BEL20 (5.5%), Paris’ CAC Next20 (5.3%) and Frankfurt’s MDAX (5.5%), as well as consolidated monthly market share of 10.9% in the FTSE 100 and 6.2% in Europe overall.
The MTF set monthly records in multiple indices in every month of 2010 and ends the year with 6.0% or more market share in 10 major European indices in December.
The BATS US Equities Exchanges, BATS BZX Exchange and BATS BYX Exchange, combined for average daily matched volume of 643.1 million shares, representing 9.5% of all US cash equity share volume for the month. In November, the BATS Exchanges represented 10.2% of all US equity share volume.
BATS BZX Exchange, formerly known as BATS Exchange, recorded average daily US matched volume of 552.4 million shares, representing 8.2% of all US cash equity share volume for the month. In November, the BATS BZX Exchange represented 9.3% of all US cash equity share volume.
Economic Survey of Euro Area 2010 OECD
January 4, 2011--Summary
The euro area has experienced a severe recession, followed by a sovereign debt crisis in some euro area countries, in the wake of the global financial crisis. This was the first major test of the robustness of the euro area in a downturn. Swift monetary policy easing, massive intervention to support the financial system and supportive fiscal policy helped to stabilise the financial system and mitigate the contraction in private demand.
Excessive economic, financial and fiscal imbalances built up in some euro area countries during the upswing, hindering the efficient operation of the monetary union, and led to growing
vulnerabilities. These contributed to especially severe economic and fiscal crises in some countries, leading to spillovers mainly through financial markets across the euro area.
Exiting from the crisis. A modest recovery is now underway, although risks remain. Financial conditions have strengthened. Activity has picked up, but the recovery is likely to be muted. Fiscal consolidation is necessary, although it may drag on growth in the short term. As soon as upward
risks to price stability in the medium term emerge, monetary policy stimulus should be withdrawn. Non-standard measures should continue to be wound down in line with improvements in the monetary policy transmission mechanism. It is essential that the banking
system is restored to good health and remaining weaknesses resolved. The stress test exercise carried out at the EU level in 2010 was an important step forward, which has increased
transparency and reinforced the credibility of the euro area financial sector. Structural reforms would facilitate on-going economic adjustment and lift growth prospects.
Resolving intra-euro area imbalances. Large current account deficits and surpluses in euro area countries in the run up to the crisis were associated with underlying economic, financial and fiscal imbalances. National economies were subject to a range of diverging pressures, which were compounded by movements in real interest rates that led to divergent saving and investment behaviour in euro area economies. For some countries, low real interest rates sparked credit, consumption and housing booms and weakened competitiveness. The banking system channelled funds from countries with high savings to deficit economies, in the context of weaknesses in supervisory oversight. Market discipline, together with fiscal and financial policies, failed to prevent the build-up of large imbalances in excess of fundamentals within the monetary union. Rebalancing economies with large imbalances has already begun, but further structural reforms are needed to facilitate the process. During the crisis, some deficit countries have faced severe economic, financial and fiscal pressures. Adjustment will be a difficult and prolonged process in some deficit countries, particularly where prices and wages need to adjust to help shift resources from domestically-focussed sectors that grew too big during the boom years.
Avoiding unsustainable imbalances. A new cross-cutting approach to economic and financial management is required to stabilise national economies more effectively. This should rest on a broad range of policies that can tackle the sources of macroeconomic imbalances, including sound fiscal policy and the development of macroprudential tools. Stabilisation would be facilitated by structural policies that help economic adjustment, including ensuring that wage setting mechanisms work well and that housing policies do not exacerbate property cycles. The surveillance of country-level economic, fiscal and financial imbalances by EU institutions should be stepped up.
view full report-Economic Survey of Euro Area 2010 OECD
Rising oil price threatens fragile recovery
January 4, 2011--High oil prices threaten to derail the fragile economic recovery among developed nations this year, the leading energy watchdog has warned, putting pressure on the Opec oil cartel to increase production.
Over the past year the oil import costs for the 34 mostly rich countries that make up the Organisation for Economic Co-operation and Development have soared by $200bn to $790bn at the end of 2010, according to an analysis by the International Energy Agency.
Oil to end the year up 12 pct, averages near $80
December 31, 2010--Oil was set to close the year up more than 12 percent and average nearly $80 a barrel -- the second highest on record -- driven by a resurgence in global demand, an unusually cold winter and falling inventories.
After rallying to a 26-month high of $91.88 on Monday, US crude edged lower on Friday, with the February contract down 14 cents at $89.70 a barrel by 6:42 a.m. ICE Brent crude fell 10 cents to $92.99.
Weak dollar hints at action to curb yen
December 30, 2010--The dollar lost ground against the yen for the ninth session in the past 10, raising speculation that Japan might be forced to intervene once again to stem the rise in its currency.
Late in New York, the yen was up 0.9 per cent to Y81.61 against the dollar, within striking distance of the 15-year high of Y80.22 that it hit in October and the record peak of Y79.70 it struck in 1995.
Investor Confidence Index Rises from 96.4 to 104.4 in December
December 28, 2010--State Street Global Markets, the investment research and trading arm of State Street Corporation (NYSE:STT), today released the results of the State Street Investor Confidence Index® for December 2010.
Globally, Investor Confidence rose 8.0 points from November's revised reading of 96.4 to 104.4. In North America, confidence rose 7.7 points to 103.1 from November's level of 95.4. However, Investor confidence was not as positive among European investors with the index decreasing 10.8 points to 99 from November's revised level of 109.8. In Asia, like North America, institutional investors were equally optimistic and confidence in that region increased by 7.4 points from a revised November level of 95.5 to 102.9 in December.
Developed by Harvard University professor Kenneth Froot and Paul O'Connell of State Street Associates, the State Street Investor Confidence Index measures investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher is risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.
"This month the confidence of institutional investors has continued its late-year improvement. Clearly, the scenario for moderated world growth with recovery in the US has increasingly gained traction," commented Froot. "Confidence in both North America and Asia has now edged above the neutral level of 100, after a relatively weak mid-2010."
"The strong decline of European investors' confidence shows that the regions' investors remain quite jittery in the face of intra-European turmoil," added O'Connell. "We went quickly from a regime of concern around the euro and the liquidity of some of the smaller countries' debts, to a regime where those concerns were ignored. And now we have come full circle: European investors are back again worrying that high sovereign indebtedness may prove destabilizing for the region."