PIGS – Portugal, Italy, Greece, Spain. These days, if the news leads with Europe, it’s probably going to be a down day. No matter how you cut it, someone is going to have to eat some European debt. Clearly the markets don’t think that the European banks have the capital to write off 50% of the Greek, or Italian, or Spanish, or Portugese debt on their books. Greece has $14.4 Billion of principal payments are due on March 20th. IF they can’t come up with the money (that’s almost a joke, AS IF they can come up with the money), then they will need more funding from the rest of Europe. Add to that the fact that there is a lowered GDP estimate for Germany released today. Many experts expect that at some point Germany going to take care of themselves and leave the PIGS to fend for themselves.
Wire: BLOOMBERG News (BN) Date: Dec 14 2011 10:32:37
Stocks, Euro, Commodities Decline on European Debt Concern
By Stephen Kirkland and Allison Bennett
Dec. 14 (Bloomberg) -- U.S. stocks fell for a third day,
the euro slid below $1.30 for the first time since January and
commodities sank as growing funding stress in Europe fueled
concern the region is struggling to contain the debt crisis.
The Standard & Poor’s 500 Index fell 1.1 percent to
1,211.95 at 11:27 a.m. in New York and the Stoxx Europe 600
Index retreated 1.9 percent. The euro depreciated as much as 0.7
percent to $1.2946. Oil dropped the most since September and
gold slid below $1,600 an ounce for the first time since
October. Ten-year U.S. Treasury yields lost five basis points to
1.92 percent, while the rate on the the 30-year German bund
reached a euro-era record low of 2.38 percent.
Italy’s five-year yield increased at an auction today,
default swaps protecting European sovereign debt traded near a
record high and borrowing costs climbed for banks in the region
as plans hashed out last week to create a closer fiscal union in
the euro zone fail to alleviate concern about the crisis.
“We’re not seeing the developments unfold that show they
want to put an end to the crisis now,” said David Watt, senior
currency strategist at Royal Bank of Canada’s RBC Capital unit
in Toronto. “Talking about a fiscal union is now next to
useless because that would happen five years from now,” he
said. “As long as they continue to talk about issues that are
irrelevant, we’re going to continue to have a market that gives
the thumbs down to EU policy-maker efforts.”
The euro slid against 10 of its 16 major peers. The Dollar
Index, which tracks the U.S. currency against those of six
trading partners, advanced 0.5 percent to 80.652, gaining for a
third day and reaching the highest level in 11 months. The krone
weakened against 13 of its 16 main counterparts after Norway cut
its benchmark rates by more than economists forecast as the euro
area’s debt crisis threatens growth.
Gauges of energy and technology companies led losses in
U.S. stocks, falling more than 1.5 percent. Cisco Systems Inc.,
Caterpillar Inc. and Exxon Mobil Corp. dropped at least 2
percent to pace declines in the Dow Jones Industrial Average.
Thirteen stocks declined for every one that gained in the
Stoxx 600. Logica Plc plunged 17 percent, the most since 2002 on
a closing basis, as the Anglo-Dutch computer-services provider
accelerated a reorganization after customers cut spending amid a
No ‘Fast Solutions’
German Chancellor Angela Merkel, during a speech to
parliament in Berlin, reiterated her opposition to euro bonds as
a tool for dealing with the region’s debt crisis. Merkel said
there’s no looking back after last week’s European summit deal
on stricter budget controls, with the path to fiscal union in
the euro region now “irreversible.”
“There are no simple and fast solutions,” Merkel told
Plans led by France and Germany to amend European Union
rules and create closer fiscal union face misgivings from the
European Commission and potentially from some of the 26 member
states that agreed to the changes, the Handelsblatt newspaper
said. Merkel favors one accord to accommodate both the setting-
up of a permanent bailout fund and to usher in new stringent
budget constraints on euro-region countries, while the
commission wants two separate treaties, the newspaper reported,
citing EU President Herman van Rompuy.
The cost for European banks to borrow in dollars rose for a
fifth day to the highest in two weeks, according to money-market
indicators. The three-month cross-currency basis swap, the rate
banks pay to convert euro payments into dollars, was 147 basis
points below the euro interbank offered rate, from 141 basis
points yesterday. The gap has widened by 38 basis points since
the European Central Bank cut its main interest rate on Dec. 8.
The London interbank offered rate, or the rate that London-
based banks say they pay for three-month loans in dollars, was
0.555 percent, according to the British Bankers’ Association,
rising for a fourth straight day and reaching the highest level
since July 2009. The dollar Libor-OIS spread, a gauge of banks’
reluctance to lend, was 46.5 basis points, from 46.0 basis
Italy’s 10-year yield increased 11 basis points to 6.79
percent. The government sold 3 billion euros ($3.9 billion) of
five-year bonds at an average yield of 6.47 percent, up from
6.29 percent on Nov. 14. French 10-year yields decreased eight
basis points to 3.19 percent.
The Markit iTraxx SovX Western Europe Index of credit-
default swaps rose 6.7 basis points to 385.5.
European Central Bank policy makers are becoming more
skeptical about the efficacy of the bank’s bond-purchase program
and the idea that the crisis can be tamed "through the printing
press" should be ignored, ECB council member Jens Weidmann said.
Treasury 30-year yields lost six basis points to 2.95
percent before the nation sells $13 billion of the debt. A
three-year sale drew record demand on Dec. 12 and bidding
increased at a 10-year auction yesterday as investors sought a
haven from Europe’s debt crisis.
Oil in New York declined 4.6 percent to $95.52 a barrel as
the Organization of Petroleum Exporting Countries agreed to
raise its production ceiling, moving the group’s supply target
nearer to current output levels.
The MSCI Emerging Markets Index fell 1.4 percent, declining
for a fifth day. China’s Shanghai Composite Index retreated 0.9
percent after the Conference Board’s October leading indicator
index for the country fell 0.1 percent.
Boudin Chaud. Cous Cous Froide. Allons Tigres--Poussez Poussez Poussez
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury
445 North Blvd, 7th Floor
Baton Rouge, LA 70802
P.O. Box 44154 Capitol Station
Baton Rouge, LA 70804-4154
One City Plaza, 7th Floor
Corner of North Blvd & 4th Street
Exit 1B I-110 Convention Street, Turn Left to get to North Blvd