Stocks fade despite Spain bank rescue plan - Detroit Free Press Stocks fade despite Spain bank rescue plan - Detroit Free Press

Monday, June 11, 2012

Stocks fade despite Spain bank rescue plan - Detroit Free Press

Stocks fade despite Spain bank rescue plan - Detroit Free Press

No sooner had stocks opened higher on Wall Street today than they quickly reversed course and began to fade, as optimism wavered about European countries saying they would lend Spain as much as $125 billion to save its banks.

The Dow Jones industrial average and the broader Standard & Poor's 500 index were lower as was the Nasdaq composite index in midday trading.

Market relief that Spain had secured European Union help to save its banking sector quickly turned to concern today, as investors began to question the mechanics of the $124.68 billion loan package and whether the country could manage the extra debt or be forced ask for more help.

The financial respite for Spanish banks sent European stocks higher: France's CAC-40 rose 1.2%, and the DAX in Germany surged 1.7%, while Spain's Ibex rose 2%.

The markets are also looking ahead to an election this weekend in Greece that will help determine whether that countries stays in the euro currency union.

Today had started well with markets in Asia and Europe rising on the news on Saturday that Spain had become the fourth and largest European country to seek a bailout.

Finance ministers from the 17 countries that use the euro said they were willing to lend Spain up to $125 billion after Madrid said it would need help to shore up banks felled by bad real estate loans. Spain has not said exactly how much of that it will tap, but markets were cheered by the fact that the nation's government was finally owning up to needing help.

The move was portrayed by Spanish and European officials as a bid to contain Europe's widening recession and financial crisis that have hurt companies and investors around the world. Providing a financial lifeline to Spanish banks was designed to relieve anxiety on the Spanish economy the fourth-largest in the 17-country eurozone.

Spain's Ibex-35 index shot up 5% on opening, with banks in particular doing very well. But any enthusiasm fizzled out, with the index was up about 1.6 % in early afternoon. Bank stocks also started the day strongly. Shares in Bankia, which had requested 19 billion in aid to cover its bad loans and assets, rose about 15%, but later fell to 7%.

The interest rates Spain has to pay on its debt also started the day well. The rate on Spanish 10-year bonds a direct measure of how much investors trust a country to pay its debt obligations started with a 17-point drop. But this soon turned into a rise and as of early afternoon it was up 9 points at 6.27% edging closer to the 7% level where the three other European bailout countries Greece, Portugal and Ireland sought international assistance.

Investors appear to be growing increasingly concerned that by taking on so much new debt via the rescue package Spain's ability to make interest payments on its debt could be strained dangerously.

"As much as the perception of the situation in Europe may have changed, plenty of risk still remains in place, with question marks over the ability of Spain to repay the debt, especially, if the country fails to get back on the growth path, the outcome of the upcoming Greek elections and the perception of situation in Italy," Anita Paluch of Gekko Global Markets wrote.

Eurozone finance ministers said Saturday they would make the loan of up to 100 billion available to the Spanish government to prop up banks laden with non-performing loans and other toxic assets after the collapse of a real estate bubble. Recession-hit Spain has yet to say how much of this money it will tap while it waits for the results of two independent audits of the country's banking industry. The bailout loans will be paid into the Spanish government's Fund for Orderly Bank Restructuring (FROB), which would then use the money to strengthen the country's teetering banks.

In a report it released late last week, the International Monetary Fund estimated Spain needs at least around 40 billion.

Investors now are very eager to know how much Spain asks for to strengthen its banks and how large a safety margin of extra money it allows itself to cushion itself against further shocks.

"People in the financial markets will be very keen to know what that cushion is, particularly in an environment where the real economy is in poor condition," said Mark Miller of Capital Economics in London.

Spain's economy is in recession, the second in three years while its jobless rate is nearly 25%.

"Markets will certainly ask the question about whether a second bailout might be required and the margin for error between the sort of 40 billion the IMF is saying and the 100 billion ceiling in terms of what we heard," Miller said.

Miller added that with the bailout, Spain's debt-to-gross domestic product ratio which was a relatively low 68.5% at the end of last year could shoot up to the 90s next year. And bond yields will remain high.

If the ratio gets up to Greek levels of 120 % or so, and 10-year yields back to the near-7% levels of a few weeks ago, "then people will ask that question about a second bailout," Miller said.

Another issue is whether the European money comes with strings attached for the government, and not just an obligation for banks to restructure. When the bailout was announced on Saturday, Spanish Economy Minister Luis de Guindos said the rescue would not force any new austerity measures on the government.

And speaking to reporters Sunday, Prime Minister Mariano Rajoy avoided using the term 'bailout' to describe the aid, calling it instead a credit line without the strict austerity conditions that have accompanied bailouts for Greece, Portugal and Ireland.

However, today the European Union made clear the money is more than just a loan. Besides being paid back with interest, there will be strings attached for the Spanish government.

"When people lend money, they never do it for free. They want to know what is done with the money," said Joaquin Almunia, the European Competition Commissioner.

"I am not talking about the just the obligation to pay back the money, but also some other kind of terms," he told Cadena Ser radio, adding that these remain to be determined.

But the economy ministry later released a statement saying the package entails "the necessary conditionality for the financial sector" but no new fiscal consolidation or structural reforms beyond those the government has already embarked on.

The loan will be supervised by the European Commission, the European Central Bank and the IMF, Almunia said.

A European Commission spokesman, Amadeu Altafaj, told Spanish state television that this troika will have people on the ground overseeing the restructuring of the Spanish financial sector.

He noted that last month the European Commission recommended Spain undertake further reforms such as speeding up the phasing of a higher retirement age it is to go from 65 to 67 and raise VAT sales tax. The newspaper El Pais quoted EU officials today as saying these changes and others are part of the conditions that come with the bank rescue package.

Money Pros: Pay off credit cards first, before tackling a home equity loan  - New York Daily News

The Money Pros are standing by to take your questions.

Q. I recently came into some extra money ($5,000) and want to use it to pay off some debts.

I have numerous credit cards, most of them with balances below $500, but they have high APRs.

I also have a home equity loan of just below $12,000 with an APR of 4.75%. It has three and a half years left on it. My payment for that loan is $300 a month.

What do you suggest I use my money for? Do I pay down, or off, the credit cards, or keep paying down the home equity loan?

A. While your home equity loan may be tax deductible, your credit cards are not.

By holding on to them, you are accumulating higher costs for the items you bought. I suspect that your credit cards have a higher rate than the 4.75% you are paying on your home loan. Therefore it is wise to repay the credit cards first.

Within this group, I suggest you retire the debt on some of the cards. Pick the highest rates, pay them off first, and cut the cards up.

No need to close the cards since the rating agency looks at the value of your outstanding debt and your available credit.

If you have money left at the end, begin an emergency fund with the balance.

In the future, try to spend money you have available. By not using credit cards or by paying them off immediately, you will avoid racking up high interest rate charge and gain better control of your finances.

Since you came into an unexpected $5,000, pat yourself on the back and take your loved ones out to dinner to celebrate. Spend no more than $100, while you still have that debt.

Karen Altfest

Karen Altfest is a certified financial planner and a principal advisor at Altfest Personal Wealth Management.

Do you have a question for the Money Pros? Send it to Phyllis Furman at

US STOCKS-Wall St down on Spanish aid terms, Greek elections - Reuters UK

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Stocks close 1.96% higher on Spain bank bailout - Japan Today

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Stocks closed up 1.96% on Monday, tracking a broad regional rally driven by the eurozone’s decision to lend Spain up to 100 billion euros ($125 billion) to rescue its banking system. The Nikkei 225 index at the Tokyo Stock Exchange added 165.64 points to ...

Stocks slip amid Spanish aid, Greek elections -

Stocks sank Monday, led lower by financial and material sectors, as a closer look at the euro zone aid package for Spanish banks disappointed investors and as market volatility rose ahead of the upcoming Greek elections.

Spain will be lent up to 100 billion euros ($125 billion) to help the country's battered banks. The size of the package was larger than expected, partially removing a cloud that has been hanging over financial markets.

Investors have feared that a banking crisis in the euro zone's fourth-largest economy could have compounded the currency bloc's troubles with Greece ahead of that country's June 17 elections, which many investors fear could lead to Greece leaving the euro zone.

"A closer look at the deal shows that this is strategic and tactical rather than a comprehensive ECB nuclear bailout option. Given the gravity of the European problem, not just Spain, people kind of waking up to the fact that this is something but not enough," said James Dailey, portfolio manager of TEAM Financial Asset Management.

"A lot in the market had happened last week building up to this. Now that we have this out of the way and Greek elections on Sunday, what good could happen until then? We have lost a short-term catalyst."

After the aid news was announced over the weekend, futures indicated gains of more than 1 percent on Sunday. However, they subsequently lost ground as concerns over the region persisted. In addition, some weak data from China underscored the hurdles being faced to strong growth.

In part because of uncertainty stemming from the euro zone, U.S. companies are finding it more difficult to grow their revenue now than at just about any time since the financial crisis.

Wall Street is coming off the previous week's advance, which was 3.7 percent on the S&P 500, the index's biggest weekly gain of 2012.

In a sobering sign of slowing overseas economic growth, China's inflation, industrial output and retail sales all flagged in May. It was the second straight month of sluggish growth, which galvanized policymakers last week into taking their boldest action yet to combat a sharpening slowdown.

Apple Inc kicks off its annual conference for software developers on Monday, and more than ever, the consumer electronics juggernaut finds itself in a pitched battle with the online search giant, Google Inc - in smartphones, cloud computing and the never-ending competition for the hearts and minds of the best software developers.

Facebook Inc is on the preliminary list to join the Russell 3000 index, according to Russell Investments on Monday. The stock is up 1.7 percent at $27.55.

Goldman Sachs is close to striking a deal over the sale of its hedge fund administration business with State Street Corp, the Financial Times reported. The move would create the largest administration services provider to hedge funds worldwide.

Reuters contributed to this report.

Money, Sex and Power - Huffington Post

While the 'Spear' debate raged last week a group of activists and academics convened in Cape Town to discuss the very issues that the controversial art sought to raise. The Forum titled provocatively title "Money, Sex and Power: The Paradox of Unequal Growth" brought back a flood of memories. As much as it spoke to an open-ended conversation amongst African intelligentsia, it held the opportunity to start a conversation that would take us back to the Pan African dream of our founding fathers of 'freedom, social justice and bread.'

I found the art distasteful but that's also my opinion of the public political discourse in our country. It fails to address issues of structural causes of our poverty and social inequality. It ignores the sexual assault on our children daily in our schools across the country by predators that masquerade as teachers and rob so many children of their innocence forever.

I also reflect on what the Minister of Safety and Security Siyabonga Cwele, speaking in the National Assembly on Nov. 16, 2011 said when he labelled people and groups opposing provisions of the Secrecy Bill as "local proxies to foreign spies". He ranted on that "foreign spies" were paying civil society groups to oppose the Secrecy Bill.

Predictably the conference was not funded by the South African government or some aid agency. It was convened by the Open Society Foundation -- funded by financier George Soros. Does he have an agenda? Yes, I am absolutely sure of it. Did he have an agenda when he funded one of our first interactions with the representatives of the apartheid establishment?

Yes, I am absolutely sure of that also.

Who in the world does not have some agenda? A mother has a resolute agenda to protect and feed her children. The Chinese have an agenda in Africa. So does India, the U.S., France and every other country.

I also have an agenda. It is to defend our Constitution and ensure that our communities are mobilised to demand their human rights enshrined in it and our contract in 1994 to deliver a better life to our people.

Conferences such as these bring together new voices from around the world into frank African conversations. Its mix of global policy actors with extensive experience gives us insight into how other countries especially in Africa but also in Asia and Latin America are wrestling with similar problems. It connects us to other networks and gives us a sense of the ferment in the world against the putrefying stench of corruption and human greed of the economic and political elites in the world.

It helps me put our domestic situation into real global perspective.

I also took some of these international activists to the launch of the book on the life of Emma Mashinini amongst them Hadeel Ibrahim from the Mo Ibrahim Foundation and Bibi Bakare-Yusuf a young publisher from Nigeria. They made an impassioned plea for us to think more globally and about the continent. In essence that we need citizen to citizen dialogues that transcend the egos of our leaders and the elites of our countries. That our youth of our continent are the motive force for change given they will make up three quarters of Africa's population by 2050. That South Africa was he model of development that placed human rights and social solidarity at the centre of our vision. Yet what we see is a decline in rights, an increasing intolerance that breaks out into ferocious xenophobic violence against foreigners.

So why do we have an American citizen funding our discussion on our African problems? While we have our fair share of hugely wealthy citizens, they are not yet engaging in this kind of challenging philanthropy.

Which of our African philanthropists will finance the public debates about social justice, lesbian and gay rights' governance and transparency of leadership? They put their money into safe bets that will not lead to any conflict with the prevailing elites who control power and run the patronage networks that have made them wealthy; more often it about laundering reputations, money and positioning for publicity and brand recognition.

I think back to our battles of social activism around the right to treatment led by the TAC, or battles to ensure that textbooks are delivered or mass opposition is mobilised against the 'Secrecy Bills.' Not many if any corporate or wealthy individual will support this most basic assertion of our constitutional rights.

I have had people in the corporate sector who shared the trenches with me for decades saying "Jay, we made our contribution already. We have to do business with public sector institutions. I can't be seen to be criticizing government."

So while I may disagree with certain assumptions that Global Foundations make I am grateful that they have in many instances given organisations involved in the social justice sector unqualified support. How else would we have seen the successful mobilisations that changed an arrogant Government that was prepared to let our people who had HIV/AIDS to die because of its Denialism?

But that does not presuppose that I have no criticism of how global philanthropy or present day civil society organisations operate.

I think back to our struggle against apartheid in the 1970s. When we were smashed in 1976 we turned to the painstaking work of organising our people at a community level far from the radar screens of the apartheid regime. It was around the bread and butter issues of our people that we created the tsunami that would one day topple Africa's most powerful regime.

We co-created a vision and strategy that ensured local ownership and grassroots leadership that would withstand the most ferocious attacks of our enemy. We never drew up a business plan or sought out some generous donor. We never entered the struggle for development as a career. We were volunteers driven by the passion. We were outraged by social injustice. It made us fearless in challenging poverty and oppression.

So what has changed nearly 40 years later? Today I am confronted by activists who want to discuss a budget before they have a meeting or launch a campaign. A whole development industry has spawned a merchant class of poverty consultants. Development assistance has been packaged into projects. A new obsession with evidence-based funding has razed the 'green shoots' -- projects with promise -- to conform to a narrow basket of indicators used to assess 'best practice' for bean counters in distant western capitals.

Are we right in demanding the same accountability of philanthropists who are spending their own money as we do of our political leaders spending our taxpayers' money? We need a public debate on this issue.

Many new Foundations view themselves as 'avant garde,' believing that they understand the notion of risk and delivery as they cut a swathe through the underbrush in search of big breakthroughs. Typically, the search is for a new technology or a market-based device that could change lives dramatically.

Ten years of chairing GAIN -- a global foundation fighting malnutrition has shown me the flaws in the modern system of traditional development assistance. The rush to seek single issue-solutions to complex problems fails to recognise or respond to the overarching cultural and political factors that connect them. Worse still, they may recognise these factors and presume a solution. Recipients desperate for financial support take donor aid with the full knowledge that the chances of programme success are minimal. They spend countless hours collecting useless information that does not improve their work at the coal face but satisfy some bean counter in a foreign capital.

The conference focus also on the roles of India, Brazil and China as drivers of growth on the continent and as important political and social actors on the African Development Agenda was critical. Our challenge is that India and China have a single African strategy. Africa has failed to build a coherent development strategy and consequently we have a weakened bargaining power in our negotiations with these powerful economies.

My day in Cape Town proved fruitful. I learnt and more importantly had the opportunity to meet and interact with a passionate, articulate and determined set of activists who hold the hopes to unlock the potential of our beautiful continent and deliver a vision of freedom from corruption, poverty and inequality that our people have a right to.

STOCKS NEWS EUROPE-Tesco underperforms after Q1 update - Reuters UK

Mon Jun 11, 2012 9:20am BST

Shares in Tesco gain 0.4 percent, underperforming a much stronger advance by the FTSE 100 index, up 1.6 percent, as the world's third-biggest retailer reports a drop in quarterly underlying sales in its main British market, leading Seymour Pierce to cut its target price for the stock to 320 pence from 350 pence.

The supermarket group, with over 6,000 stores in 14 countries, says consumer confidence was subdued across all of its markets, with total sales up 2.2 percent including petrol in the 13 weeks to May 26, its fiscal first quarter.

Seymour Pierce says Tesco's Q1 sales were broadly in line with market expectations and thinks there must be some relief that despite the well flagged negative UK like-for-like sales, the firm's management is advising no change to full-year 2012/13 expectations.

"We continue to believe that Tesco is still a strong business with an unassailable market leading position in the UK that has temporarily come off the rails  Nevertheless it is hard to see anything other than pedestrian earnings growth from the company over the next three years," the broker says in a note.

"UK profits are unlikely to grow while the company has to invest in its proposition to defend market share, and overseas, which still only accounts for circa 25 percent of operating profits, will not significantly move the dial," Seymour Pierce adds, retaining its "hold" rating on the stock.

Reuters messaging rm://

1 comment:

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