Financial Markets Stabilize but Downsides Remain - NASDAQ Financial Markets Stabilize but Downsides Remain - NASDAQ

Monday, May 21, 2012

Financial Markets Stabilize but Downsides Remain - NASDAQ

Financial Markets Stabilize but Downsides Remain - NASDAQ

(IBTimes) - Financial markets stabilized in Asian session on Monday after the G-8 meeting. However, the actual macroeconomic outlook and the situation in the Eurozone sovereign debt crisis have not changed much from previous week. Therefore, it is reasonable to anticipate more downsides after the recovery. In China, Premier Wen Jaibao was reported of having said that the priority should be given to stimulating growth. This led to anticipations that further reduction in RRR will come.

The focus of the G-8 meeting over the weekend was undoubtedly on the sovereign debt crisis in the Eurozone. It was stated in the communiqué that world finance leaders "agree on the importance of a strong and cohesive euro zone for global stability and recovery, and we affirm our interest in Greece remaining in the Eurozone while respecting its commitments". Concerning the global economic outlook, the leaders acknowledged persistence of "significant headwinds" and they pledged to "take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses, recognizing that the right measures are not the same for each of us". However, there were no further detailed plans on how to resolve the problems.

In China, Premier Wen Jiabao stated that the government "should continue to implement a proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth". The comments indicated that the government sees more is needed to be done to stimulate growth. It's expected that the PBOC will implement further RRR cuts following last week's reduction which would inject RMB 400B to the banking system.

Commitments of Traders:

Speculators were mixed towards the energy complex in the week ended May 15. Net length for crude oil futures added +503 contracts to 184 463. Net length for heating oil slipped -3 084 contracts to 10 131 while that for gasoline dropped -2 581 to 71 811. Net short for natural gas futures added +4 349 contracts to 109 424.

Speculators were bearish towards precious metals. Net length for gold futures dipped -9 161 contracts to 114 142 while that for silver declined -1 089 contracts to 11 474 contracts. For PGMs, net length for platinum decreased -1 358 contracts to 14 370 while that for palladium dropped -2 134 to 2 919.










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World leaders back Greece, vow to combat financial turmoil - Daily Mirror
World leaders backed keeping Greece in the euro zone on Saturday and vowed to take all steps necessary to combat financial turmoil while revitalizing a global economy increasingly threatened by Europe's debt crisis.

A summit of the G8 leading industrialized nations came down solidly in favor of a push to balance European austerity - an approach long driven by German Chancellor Angela Merkel - with a new dose of U.S.-style stimulus seen as vital to healing ailing euro-zone economies. But it was clear that divisions remained.

"We commit to take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses, recognizing that the right measures are not the same for each of us," the leaders said in a joint statement issued at their meeting at the Camp David presidential retreat in Maryland.

The overarching message from the summit hosted by President Barack Obama reflected his own concerns that the euro-zone contagion, which threatens the future of Europe's 17-country single currency bloc, could hurt the fragile U.S. recovery and his re-election chances in November.

With Greece's political and economic upheaval high on the summit's agenda and stoking concerns over instability in Spain and Italy, Group of Eight leaders sought to calm the situation.

In the first line of their final economic communique, they essentially endorsed calls to broaden Europe's focus beyond German-backed belt-tightening, calling it "our imperative" to promote growth.

Anxious to quell investor fears, the G8 said: "We reaffirm our interest in Greece remaining in the euro zone while respecting its commitments." But leaders offered no specific prescription for extracting Athens from its worsening crisis.

It was unusual for the often-bland G8 communique to single out a relatively small nation. But fears that a political stalemate in Greece would lead to its departure from Europe's monetary union at unknown costs to the financial system and global economic stability have spooked markets.

Greek voters this month toppled a government that had agreed to painfully austere terms of an international bailout plan, and uncertainty hangs over the next election set for June 17.

Spain too has roiled markets by revealing huge bad loans in its banking system as it struggles to rein in its budget while facing recession.

Merkel, increasingly isolated by a French-led push for a more growth-oriented approach, sought to play down the differences, saying: "Solid finances and growth belong inseparably together and should not be put into contrast."

Obama, who has pressed Europe for more growth-boosting measures like those he pursued at home, used his closing statement to remind euro-zone leaders that the stakes were high and there could be "enormous" costs if they failed.

"Growth and jobs must be our top priority," he said, reaffirming that Europe has the capacity to meet the challenge.

Marc Chandler, currency strategist at Brown Brothers Harriman, said: "It is significant that a group as weighty as the G8 backs Greece and reinforces the idea that Europe needs a strong union. It strengthens its hand."

In another move to shore up shaky global growth, the G8 leaders said they would monitor oil markets closely and stand ready to seek an increase in supplies if needed. While crude oil prices have declined by 10 percent over the past month, the threat of tighter sanctions on Iran loom next month.

The G8 said the global economic recovery shows promising signs but "significant headwinds persist."


The mountain cabins at Camp David where a shirt-sleeved Obama hosted the G8 leaders contrasted with recent tense meetings in European capitals about a sovereign debt crisis that just keeps getting worse.

The economic communique endorsed a recent political shift away from the budget-cutting austerity that has been championed by Merkel and British Prime Minister David Cameron as the route to prosperity.

Instead it recognized a need to combine budgetary discipline with a growth strategy. This strengthens the hand of newly elected socialist French President Francois Hollande before a crucial European Union dinner on Wednesday to discuss growth.

Cameron, after an early morning gym workout with Obama, said he detected a "growing sense of urgency that action needs to be taken" on the euro zone crisis. London relies heavily on international finance and banking instability would strike a fresh blow to an economy already in recession.

"Contingency plans need to be put in place and the strengthening of banks, governance, firewalls - all of those things need to take place very fast," he told reporters.

European leaders seemed keen to stress that they would stand firm in protecting their banks, after news of escalating bad loans raised the specter that rescuing Spain's banks would crash the euro zone's fourth largest economy.

Hollande suggested using European funds to inject capital into Spain's banks, which would mark a significant acceleration of EU rescue efforts. But there was no direct mention of Spain in the communique or any indication of action leaders would take to combat the financial stresses.


There already were signs of a softening in Germany's austerity stance as the meeting began.

Germany's largest industrial union, IG Metall, struck its biggest pay deal in 20 years early on Saturday. The 4.3 percent pay increase, more than double Germany's inflation rate, will boost worker buying power in the euro zone's richest nation and lift consumption. That is something the United States has urged as a means to bolster overall growth throughout the world's second largest economic region.

G8 leaders also raised pressure on Iran over its nuclear program, which they suspect has military objectives, by committing to a common approach. They pledged to implement sanctions fully against Tehran and indicated they would act together to lower oil prices if needed.

"Our hope is that we can resolve this issue in a peaceful fashion that respects Iran's sovereignty and its rights in the international community, but also recognizes its responsibilities," Obama told reporters.

The Camp David summit kicked off four days of intensive diplomacy that will test world leaders' ability to quell unease over the threat of another financial meltdown as well as plans to wind down the unpopular war in Afghanistan.

After the Camp David talks, Obama and several of the G8 leaders headed to his home town of Chicago where he will host a two-day NATO meeting at which the Afghanistan war will be the central topic.

(Additional reporting by Alister Bull, Jeff Mason, Caren Bohan, Stella Dawson, Elizabeth Pineau, Gleb Bryanski, and John Irish; Writing by Stella Dawson; Editing by Mary Milliken and Christopher Wilson)

(Source : Reuters)

Barclays offloads fund management business BGI to BlackRock for $13.5bn - Daily Telegraph

Asked about the windfall he will receive, American-born Mr Diamond explained that he bought shares in BGI at the same time as many other “senior people”. “The way the business has performed over the last six years, driving from $100m a year of profit before tax in 2003 to as high as $1.5bn in 2007 means the returns to employees who bought shares were good. I’ll leave it at that,” said Mr Diamond.

Both he and Mr Varley will join the BlackRock board should the deal - which values BGI at 11.8 times 2008 earnings before interest, tax, depreciation and amortisation (EBITDA) - be approved by shareholders. The sale proceeds would lead to a net gain for Barclays of $8.8bn, raising the bank’s Tier One capital ratio to 8.3pc from 6.7pc.

There remains a slim chance that the deal could be scuppered should a consortium led by CVC Capital Partners – which had originally offered $4.4bn to buy the iShares part of BGI in April - chooses to propose a higher offer for the entire BGI business.

CVC has until June 18 to propose such an offer, with Mr Diamond on Thursday night confirming that it was “pretty clear” that Barclays’ board would accept an offer only for the whole of BGI and not just iShares, which specialises in exchange traded funds.

However, if CVC does not trump BlackRock’s offer, the proposed combination will be recommended by the Barclays board and put to a shareholder vote, which, if successful, will lead to the creation of the renamed BlackRock Global Investors with $2.8 trillion of assets under management.

Mr Diamond went on to admit that the two companies have been talking on-and-off for the last 6 to 7 years, but that although “it wasn’t the right time then, clearly it’s the right time now.”

BlackRock is funding part of the deal through a $2.8bn institutional share offering. Although Mr Fink would not disclose the identity of any of the investors involved, the Sunday Telegraph revealed last week that the Qatar Investment Authority, the Abu Dhabi Investment Authority and the Kuwait Investment Authority were all interested in backing BlackRock.

Shares in Barclays, which closed up 16p at 304.5p on Thursday on expectation of the deal’s announcement, are set to rise further when the market opens for business this morning.

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