Financial Market report for Friday May 20, 2011
1) ... Competitive currency devaluation plus ongoing concerns over price controls on Chinese coal, and concerns over European Sovereign Debt turned stocks lower today.
2) … Major world currencies, DBV, and emerging world currencies, CEW, fell lower while the US Dollar USD, $USD, traded by UUP, rose 0.74% to close at 75.65.
The chart of the Euro Weekly, FXE Weekly, shows that
Competitive currency devaluation at the hands of the currency and bond traders has meant a rally for the $USD
3) … Stocks falling lower today included
Retailers, RL, -4.3, BBBY, -2.0, ANF -1.7%, ULTA -1.8%
Banks, STD -3.9, BNPQY -5.2%, ING -3.5, UBS -1.5, RBS -1.7, LYG -3,.5, DB -3.9, STI -2.2
USB, 2.4, FITB, -2.1,
4) … Gold, GLD, rose 1.2%
5) … News of the day
Motorola XOOM is the First Tablet Built on Android 3.0, Motorola XOOM Wi-Fi, and has been available through Sprint Direct Ship sales channels for $600.
Digital Journal relates Enjoy The Crisp Taste of Soda Stream(NASDAQ:SODA) Fountain; this stock is a short sell
Business Insider reports Netanyahu Officially Tells Obama That a Return to 1967 Borders Isn't Going to Happen.
Between the Hedges reports The Spain sovereign cds is surging +7.17% to 259.88 bps, the Italy sovereign cds is gaining +4.06% to 158.87 bps, the UK sovereign cds is rising +3.7% to 59.17 bps, the Belgium sovereign cds is rising +3.83% to 146.42 bps and the US sovereign cds is rising +7.04% to 50.50 bps.
Mike Mish Shedlock writes S&P revises Italy's credit outlook to negative
Het Nieuwsblad reports that European Council President Herman Van Rompuy announced on Friday that he will probably seek a second term in office. And Open Europe asks Is Christine Lagarde the answer?
Der Standard reports French Finance Minister Christine Lagarde said Greece risks a default if it doesn't step up consolidation efforts. "Greece risks a sovereign default and finance ministers have expressed strong doubts about the sluggish progress," Lagarde said. Both issues "should be enough for now to stimulate the government in Athens to start privatizations." Lagarde said privatization efforts "too slow." At the same time there won't be a restructuring or a reprofiling of Greek debt.
OpenEurope reports France and Germany at odds over permanent eurozone bailout mechanism; Spanish local elections could reveal pile of ‘hidden debt’. The FT reports that France and Germany are at logger- heads over the role of private creditors in potential sovereign defaults under the regime establishing the European Stability Mechanism (ESM), the eurozone’s post-2013 permanent bailout fund.
Germany is insisting that the treaty establishing the ESM contains a legal requirement which states that the ESM must include some form of private sector involvement in any disbursement of financial aid, with France pushing for a political rather than legal agreement. Germany is reportedly supported by Austria, Finland and the Netherlands, while France has the backing of the rest of the eurozone countries.
The WSJ reports that EU leaders are not backing down in their row with the ECB over potential restructuring of Greek state debt, as they believe the ECB will not fulfil its threat to stop accepting Greek debt as collateral if there were any form of restructuring as such a move would bankrupt Greek banks and threaten financial stability.
A new journal article from CQ Global Researcher, titled “Future of the Euro”, cites Open Europe’s briefing on a Portuguese bailout and quotes Open Europe’s Raoul Ruparel saying: “Greece and Ireland are already bailed out and look like they won’t be able to finance themselves next year,” meaning that a debt restructuring is the only real long term solution. Meanwhile, EUobserver reports that the local elections in Spain, expected to result in a heavy defeat for the governing Socialist party, will also expose a pile of 'hidden debt' held by regional and municipal authorities, adding billions of euros to Spain’s official debt figures.
FD reports that the Greek crisis has led to a clash in the Dutch Parliament between Dutch Prime Minister Mark Rutte and Geert Wilders, whose PVV party supports the minority government despite being in opposition, with Wilders calling for the Dutch government to stop sending money to Greece. The article suggests that the row ultimately risks bringing down the minority government.
Meanwhile, The Parliament reports that UKIP MEP Marta Andreasen has urged the Commission to explain where the money will taken from should a country fail to pay back loans given by the €60bn European Financial Stabilisation Mechanism, which is backed by the EU budget and therefore all member states.
FT FT 2 WSJ Telegraph WSJ 2 CityAM Economist Welt: Leader FAZ: Leader FT 4 FT 5 EurActiv Irish Independent Les Echos EUobserver 2 FD Powned TV Telegraph: Warner WSJ: Mattich WSJ: Fidler WSJ: Philippe EUobserver
EUobserver reports that thousands of protestors continue to take to the streets in Spain ahead of this weekend’s regional and municipal elections to express their disillusionment with the political establishment, and to protest against political corruption and extremely high rates of youth unemployment in particular.
El País El Mundo EUobserver IHT FT 3
Iron Ore 'Bubble' Looms, Will Lower Price. The iron ore market has risen to “bubble” levels that will burst as new mines create oversupply of the steelmaking raw material, according to Baosteel Group Corp., China’s second-biggest mill. “There is a bubble in this market, many are gambling,” making acquisitions and investment expensive, Chairman Xu Lejiang said in an interview in Shanghai, without saying when prices would drop.
“Everyone who has money is rushing in to invest in iron ore.” Vale SA (VALE3), Rio Tinto Group and BHP Billiton Ltd. (NYSE:BHP), the three biggest suppliers, plan to spend $45 billion on mines. Macquarie Group Ltd. predicts prices will average about half current levels after 2014 as demand growth in China, the world’s biggest buyer, slows. “The reason the big three keep spending is that they probably think growth in India, Brazil, Russia and South Africa will be sustained, and also because they believe the return on their input would beat those blind investments” by smaller rivals, Xu said. The biggest losers from the new mines may be the speculative companies that haven’t yet started production and their investors, Xu said.
Basic Materials: Iron Ore: Cliffs Natural Resources, CLF, -2.5
6) … The world has entered into the Age of Deleveraging as Quantitative Easing has now coming to bonds as well as stocks and commodities.
6A) … FactorShares 2X Gold/ Short S&P, FSG, is in an Elliott Wave 3 Up indicating that the seigniorage of Neoliberalism has failed on inflation destruction, demand destruction, exhaustion of quantitative easing, and competitive currency devaluation.
6B) … Peak Credit was likely achieved the week ending May 20, 2011 as both bonds and credit providers have both appeared to have topped out. Junk bonds, JNK, bonds overall, BND, appear to be topped out as well. Credit provision firms such as ECPG, COF, AXP, DFS appear to have topped out.
6C) … Doug Noland writes “The backdrop really turns uncertain when one ponders a repeat of last year’s scenario where Greek debt problems turn systemic through a dislocation in the CDS market. And if, once again, such a development leads to euro weakness, the resulting boost to the dollar could further catch players on the wrong side of various “carry trades” and other bets gone astray. As I noted above, the end of QE2 doesn’t have to mean liquidity issues for the marketplace. Then again, the end of quantitative easing becomes a major market liquidity event if the marketplace is in the midst of a serious bout of speculative de-risking and de-leveraging. Much to contemplate and analyze over the coming days and weeks.”
6D) … The Optimized Carry ETF, ICI, entered an Elliott Wave 3 Down this week.
6E) … The failure of Neoliberalism’s seigniorage is seen in world stocks relative to world government bonds, VT:BWX, falling lower yet again.
6F) … John Mauldin writes All for One Euro and One Euro for All?
7) ...European Regional Economic Governance will emerge out of sovereign debt crisis before 2013
Social unrest in Spain coupled with ongoing sovereign debt issues is setting the stage for the establishment of ten regions of global governance as called for by the Club of Rome in 1974.
A Chancellor, that is the Sovereign, as well as a Banker, that is the Seignior, will arise to provide a new seigniorage, that is a new moneyness, based not upon sovereign debt, but rather political coordination of their word, will and way.
Out of Gotterdammerung, that is an investment flameout and financial collapse, state leaders will announce regional framework agreements, which waive national sovereignty and establish regional economic and political governance as well as assign stakeholders to run industries for the regional good These will oversee the factors of production such as,labor and capital to establish state corporatism.
An Iron Chancellor, the Sovereign, perhaps Herman Van Rompuy, and an Adept Banker perhaps Mario Draghi, or Christine Lagarde, will provided a new seigniorage.which will be for the most part political and not economic; such will require and enforce great austerity and mass layoffs in socialist state regimes particularly the periphery nations, that is the PIIGS.
While sovereign debt has been the underlying seigniorage of the Age of Neoliberalism.
The word, will and way of the Sovereign and the Seignior will be the seigniorage.the age of Authoritarianism.
European Federalism has been creeping in scope and power since World Ware II, with the aid of the Spinelli Group and others. A Euro Centric Continent, now precludes a return to an age of sovereign nation states.
Sovereign state currencies are a pipe dream of the Mises.Institute and Austrian economists. A much greater likelihood is the rise of a Euro German Empire, that is a revived Roman Empire, with a polical leader and a banking leader whose power will rival and exceed those of Charlemagne.
Stocks: UUP, FXE, VGK, VT, BWX, ICI, CHIM, XRT, WOOD, DOO, SLX, PSCD, THD, ALUM, EUFN, FGEM, XLF, KRE, ECPG, COF, AXP, DFS, EWP, NORW, EWG, EWI, TUR, RSX, RSXJ, HAO, GERJ, EWD, LMCA, AWI, LOW, HD, CVCO, KAR, SH, DBV, CEW, USB, FITB, SFLY, EXR, WBC, DAN, TEN, MOD, JCI, LBY, YZC, ARUN, USAP, PKOH, RL, BBBY, ANF, ULTA, AEI