Moody’s May Cut Greece to Junk in Four Weeks
by Edward Harrison
Moody’s is going on a rampage regarding the sovereign debt of the Eurozone periphery. They are now reviewing Portugal and Spain for a potential ratings downgrade. That means they are threatening Greece with junk status and also warning that cuts to Portugal may come as well. Spain’s rating outlook remains stable and Ireland are not mentioned.
In their most recent note alerting the market of these actions, Moody’s has defended themselves despite the wide perception that the ratings agencies are perennially behind the curve on downgrades.

Some good readings for the long Christmas weekend from a great contributor of FXstreet.com as it is The National Bank of Canada through National Bank Financial Group division

Monthly Fixed Income Monitor - Looking for monetary exit strategies by National Bank of Canada

Economic Monitor - World: Strong Asia-led growth in 2010 by National Bank of Canada

Monthly Equity Monitor - 2010: Recovery year by National Bank of Canada

Francesc

Dollar appreciation in 2008: safe haven, carry trades, dollar shortage and overhedging
Many observers were surprised by the US dollar’s appreciation in late 2008, the sharpest in the period since generalised floating began in 1973. In their feature, Robert McCauley and Patrick McGuire (BIS) argue that a combination of factors contributed to this development. First, the US dollar benefited from the global flight to safety into US Treasury bills. Second, the dollar profited from the reversal of carry trades. Third, a dollar shortage in the international banking market resulted in high dollar interest rates in private markets, which supported the currency. Finally, writedowns of dollar assets left European banks and institutional investors outside the United States overhedged. The resultant squaring of their positions in turn may also have boosted the dollar.
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Saxo Bank to buy E-Trade’s Nordic business
COPENHAGEN, Dec 3 (Reuters) - Privately held Danish bank Saxo has agreed to buy the local Nordic trading business of U.S.-based online bank and brokerage E-Trade for an undisclosed sum to broaden its product offering and expand its client base.
The acquisition will boost Saxo Bank’s assets under management by 5 billion Danish crowns ($1.02 billion) and add 50,000 active accounts, Saxo said in a statement.
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Brown urges business leaders to accept Tobin tax
• Levy on City trading aimed at restoring trust in banks
• Survey shows more than 50% of voters back planv
The Guardian
Gordon Brown will take his radical proposal to tax City trading to Britain’s business leaders today, as a survey shows that more than half of voters would back the plan, if the proceeds went to help the poorest in society.
Speaking at the CBI’s annual conference in London, Brown will press for a global levy on financial transactions as one way of restoring the “contract of trust” between banks and the rest of society.
The prime minister’s renewed commitment to the controversial levy, also known as a Tobin tax, comes as a survey carried out for Oxfam by pollsters YouGov and obtained exclusively by the Guardian, shows 53% of voters are in favour of the idea, with just 28% against. Even among Conservative voters, 43% back a transaction tax, compared to 39% against.
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Hi everyone

Some good news to start the week. Yesterday Monday November 16th 2009, FXstreet.com’s Forex Mobile Site:

http://m.fxstreet.com

broke for the first time ever the 2,000 unique visitors level to reach 2,236, much above the previous high of 1,747 reached Tuesday last week.

UPDATE: on Tuesday November 17th the mobile site reached a new all-time high of 2,688 unique visitors and 3,636 page views.

I must clarify that the main reason behind this big increase is that Google Analytics stats are now counting both mobile devices supporting JavaScript and those that don’t. Before yesterday Google Analytics was only recognizing those that run JavaScript, which are mostly last generation devices.

So to summarize it, previous data was underestimating the real traffic of our mobile site, but I can not stand to congratulate ourselves for having such a crowd visiting already our Mobile Site.

Thanks everyone!

Francesc

Hi everyone

Today’s BoE and ECB Live Coverage touched a new all-time high of 2,000 traders.

The event attracted 1,926 traders and was hosted by Valeria Bednarik, covering the Interest Rates decision of two of the most important World Central banks, the ECB and BoE, for more than two hours live from FXstreet.com Homepage and Calendar.
Yesterday’s FED Live Coverage was followed by more than 1,100 traders and we expect to reach great numbers in tomorrow’s NFP Live Coverage.

Francesc

Transcripts

FED Live Coverage: http://transcripts.fxstreet.com/2009/11/live-coverage-fed-interest-rate-decision-.html
ECB & BoE Live Coverage: http://transcripts.fxstreet.com/2009/11/boe-and-ecb-live-coverage-.html

Scary future for Spain…..

Francesc

Spain: The Hole In Europe’s Balance Sheet
By Variant Perception

Dives sum, si non reddo eis quibus debeo.
I am a rich man as long as I don’t pay my creditors.
Titus Maccius Plautus (c. 254-184 BCE), “Curculio”

Themes

• Spain = Japan 2.0? - We argue that 1) the real estate crash in Spain is worse than is widely believed, 2) Spanish banks are hiding their losses, and 3) investors are smoking crack if they believe that Spanish banks are among the strongest in Europe, (see Forbes latest Spanish Banks In Top Form). If all these are true, Spain will soon have zombie banks like Japan.
• Banks are hiding losses - We believe that Spanish banks are not marking their real estate loans to market and are extending credit to zombie construction companies. They do this by 1) Getting a boost from accounting changes, 2) Not marking loans to market, 3) Continued lending to zombie companies, 4) Extending 40 year and 100% loan-to-value loans, and other bubble-like lending practices. We look at each of these in turn.
• Spain is in deflation - In a deflationary environment, servicing debt becomes even harder. Even when rates go to zero the real burden of debt goes up. That is why deflation is such a terrible thing. Eastern Europe, Spain and Ireland are now all experiencing the beginning of deflation. We believe that we will see much more deflation to come, which will have broad ramifications across the European banking sector.
• Who’s holding the bag? - The periphery countries are net debtors, and the rest of Europe is the net creditor. When a debtor can’t pay, the creditor suffers. Germany, France and others will need to cope with recapitalizing the periphery and Spain.
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Arguments for ECB to hike in 2010 by Danske Bank
* The focus of the ECB now appears to be shifting from whether to implement more stimulus measures to when to begin withdrawing them.
* We believe that the euro area next summer will have recovered so much that the ECB will consider interest rates at historical lows as being inappropriate and will start hiking.
* When the ECB starts hiking it will probably deliver about 0.5 percentage points each quarter, which was the average hiking speed seen in the 2000-01 hiking cycle.
* The exit strategy is likely to begin with alterations of the conditions for the long-term refinancing operations.
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• After a small break in June, Global PMI had another strong increase in July. The global new orders index rose from 49.1 to 53.3, which is above the long-term average of 52.6. OECD’s leading indicators also rose strongly to even higher levels, pointing to very strong growth and a further rise in PMI during Q3 and Q4.
• The order-inventory balance from PMI data also rose a bit further, painting a similar picture of very strong global growth in H2 09.
• In the US most leading indicators continued higher. The ISM new orders index made another move higher from 49.2 to 55.3 and the order-inventory balance rose further. The ISM model points to a further rise above 55 by year-end.
• In Euroland OECD’s leading indicator, the PMI order-inventory balance, and ZEW all point to a significant rebound in H2 growth. In Scandi a sharp further rise in Swedish PMI stands out. Other countries and surveys also point to improvement, albeit at a slower pace.
• Asia continues to look strong. In particular, the sharp rebound in industrial production in Japan, Taiwan and South Korea is striking. CEE shows further a rise in PMI. Russian PMI increased strongly again in July.
• Outlook: We look for further improvement in PMI data in the coming months whereas some of the leading indicators that have risen the most are likely to level off soon from the very high levels. Global GDP growth looks set for a strong H2 recovery.
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