Stocks soar on central bank readiness; Greece eyed - Stocks soar on central bank readiness; Greece eyed -

Friday, June 15, 2012

Stocks soar on central bank readiness; Greece eyed -

Stocks soar on central bank readiness; Greece eyed -

Eric Thayer / REUTERS

Traders work the floor of the New York Stock Exchange Friday.

Stocks closed the week sharply higher Friday on hopes of collective action from global central banks if Sunday's election in Greece results in market turmoil.

The Dow Jones industrial average closed the day up 115 points.

The news helped offset the latest round of weak U.S. economic data, which pointed to sluggish growth domestically. But traders were cautious and a measure of market anxiety also rose for the day.

Officials of the Group of 20 leading nations told Reuters on Thursday central banks of major economies would take steps to stabilize markets and prevent a credit squeeze, if necessary.

The news spurred sharp gains late in Thursday's session.

Later reports of the European Central Bank hinting at an interest rate cut and Britain set to flood banks with cash further sparked bullishness.

But Spain's banking system remains an issue and the country's 10-year bond yield, at 6.92 percent, was still too close to the 7 percent mark at which other highly indebted euro zone nations were forced to seek bailouts.

Related: Greek bank shares jump ahead of key election

"We think there is plenty of reason to remain bearish longer term. There is ample empirical support for the notion that banking crises are ordinarily followed by double dip recessions, and the latest recession was caused by no ordinary banking crisis," said Peter Cecchini, global head of institutional equity derivatives at Cantor Fitzgerald in New York.

"Unfortunately, markets and policy makers are so enamored by monetary policy solutions, they've forgotten how things are supposed to work," which should be based on innovation and productivity growth, Cecchini said.

Despite the gains the market's fear gauge, the CBOE Volatility Index, remained elevated.

Investors fear the Sunday elections in Greece may set the nation on a path to an exit from the euro zone. That possibility, along with questions about the effectiveness of a bank bailout plan in Spain, has triggered a spike in volatility.

A gauge of manufacturing in New York state fell sharply in June, though it still showed growth, while a read on consumer sentiment was also below consensus forecasts.

Recent economic indicators, including Thursday's unexpected rise in jobless claims, have pointed to sluggish growth in the U.S. economy. However, U.S. equities have largely tracked European developments in recent months, and shrugged off weak domestic data on occasion.

Some investors think the lackluster U.S. data increases the chances that the Federal Reserve will signal more easy money to counter slowing growth when it releases its policy statement next Wednesday at the close of a two-day meeting.

Reuters contributed to this report.

Insight on the markets now and where they're headed Monday following the Greek elections, with Paul Schatz, Heritage Capital; Scott Wren, Wells Fargo; and Jeffrey Davis, Lee Munder Capital Group.

Stocks rally before Greek vote - Yahoo! Eurosport

Stocks around the world rallied on Friday despite uncertainty over Greece as investors appeared to bet on fresh stimulus from the United States and Europe (Chicago Options: ^REURUSD - news) to boost growth and fight the eurozone crisis.

Asian markets started the rally, with European markets following and US stocks extending Thursday's gains in early trading.

London's benchmark FTSE 100 (Euronext: VFTSE.NX - news) index closed up 0.22 percent to 5,478.81 points, while in Frankfurt the DAX 30 (Xetra: ^GDAXI - news) rose 1.48 percent to 6,229.41 points, and in Paris the CAC 40 (Paris: ^FCHI - news) climbed 1.82 percent to 3,087.62 points.

Madrid gained 0.34 percent and Milan jumped 2.34 percent after the Italian government adopted growth measures and plans to sell off some state-held companies and property.

In foreign exchange deals, the euro drifted up to $1.2635 from $1.2630 late Thursday in New York (Frankfurt: A0DKRK - news) . Sterling rose against the euro and dollar in afternoon trading after initially dropping following the stimulus news.

The dollar slid against the yen, buying 78.68 yen instead of 79.34 late on Thursday.

"The prospect of co-ordinated central bank intervention from central banks next week in the event of turmoil caused by the result of this weekend's Greek elections has given equity markets a boost today, and calmed some rather frayed investor nerves," said Michael Hewson, senior market analyst at CMC Markets.

"The Bank of England took a similar approach by announcing two new stimulus packages to aid worsening economic fears and to give long term supports to UK banks allowing them to borrow loans below market rates," added Khurram Ali, a broker at Valbury Capital.

European Central Bank chief Mario Draghi fuelled speculation of an imminent rate cut or other measures, warning Friday of "serious downside risks" to the euro area economy while inflation saying was no threat.

However, with Spain's borrowing costs pushing to record highs despite a 100 billion-euro bank bailout, traders remain on edge.

The IMF said Friday that Spain will likely miss its budget-cutting deficit target for 2012 and it pushed Madrid to adopt broad reforms as it grabs a rescue line for stricken banks.

Asian markets mostly rose on Friday and US stocks forged higher in midday trade.

At around 1600 GMT, the Dow Jones Industrial Average was up 0.57 percent to 12,724.52 points, the broad-market S&P 500 (SNP: ^GSPC - news) climbed 0.64 percent to 1,337.64 points and the tech-rich Nasdaq Composite (Nasdaq: ^IXIC - news) gained 0.79 percent to 2,858.74 points.

"Place your bets. Yesterday's and today's trading is all about positioning ahead of Sunday's elections in Greece and next week's Federal Reserve policy meeting," said Dick Green at

Green said stocks rallied "because traders are betting that European governments will take action after the election to prevent any adverse credit market impact from the possibility of Greece leaving the eurozone.

The gains followed those on Thursday, as poor jobs data sparked speculation that the US central bank would start a third round of stimulus known as quantitative easing in a bid to kickstart the world's biggest economy.

"Sentiment seemed to strengthen on hopes that underwhelming data might compel the Fed to implement another round of quantitative easing when they meet next week," said

In Britain finance chief George Osborne and Bank of England governor Mervyn King said they would flood banks with billions of pounds in a bid to jump-start lending to households and businesses and fend off a potential storm from Europe.

But while investors absorbed the possibility of fresh cash in the system Europe's troubles tempered sentiment.

The IMF said in a report Friday that as Spain taps a eurozone loan of up to 100 billion euros to restructure the banks, it must also implement "comprehensive" reforms including raising value added tax immediately.

On Thursday the interest rate on Spanish 10-year government bonds soared to 6.9667 percent, the highest since the birth of the single currency in 1999, and close to the danger-zone 7.0 percent considered unsustainable to service debts.

The jump came after Moody's on Wednesday slashed Spain's sovereign debt rating by three notches, saying the bank bailout would put extra strain on the country's already weak finances.

The rate of return for investors on Spanish 10-year bonds slid to 6.838 percent on Friday, but the risk premium -- the difference in the rate between Spanish and safe-haven German 10-year bonds -- hit a new euro-era record of 5.54 percentage points as the yield on German bonds fell more.

Morning business round-up: ECB ready to act 'if necessary' - BBC News

What made the business news in Asia and Europe this morning? Here's our daily business round-up:

The European Central Bank (ECB) said it is ready to provide further support ''if necessary'' to the eurozone's banking system.

Its president Mario Draghi said: "The eurosystem will continue to supply liquidity to solvent banks where needed."

A general election in Greece on Sunday has heightened fears of further instability on financial markets.

Greece saw a major retailer, France's Carrefour, pull out of the country.

The French retail giant said it was selling its stake in its Greek joint venture owing to fears about Greece's deteriorating economic situation.

It is selling to partner Marinopoulos, and will take a financial charge of about 220m euros (£179m; $278m) on the deal.

In a statement, the company said the move was in response to "challenges posed by the Greek economic context".

Carrefour's shares rose 1.68% following the announcement.

Still in Europe, new EU car registrations slumped.

Demand for new passenger cars fell sharply across the European Union in May, reflecting weak consumer confidence in the wake of the financial crisis.

The European Automobile Manufacturers' Association said new car registrations totalled 1,106,845 vehicles, down 8.7% compared to the same month last year.

France led the decline with a 16.2% market contraction, closely followed by Italy, which fell 14.3%.

Only the UK market grew, rising 7.9%.

Meanwhile, in the UK, its central bank acted to try to boost confidence and lending against a backdrop of failing business nerve in the face of the eurocrisis.

UK bank shares jumped on the stimulus move.

The Bank of England's plan, announced late on Thursday, came in response to the worsening economic outlook, its governor Sir Mervyn King said.

Together with the government, it will provide billions of pounds of cheap credit to banks to lend to companies.

Business headlines

To Asia now, where Coca-Cola announced it would start business again in Burma.

It has been 60 years since it last operated there and its return follows a US decision to suspend investment sanctions against the country.

Officials suspended the sanctions last month as the country has moved towards democratic reforms.

Coca-Cola is waiting for a licence from the US government.

The country was one of only three that Coca-Cola does not do business with.

And as Burma opens up to international business, the latest Business Daily podcast reports from Rangoon, and asks if Burma is set to become a new Asian Tiger, or whether the legacy of 50 years of mismanagement is too great an obstacle.

Easy money won’t sate hunger for real assets - Financial Times

"Remember me" uses a cookie. View our Cookie Policy.

Ex-Business Titan Rajat Gupta Guilty of Insider Trading - Daily Finance
Rajat Gupta, former Goldman Sachs board memberBy Grant McCool and Basil Katz

NEW YORK -- Rajat Gupta, a consummate business insider who once sat on the board of Goldman Sachs Group, was convicted on Friday of leaking secrets about the investment bank at the height of the financial crisis, a major victory for prosecutors seeking to root out insider trading on Wall Street.

The Manhattan federal court jury delivered its verdict on its second day of deliberations, finding that Gupta had fed stock tips to his hedge fund manager friend Raj Rajaratnam, which he had gleaned from confidential Goldman board meetings.

Gupta is also a former director at Procter & Gamble and a former executive at the elite business consulting firm McKinsey & Co. He is the most prominent person convicted in the government's crackdown in the last few years on illicit trading involving hedge funds and financial consultants.

The 63-year-old Gupta was found guilty of three counts of securities fraud and one count of conspiracy. The jury acquitted him on two other securities fraud charges.

He could receive up to 25 years in prison. The maximum sentence for securities fraud is 20 years and the maximum sentence for conspiracy is five years, though it seems unlikely that he would receive such a heavy punishment. Rajaratnam was convicted of 14 counts of securities fraud and conspiracy last year and is serving an 11-year prison term.

After the verdict, an ashen-faced Gupta glanced grimly back at his wife and four daughters in the courtroom. Later, the family stood hugging each other in the courtroom as Gupta tried to console his distraught daughters.

His defense lawyer, Gary Naftalis, said Gupta is likely to appeal.

Since being implicated in the Rajaratnam case more than a year ago, Gupta has denied the charges. In addition to his business background, the Indian-born Gupta was known for his work with philanthropies fighting AIDS, malaria and tuberculosis in developing countries.

"I wanted to believe the allegations weren't true," said Lepkowski, a nonprofit group executive from Ossining, New York. "At the end of the day, when all of the evidence was in, it was in my opinion, overwhelming."

Among the most dramatic contentions against Gupta was prosecutors' charge that he had told Rajaratnam about a crucial $5 billion injection into Goldman by Warren Buffett's Berkshire Hathaway at the height of the financial crisis.

Part of the prosecution's evidence was that within a minute of disconnecting from a Sept. 23, 2008 board call approving the investment, Gupta called Rajaratnam at his Galleon Group office in New York. Rajaratnam then hurriedly ordered his traders to buy as much as $40 million in Goldman stock because only minutes remained before the market closed.

At trial, Gupta's lawyers argued that prosecutors "had no real, hard, direct evidence" against Gupta, who did not take the witness stand.

U.S. District Judge Jed Rakoff has set sentencing for Oct. 18.

The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.

No comments: