The week in the markets (31 Oct - 6Nov)
Personal comment.
After the miracle that was expected (and confirmed) this week, which is called a black and Hussein Obama becomes president of the USA (another miracle is that she does), I received news of aid from our government the mortgage and I thought if there were any other one this week and the government would have done if we are from here when called for direct aid to the people. But I am afraid that has not happened: the government first decided to deny the crisis and support the banking industry after a series of measures hardly justifiable to the alleged strength of our financial sector. Now they have submitted results boxes and banks and profits have continued to be astronomical (if they are not means that aid has not been a change of transparency, still missing that no entity in Spain this loss when there are solutions in other countries more solid than ours) decide to "help" directly to individual mortgaged helping them go through this slump. But once again become a more aid for banks to the public. I think in the forum has already been felt all the opinions on this subject and I must also say that very acutely so I just want to emphasize again that the prevailing idea is something like: "We are in the worst of the crisis, guaranteed deposits until 2010 and helped the mortgaged two years and then with the revival that will fix everything is "What will happen if those unemployed after a two-year moratorium can not find work? For this reason there is no response.
Of course it is desirable that all this is a bad streak but most cyclical of time this seems far removed from reality. The numbers continue to decline week to week and what is valued as improvement may simply be adjustments after a very sharp. Fixed in this original graphic where we can see how it appears the trend for banks to borrow from the Federal Reserve is changing, but if we compare with other periods in which there is not even needed to resort to the EDF, it is easy to appreciate the level of banking crisis of the USA and alejadísimo that this is settled:
I do not see any signal that enables believe that this crisis will last only a few months. E insist not to confuse the bag (which may well bounce for a few weeks as he was bouncing a few days) with the real economy. The macro data are disastrous, unreservedly and hope that the lowering of rates might change, whether justified or not-only be realized within several months, and that if this drives the rebate credit. If not, only reduce the benefits of saving without encouraging the activity to the investor. And the worst thing is that the states are running out of room for maneuver as in Spain itself has acknowledged Solbes (http://www.elpais.com/articulo/economia/Solbes/dice/habra/recursos/afrontar/crisis/elpepueco / 20081105elpepieco_6/Tes)
Turning to the bag, the idea of "This is a pothole, a historic opportunity to buy, but months back in the upward path" is being installed. And yet this week (except in Europe, from Thursday to Thursday-closed flat, with some better rates and other worse) has come to a negative balance. And that if we look at the percentage rise since we have been minimal, is notable because the descent was very sharp. And was the upward trend in November and the maximum rise (Tuesday) after a day of low volatility (Monday). But neither with the help of central banks has been with the resistance led by commenting two weeks ago and is still stuck in a dangerous area. The Dax rose well above 5000 but has been unable to keep them in the SP and the arrival in 1000 has been the perfect excuse to very aggressive sales. The Dow and the Ibex nor have approached the 10 mil ...
The fear is still there as we saw on Wednesday because although statistically markets operate best on the day following the victory of a Republican than a Democrat the truth is that it should have been positive that the forecasts were met and there were no surprises, however these As of last week to buy the rumor and sell the news is becoming a habit and this caused a deep bearish movement. As I commented last week, while there are rises in quiet but there are a lot of threat falls hurry to sell. And he has returned to fulfill. However, I detect many voices that speak of buying in the fall of the year-end rally is possible .... I remain neutral and to envy to keep clear at these levels because I keep seeing danger to both sides. Today it is known the figure of unemployed last month and is feared to be disastrous, most of -200 thousand. As a curious statistic you remember that it was not a bad figure since March 2003, just the month in which he died the previous bearish trend and started the bull that ended in the fall of 2007.
And with regard to the Euribor, a point: that is truly novel now has one year deposits in financial institutions and which are due before 2010 and thus are guaranteed by the state, giving a return similar to the cost of a mortgage. It seems to me that an abnormality was corrected when 2009 arrives and there is much need for liquidity in the face of squaring balance at the end of the year. The Euribor rate comparing to a year with the intervention to 14 days of the ECB should better compare the returns offered by your bank for a year and what you pay for mortgages at that same bank and verify that the differential is not so much . Not to defend the banks with this, just describe a reality, the battle to capture a liability is so great that the differential between what it receives a customer with money and what they should pay that money for a mortgage is minimal. One consolation: yesterday in U.S. rates were at 1% and libor to 12 months to 2.84 (a 184% more), here had to 3.25 and the Euribor to 12 months to 4.70 (a 44.62% increase). But much remains could be even worse ...
Some views.
- El Corte Ingles fears that the fall in consumption resulting from the crisis this year will translate into a cut of sales for the first time in its history, although the firm still hopes that the Christmas campaign allows at least match the results of last year.
- The strange decision to Barclays:
http://news.bbc.co.uk/hi/spanish/business/newsid_7701000/7701940.stm - Against the ban on sales overdrawn:
http://www.elpais.com/articulo/dinero/disparen/Solo/somos/osos/elpepueconeg/20081102elpnegdin_2/Tes/ - Reporting on the crisis in Latin America, interesting:
http://www.elpais.com/articulo/semana/crisis/pone/prueba/Latinoamerica/elpepueco/20081102elpneglse_2/Tes - Dramatic change in attitude of the market interest rate described in the evolution of the one-month LIBOR on $:
- Methods to be handled in the event of defaulting:
http://www.elmundo.es/mundodinero/2008/10/24/economia/1224853425.html - The CEO of Intel: "This recession is going to be the worst I've seen in my life"
- The budget must be balanced, the Treasury must be replenished, public debt should be reduced, the arrogance of public officials must be moderate and controlled, and assistance to foreign countries should be curtailed so that Rome did not go into bankruptcy. People must learn again to work instead of living at the expense of state assistance. (Cicero, Year 55 BC).
The opinion of the week.
JRRallo: Without state intervention, the facts would have discurrido as follows: Miguel stays in the strike and can not continue paying your mortgage, the bank has the option of lien or renegotiate the terms of the contract by changing the term. However, what is going to change the term, if probably within a few years Miguel will remain in the strike? The most plausible option would be the first: the bank keeps a house unmarketable and acknowledges in its annual accounts that have lost money. Results? Miguel loses and the bank too.
What is the Government's plan? If Miguel falls in unemployment benefits from the moratorium, the bank gladly accept the lack of a mortgage, because it will give equal if in two years Miguel remains unemployed and unable to pay. So, he charged the house to seize a portion of the mortgage and the ICO will pay the other party. Results? The bank wins, and Miguel and taxpayers lose.
Data for reflection.
- Descriptive chart where you can appreciate the real estate component in the latest annual American growth, is that it has been so important that without it would lead to stagnation / recession 7 years ago:
- Japan on Friday lowered its rates by 40% (from 0.50 to 0.30%) but did not prevent stock market closed with its worst month of his 58 years of history (-23.83%, which became 38% on the day of their minimum )
- China closed in October as its worst month since 1994.
- Standard & Poor's on Friday downgraded the rating of Argentine debt.
- ECRI indicator of annualized growth, down to -21.9 from -19.3%, the worst indicator since 1949 (previously did not exist). It has the dubious honor of being considered the most reliable indicator to indicate recession and not going down every week which suggests a very very deep recession.
- October 2008 has proved to be the worst month in the Ibex 10 years and the second of its entire history (-17%). In the case of the Dow Jones has been the worst since 1987. However, the final week of the month has been for the Dow Jones the best week since October 1974. for the S & P 500 best week since January 1980 and for the Nasdaq since April 2001.
- October has been the most negative months in the history of crude, the falling 32.6%
- This weekend the Florida's Freedom Bank became the largest bank 17 that closes this year in USA. In Portugal, and to the imminent suspension of payments for loss of € 700 million, was nationalized the Portuguese Banco de Negocios. On Monday, the financial authorities of Austria announced the nationalization of the eighth bank in the country, the Kommunalkredit in serious problems for the international financial crisis.
- A private foreign bank started the way the weekend: JP Morgan postponed for 3 months to pay their mortgage
http://www.elpais.com/articulo/economia/Quiero/hipoteca/JPMorgan/elpepueco/20081101elpepueco_1/Tes and the Spanish government and BBVA reacted with similar measures on Tuesday. - There is money for the banks but the municipalities are the first delinquent: http://www.cotizalia.com/cache/2008/11/03/noticias_89_morosidad_ayuntamientos_dispara_tardan_meses.html
- Two of the largest banks in Brazil, Itaú and Unibanco, have announced their merger on Monday under the name Itaú Unibanco Holding, an entity that will become the largest financial group in Latin America.
- The iTRAXX Crossover (index that measures the annual cost of securing corporate debt against a possible default) most used (available from various periods) has gone in a few days of its maximum 920 to be quoted in this week 200 points lower. The volatility was also reduced dramatically, around 30%. However, on Thursday, two variables will be ruined enough.
- The defaults soar 263% a:
http://www.elmundo.es/mundodinero/2008/11/04/economia/1225788173.html - Spanish and Italian debt, in the sights of speculators:
http://www.cincodias.com/articulo/mercados/deuda-espanola-italiana-objetivo-especulacion/20081106cdscdimer_4/cdsmer/ - Falling rates in England left its rates to the level it had in 1955.
The data of the week.
- A year ago the number of unemployed in Spain has increased by 769,449 persons, representing an increase of 37.56% over a year. Unemployment stands at 2,818,026 people. On the productive sectors, unemployment increased in 9039 people in agriculture (+10.56% over the previous month), at 20,144 people in industry (+6.12%), in 36,275 people in construction (+8.18%), as 113,720 people in services ( +7.49%) And 13,480 people in the group without previous employment (+5.41%). In the past year, unemployment has increased by 27,865 persons in agriculture (41.74%) in 78,874 people (29.15%), as 239,191 people in construction (99.5%), services to 378,077 people (+30.15%) and 45,442 persons in the group without previous employment (+20.93%).
Summary of the week .-
Friday
The bullish streak is over Japan's rebound from a minimum 29% in 3 days and fell 5% perhaps disappointed by the drop in rates of 40% instead of 50% expected and the yen stronger. € and crude below have prompted a weak opening that exceeded the European -1% within a few minutes and in a strange meeting of low volatility was recovering. The first negative figure in two years of consumer spending in the USA was the excuse for Europe to mark maximum and some indexes moved to positive, perhaps because to be a factor as negative ilusiona possible further decreases in rates. And that should outweigh anything because both the Chicago and the Michigan index as the ECRI left disastrous and yet, despite an opening at around -1% recovered and helped some Europeans very close to the upside above the Ibex 3% gain and the remaining 2%. USA went up more after the European close, and when it was already above the 2%, a level that exceeded magnitude but that was reduced in the last hour below 1% while a obtained a bullish momentum finally closing in around +1.5%.
Monday
The closure for a public holiday in Japan did not prevent another day of hope in Asia with Hong Kong, Australia and India (which dropped rates half a percentage point) bounced strongly, although the hikes in the opening European were very moderate and within minutes they became in Some indices moderate losses. In a striking tomorrow of low volatility indices were gliding to the breaking down -1% at a time of the opening USA. This was-against expectations-positive and one hour before closing time in Europe was encouraged in the closing shopping +1% on average ignoring a dismal ISM manufacturing data. USA also had a somewhat volatile session that ended with little change. To highlight the new drop in crude-a minimum of 20 months and the lowering of the fear of possible defaults in Latin America.
Tuesday
The drop in rates from 0.75 in Australia served as the excuse for a rise of over 6% of the Japanese Nikkei lower while China returned to minimum annual grazing by the government to lower the growth forecast to below 8%. Europe opened in minutes with doubts but took the upward path by overcoming an early +1%, increases that doubled before the fall of the interbank and the rise of crude, the € and raw materials in general. Some indexes exceeded +3% but the opening USA (around +1.5%) expected better and it calmed the anxieties buyers. One day a more ominous macro data in USA (factory orders in September fell by -2.5% and -3.7% without a transport) was not only ignored but pushed the market beyond the pockets +2% USA and the Ibex +4%, the best of Europe in the morning, very helped by rises in Latin American stock markets of the past two days. The acceleration of the rise of the euro (above $ 1.30 against) and oil (above $ 70), confidence in Obama's victory in general and faith in the rebound pushed the indexes Americans to the neighborhood of +3% (with the SP500 surpassing 1000) and Europe to close at around 5%. In the end neither crude nor the € could remain above their resistance but the SP500, marking the second highest of the day before the closure, it could break after several attempts during the day, the resistance of 1,000 points and close to rise +4 % While Nasdaq and Dow Jones did slightly exceeding 3%.
Wednesday
Continuation of the rebound in Asia (+4.46% Japan) with the excuse of Obama's victory but with crude, €, and future USA-SP saying goodbye to the false break the resistance of 1000 - to the bottom. Europe avoided the progress in the USA Tuesday afternoon and opened down 1% to accelerate sales doubling that number in minutes and stabilized during the morning surpassing the -2% on average. By midday, with the strong performance of Time Warner and a very strong Ibex, was moving away from Europe is minimal. The Ibex rose to positive and the rest reduced its losses by half and one hour of opening American Europe fell 1% and Ibex rose 1%, the reaction is over there in the morning. USA opened the 1.5% decline that was, except for the Ibex-what was then Europe, and fell some more. Yet, as happened the previous day, a terrible fact (the ISM non-manufacturing) was used as an excuse to rebound from floor / USA and Europe were at peak of the day. The SP500 again crashed against the resistance 1000 and this, coupled with the desire to make cash (especially in the financial sector) to be noticed from the opening and the sharp drop in crude oil (and oil) led to Europe closing with losses of around 2% (the Ibex closed in mild positive except for the trend) and USA to overcome the 3% drop. In the last hour of meeting disposals rushed surpassing the 3 indices -4% and the Americans in the final minutes -5% highlighting the more than 9% fall in the banking sector.
Thursday
Sharp drop in Japan (-6.53%) and proximity to its annual minimum in the Chinese stock market following the U.S. meeting on Wednesday and poor forecast from Cisco. Europe opened down about 3% to a timid recovery after falling back to above the new minimum -4% and maintaining these descents to the surprise cut of 1.5 points from the Bank of England left rates at around a minimum 1% were disappointed but little reaction to the bullish stock market, even in English-a measure so aggressive. The strong performance of Wall Mart, declining from 0.50 in Switzerland and speculation about the ECB cut another 1% maximum losses marking the day in negative-always-but were disappointed that the ECB is only down 0.50 and again exceed -3% and -4%. USA opened down slightly more than 1% in minutes to reduce losses at around -0.50% and the half-hour longer be skim the -1.5%, when the -2% and the Dax and Ibex came to -- 6%, a level that punctured shortly after arriving at the USA almost -3%. The closure was almost minimal and ranged from -5.70% -6.84% of the FTSE's Dax. USA fell further after closing above the European -4%. The SP came to -5% (and the Citigroup fell more than 10% playing minimum of 12 years) and then rebounded strongly, but was short-lived and that marked the closing down, leaving the Dow and Nasdaq in the environment of -4.5 %. The crude oil fell again and aggressively approach the $ 60 level and also gave € ground.
Written by Droblo on November 7, 2008 with 295 points.
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