Daily Market Reviews by UWCFX

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UWC is proud to provide daily market reviews by the well-known financial expert – Mr. Arne Treholt, a former Political Secretary to the Minister of Shipping and Foreign Trade, then Deputy Minister of Law of the Sea of the Norwegian Royal Ministry of Foreign Affairs. He also held the position of Counselor for Economic Development and Social Affairs at the Ministry of Foreign Affairs, and was member of the Norwegian Mission to the United Nations, New York. At the moment Mr. Treholt is a Vice President and a Business Development Director of United World Capital.

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WEEKLY MARKET REVIEWS

by Arne Treholt Vice-President of Business Development and Investments

Greeks are proud to state that their country is the cradle of democracy. Greeks are going to vote on Sunday for the second time in one month. International eyes are on Greece. Never before in their history there has been such an interest for the outcome of a Greek election.

For the first time since Andreas Papandreou dominated the Greek political scene and challenged the power centers in Europe and US with his charismatic, oratory flame, a 37 year former street protester and engineer, Alexis Tsipras, and his Syriza party, makes claim to his position. Tsipras has flatly rejected the austerity measures of IMF (International Monetary Fund), ECB (European Central Bank) and EU (European Union), which the established political parties hesitatingly accepted. This rejection sent shockwaves through international capitals.

SYRIZA’s dilemma is, however, to reconcile a rejection of the troika Memorandum with Greece’s continued EURO membership. Tsipras is well aware of the fact that 75 % of Greeks don’t want to return to the drachma. Greeks see themselves as” Europeans”, and the EURO is the very symbol of being a European. Whether that is in their real national interests, is at present not at the agenda.

During the last week, Tsipras has been all over the place. Yesterday he issued a strong warning to speculators: Don’t gamble on the assumption that a Syriza victory is equal with a Greek exit from the Euro! This message was taken from the violent atmosphere of Athens protesting streets to new forums as Bloomberg News and Financial Times. Syriza claims to renegotiate the austerity measures. That does mean that Syriza shall claim a Greek exit from the Euro.

His message has been received with shrug of shoulders and open mouths in European power centers. They have given their signals to the Greek voters; stay with the austerities and the parties which swallowed them; or else …

The upper hand is, nevertheless, neither with the Greek voters or Tsipras. It rests in Germany.
Germany is at the final stage of deciding the fate of Greece’s fate inside or outside the Euro. That depends primarily not on Alexis Tsipras. But give Tsipras the credit. He has managed the piece of art of having the power corridors of Europe to listen: even if it is with open mouths.

Greece confronts Germany with its own history. Greeks have terrible war time memories of Hitler Germany. The rationale for the establishment of the European Union was to avoid the horrors of the past. In Germany’s case the hyperinflation of 1923 and the death of democracy in 1933 which lead to a destructive war.

It seems, however, that Angela Merkel as the key decisive figure is more occupied with the memories from 1923 than the ones from 1932. Today it is not inflation, but depression and mass unemployment that threatens the stability of Europe, and Germany’s recent prosperity is closely connected with the EURO establishment.

Germany is the big winner of the Euro introduction. The Euro gave German exporters a competitive exchange rate to the old Deutschmark. 42 % of German exports go to the Euro-zone. It is hardly in Germany’s interest to plunge the southern periphery of Europe counts for 25 % of their export into Depression. Angela Merkel obviously realizes this, when she the last weeks has stressed the necessity for a closer European fiscal and political union. Germany and the political and financial elites of Europe might be ready and wish a closer integration.

The big question is whether the streets in Athens and Madrid, which are further and further alienated from the European power centers, think likewise.

That also count for Europe and Greece, which take pride of being the birthplace of democracy.

Copyright: United World Capital

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EURO jumps after pro bail-out victory

Arne Treholt Vice-President of Business Development and Investments

The EURO jumped to a one month high trading at 1.2702 vs. USD, after the political parties supporting Greece international bail-out won the elections on Sunday.
The center-right New Democracy party came first with 29,8 %, and will together with center-left PASOK which also supports the terms and conditions laid down in the Memorandum negotiated with the troika of IMF(the international monetary fund), ECB (European Central Bank) and EU, probably succeed to form a majority government. A small pro-bail out party on the left might also join the coalition.

PASOK and New Democracy have together 161 of the 300 places in Parliament. The anti bail-out leftwing coalition, SYRIZA, which came in second with 26,8 % has rejected to participate in a national salvation government headed by ND’s Antonis Samaras. Before the elections Western European heavy weights as Angela Merkel and Italia’s Mario Monti along with the EU-Commission had warned strongly against the consequences of a victory for the leftwing Syriza.

The outcome of the much anticipated elections had markets to soar. The pro bail-out parties victory is increasing the chances for the debt-laden Greece to stay in the Euro, and came as a relief to global markets ahead of G-20 meeting in Mexico.
The Euro recovered strongly. Asian markets led by the big exporters jumped up to 2 %, and oil prices are at its highest levels in one week. Brent trading at 98.90.
Gold and precious metals are trading flat. Gold at 1622. Japanese Yen is gaining versus USD at 79,1245.

Although the elections are seen as a victory for the pro bail-out camp, SYRIZA and other rejectionist parties also came in strongly. Greece is in deep recession and experiencing its 5th year with negative growth. Unemployment running at 25 %.
The elections have given some clarity, but the fundamental challenges facing both the EURO and Western European economies shall soon be back on the agenda.

Copyright: United World Capital

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Greek relief rally proved short lived

Arne Treholt Vice-President of Business Development and Investments

The relief rally after the Greek elections on Sunday proved short lived. Already few hours into Monday’s trading the positive sentiment, which saw Asia and oil prices raise, turned soar.
Markets were back to normal reacting to the worldwide consequences of the European sovereign and banking crisis. As a worrying sign, interest rate on Spain’s 10 years bond surpassed the critical 7 % threshold, giving a dark reminder of what happened when Greek bonds jumped to 7 % a couple of years ago.

Oil prices dropped back to year’s low. Brent trading at 96. The Euro/USD which reached 1,27 during morning’s trading yesterday fall back to 1,2613 confirming the long term downward trend of the Euro.
The pressure on a Greek exit is temporarily gone. Greece shall probably be able to form a coalition government between the center parties, New Democracy and Pasok, today. But if the new government shall be able to keep, at least, a minimum of credibility towards their electorates, the new Premier, Antonis Samaras, would have to ask and also be given some token concessions from the “troika” of ECB., IMF and EU. Without such concessions and easing of austerities, Greece is going to face a new long and very hot summer in the streets.

After the German Foreign Minister and Brussels had indicating some willingness for concessions, Angela Merkel was on the eve of the G-20 meeting in Mexico steadfastly against giving any concessions. She is, however under strong pressure. The leaders of the 20 strongest countries have urged Europe to take steps to resolve its debt crisis. As a token of their willingness to contribute to a solution, two of the leading BRIX-countries, China and Russia, stated that new billions of dollars would be put at the disposal of IMF, the International Monetary Fund. Christina Laggard, the head of IMF, stated that USD 450 billion would be kept as a contingency for Europe.

The dollar is trading weaker after the last events on expectations that the US Federal Reserve would introduce new stimuli to its stagnating economy.
JPY is stronger, creeping below the 79 mark against the USD.
Gold prices are as silver slowly edging upwards; confirming a trend seen over the last weeks where precious metals again are sought as a safe havens during market upheavals and big volatility in the currency markets. Gold is up 7 % over the last month.

Copyright: United World Capital

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USD dips on monetary stimulus rumors

Arne Treholt Vice-President of Business Development and Investments

Rumors that the Federal Reserve (FED) may feel compelled to launch a new monetary stimulus, dipped the dollar to 1.2672 against Euro in morning trade.
As economic storm clouds gather and the American recovery has stagnated, US authorities seem once again prepared to use the printing press to stimulate in order to get its own and the global economy back on track.

The rumors about immediate action is strengthened by the fact that FED is wrapping up a meeting today. A likely outcome is that FED will further prolong their historically low interest rate policies. This would probably have a negative impact on the dollar. USD has during the last months turmoil been seen as a safe haven for investors.

The G-20 meeting in Mexico ended with behind the scene bilateral meetings on the debt crisis in Europe, Syria and Iran. President Obama stated that he saw growing willingness among European leaders to deal actively with the crisis.
The Euro has been extremely volatile. After reaching a month high after the Greek elections on Monday, Spanish borrowing costs fueled fears of an escalating Euro- zone debt crisis. Spanish bond yield rose above the critical 7 %, the highest since the Euro was launched in 1999, threatening Madrid’s ability to finance itself.

Greece, Ireland, and Portugal were all forced to seek international bailouts soon after their 10-year bond yields rose above 7 %.
Cyprus with its close binding to Greek economy risks to be the fifth country to be bailed out after its authorities asked the European Financial Stability Mechanism for support for their struggling banks.
Although Sunday’s election eased the immediate fear that Greece might be forced out of the Euro-zone, the narrow basis for the new government has raised doubts whether it can implement further spending cuts and increase taxes which is a logical consequence of the bail out.

Oil prices continue its downward trend: Brent at 95,81. Copper and gold are also lower. JPY increases vs. USD at 78,905. The Asian composite index, MSCI, rose to its highest level in one month. The US exchanges were solidly up on stimuli expectations.

Copyright: United World Capital

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FED lowers growth outlook

Arne Treholt Vice-President of Business Development and Investments

FED slashed the forecast for economic growth and saw no immediate improvement in the labor market, when FED chairman, Ben Bernanke, summed up US central banker views yesterday.
Markets reacted by sending stocks and commodities down. Brent crude fell to 92,08, the lowest level for the year. EURO/USD is trading flat at 1.2675, while JPY lost vs dollar trading at 79,57. The weaker yen boosted the Japanese export industry. Nikkei was the only positive stock exchange during Asian trading.

While dampening the forecasts for the economy, US Federal Reserve expanded its “Operation Twist” by $ 267 billion till the end of the year. This means selling of short term securities to buy longer-term ones to keep the long-term borrowing costs down.
Bernanke kept the door open for a round of further quantitative easing depending upon the development in the labor market. US unemployment figures were 8,2% in May. Growth forecasts for 2012 are lowered 0,5 % to 1,9 – 2,4 %.

Bernanke stressed that the debt crisis in Europe is weighing heavily on the US markets. The EU-commission is expected to consider proposals for introduction of EURO-bonds and closer banking integration at a meeting later this week. In Greece, Samaras presented his new coalition government yesterday.
Chinese manufacturing figures continue to be weak.

Markets were unimpressed by these new developments. US- and Asian markets ended in the red. The lower growth forecast had an immediate negative effect on commodities, and affected commodity driven currencies.
The currency markets have seen relative stability over the last couple of days, but are extremely sensitive towards any news announcement. Both stocks and currency markets are in for big volatility for the last two trading days of the week.

Copyright: United World Capital

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Stocks and commodities plunge on growth outlook

Arne Treholt Vice-President of Business Development and Investments

The global stock markets plunged on the US growth forecast yesterday. Simultaneously, Moody’s, the international credit rating agency, downgraded 15 of the world’s biggest banks including heavy weights as Credit Suisse which saw its rating reduced with 3 notches.
Oil prices dropped to its lowest level in 8 months with Brent crude spot falling through technical support level on 90 dollar pr. Barrel. In addition US jobless claims and housing numbers came in worse than expected and sent DOW Jones (minus 1,96 %) and Nasdaq down ( 2,44 %).

In Europe the head of the International Monetary Fund, Christine Laggard, warned that the Euro crisis has reached a critical level. She urged for monetary coordination and the establishment of a tight monetary union. The crisis in Spain is going from bad to worse. Estimates presented on Thursday show that Spain’s banks are in need of a capital infusion on up to 78 Billion Euros. This while Spain’s borrowing costs are creeping upwards on higher risk and interest rate on their bonds.

The picture in Asia is equally bleak. The rapid economic growth in China seems to have slowed down. Manufacturing data is lower than expected. This morning India is adding its voice to the choir, reporting on stagnating and sluggish growth.

For the moment there seems to be no light in the global tunnel. Much, however, hang on European leaders. But it is not expected that the EU-summit during the weekend shall lead to a breakthrough.
A tighter monetary coordination in the form of a monetary union shall imply that sovereign states would have to give up authority on their fiscal and taxation policies. It is unlikely that the richer member states like Germany, the Netherlands and Finland are ready to give up their sovereignty bailing out a struggling southern European periphery with taxpayer’s money.

The currency situation continues to be extremely volatile. After sniffing on the 1,27 level again yesterday, EURO/USD has fallen to 1.2555.
USD is strengthened towards JPY trading at 80,4225.
Gold and silver are following the commodities down. Gold is at 1567, 40 dollar down from yesterday’s high, but above bottom levels.
A new onslaught is expected when European equity markets open later today.

Copyright: United World Capital

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Global markets suffer worst losses in weeks (22/06/2012)

Arne Treholt Vice-President of Business Development and Investments

The week started with the result of the Greek elections given markets a glimmer of hope. This was, however, short lived. After some hours relief rally, markets were back to hard core realities in the form of a growing sovereign and bank crisis in Europe, a stagnating US economy and sluggish growth in ASIA. Markets suffering their heaviest losses in weeks.

A volatile week ended with the International credit agency, Moody’s, downgrading 15 of the biggest banks in the world on Thursday, involving heavy weights as Credit Suisse, which saw its rating cut with three notches.

The international rating agencies, most of them of US origin and known for their cozy relations with the very countries and banks they are rating, were heavily criticized after the financial crisis in 2008. Then they failed to sound alarm about the serious credit status of major American banks. They also overlooked the serious debt situation of the US government; running heavy budget and trade deficits. Europeans saw political motives behind the rough credit attitude their own banks and governments were subject to.

This time it might be different.

The Moody’s is first out with the alarm. Other rating agencies are set to follow suit. It is not longer possible to hide the seriousness of the European sovereign and banking crisis illustrated by the smallest country inside the Euro-zone, Cyprus, this week applying for emergency support from EU institutions for their three banks, a clear token of the fact that there are not only governments have lived beyond their means. Bankers in Europe and across the Atlantic have been gambling with their bank’s client’s money often out of uncontrolled greed hunting for what they wrongly saw as easy money.

Now it is payback time and slowly both the so called global political and finance elites start to realize what is at stake. When the head of the giant bank J P Morgan Chase defended a USD 3 trillion hedging loss in congressional hearing during the week, he stressed that banks must be permitted to take risks.

Yes, for sure, but on the cost of whom? Taxpayers and bank depositors?

Hubris is a Greek word for individual playing above their own intellectual capacities and means. Bankers and politicians have long been behaving as they belonged to an isolated island isolated from the world of ordinary people. It would soon show whether the medicine ordained this week by one of the elite’s main actor, IMFs Christine Laggard: the establishment of real integrated EU monetary Union, is what the one, which shall save the EURO and the global economy.

Copyright: United World Capital

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SOROS WARNS EURO AT CRITICAL CROSSROAD

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

One of the world senior investors, George Soros, known to have built his fortune on torpedoing the British pound decades ago, issued a stark warning to European leaders in front of this week’s EU-summit. The Euro is on the brink of collapsing and may take the rest of the global economy with it. Soros complimented Angela Merkel for being a strong leader, but added: one who consequently has taken the wrong decisions to a growing crisis.

The crucial question is about burden sharing. Soros found it unlikely that Germany will accept to compromise its economy to the benefit of Greece, Italy and Spain. A recent published poll shows that the highest number of EURO skeptics in Europe are in Germany, indicating the domestic political challenge. The Euro and the bailouts of the southern periphery countries is deeply unpopular in Germany. In front of the EU-summit the Euro is falling to 1.2528.

Most observers see no prospect for a “quick fix” during this meeting. The leaders will probably agree on a “growth pact” establishing a new fund for stimulating growth in the magnitude of approximately Euro 150 billion. This is in line with the new French President’s proposal. This represents a new “fire wall” initiative. It might temporarily ease, but not solve the Euro crisis. With clear address to the new Greek government, German Strong man, Minister of Finance, Wolfgang Schauble, stated on Sunday that throwing more money at the euro zone debt crisis, will not solve the cause of the problem.

Schaubel’s statement came as a reaction to Greece’s proposals to prolong the implementation of the austerity measures with two years and reduce VAT from 23 to 13 %. In a related development the Cypriot Minister of Trade went on a special mission to China to seek Chinese support for a package on Euro 12,7 Billion to save its banks. Cypriot banks are heavily exposed to Greek treasury bills and private debt.

The Indian rupee fall Friday to its lowest level in one year, 27 % down vs. USD. The rupee has recovered somewhat in morning trade. Shanghai starts the week in blue on expectation on Chinese stimulus. The Chinese currency is at its lowest in seven months. Gold trading at 1572.

Copyright: United World Capital

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Cyprus seeks banks bailout

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Cyprus becomes the fifth Euro country after Greece, Portugal and Spain to seek a lifeline for its debt ridden, when its government on Monday turned to Brussels for bailout and emergency funding.
Cyprus had earlier sent ministers to China and Moscow for credit talks. Cyprus received last 2,5 billion Euros loan from Russia last year, and has been scrambling for funding from both Moscow and Beijing to avoid the stringent EU terms for bailouts.

The international rating agency, Fitch, yesterday downgraded Cyprus debt to junk status. This comes a day after Moody’s downgrading. Cyprus’ second biggest bank, Popular Bank, has till Friday to find 1,8 billion Euros to recapitalize. Both Popular Bank and the number one bank, Bank of Cyprus, are heavily exposed to Greece both through buying Greek treasury bills and private loans to Greek citizens. 47 % of Popular Bank’s loan portfolio is exposed to Greece.

The Western European leaders are meeting on June 28th. Prior to the summit there is no token that Germany will soften its stand on the negotiated and agreed austerity terms and conditions. Due to an urgent eye operation the newly elected Premier, Antonis Samaras, is not going to attend the summit. Neither will the Minister of Finance who resigned few days after being appointed after emergently being brought to hospital.

Germany seems completely unwilling to bear the burden of a debt sharing with the striving Southern European periphery, and might choose to make Greece a test case; either you stick to your obligations or there is now place for you in the Euro. In an interview yesterday, Angela Merkel repeated her rejection of Euro bonds.

Sensing that the summit is going to be a new none starter, global markets are reacting nervously. Asia is down for the fourth day in row after jumpy sessions in Europe and US. The Euro/USD is falling and at 1.2496.
Yen is stronger; USD/JPY at 79,505. NYMEX at 179,15 and Brent 91.14 are stabilizing somewhat after steep falls the last weeks.
Gold recovered during yesterday session.

Copyright: United World Capital

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Merkel buries Euro bonds

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Positions are hardening in front of the crucial European Union summit at the end of the week. “Not in my life time”, was German Chancellor Angela Merkel clear message to Euro leaders who want a joint debt burden sharing by introduction of EURO bonds. In a meeting with Parliament, the Bundestag, Merkel repeated that Germany is not prepared to share Western Europe’s total debt liability.

Cynicism rules the ground affront of the summit. There are no expectations. Observers know that the European Union thrives on crisis, but very seldom, something concrete comes out of the summits. We need to go back to early 1990’ies and the establishment of the Maastricht Treaty for a closer coordination and cooperation in Western Europe, for a major breakthrough.
The sigh of the President of the EU-Commission: “We cannot stand still”, illustrates the situation. His outburst is, however, unlikely to make any impression on Berlin.

Without Germany’s active backing and support, all concerned parties know that the EU is a lame duck, unable to nourish and keep its favorite child - the EURO, alive. They also know that few of the member countries are ready for the ordained medicine: a tighter monetary union developing into a political union as a following up step.
The European bureaucrats are pressing for such a solution. Individual member states and its electorates are not that enthusiastic. The key players know that Germany, and not elections in France or Greece, is going to decide whether the Euro will survive.

Everybody’s eyes are nevertheless on Europe. Anxious global markets yesterday watched that the interests on European bonds continue to raise. That overshadowed positive US economic domestic figures. US markets ended slightly up.
Asia is up after falling for four days. EURO/USD is stabile at 1.2499. USD/JPY 74945. Oil prices are reacting up after the last week’s steep fall. Brent is 92,75. Gold is at 1571.

Copyright: United World Capital

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Asia raises on US data

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Strong US housing durable goods sales got the positive sentiment back in the markets yesterday. The American stock indices rose for the second day in row. Both Dow and Nasdaq were up 0,74 %. Asia followed up this morning with oil prices also stronger on US-growth prospects.
Brent is trading above USD 93 after dipping below 90 at the end of last week. Euro/USD is hovering below the 1.25 mark at 1.2499 before a crucial EU summit is going to give investors a better idea of where the Euro is moving.

German chancellor Angela Merkel met her French counterpart, Francoise Holland in Paris yesterday as a warming up for the summit session. The European leaders are trying to overcome their differences in a situation where strong German rhetoric has dominated. Germany has demonstrated no will for compromises, and flatly rejected to take a joint responsibility for sovereign and banking debts, which have heaped up in the Southern European periphery.

A feeling of disillusionment has been spreading, and nobody seems to have any expectations as to what could come out of the summit. The EU-president, Herman van Rompuy, presented earlier in the week a ten years plan for coordinated banking surveillance and an emergency banking insurance system, as steps towards the issue of Euro bonds, which Merkel has promptly rejected. Euro bonds are strongly supported by France, Italy and Spain.

Cyprus, which is going to overtake the half-yearly presidency of the EU on June 1st, has asked for emergency assistance on approximately Euro 10 billion for its struggling banks. There seems to be a positive development towards a solution supported by EU, the European Central Bank and the International Monetary Fund.

The reason for the US optimism is that pending home sales in May was up 5,99 %, much higher than expected. The good home sales news led to a lift of the Australian dollar and New Zealand, Kiwi in morning trade USD/JPY.

Copyright: United World Capital

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USA: news from EU summit a little damped an ardor of bears

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

On Thursday, June 28, the stock market of the United States finished the trading session in the negative territory in view of quite weak macroeconomic statistics, as well as on appeared information that losses of JP Morgan Chase can reach $9 billion.

Accordingly to the data published yesterday, the number of primary requests for unemployment benefits made 386 thousands whereas analysts expected 385 thousands. Besides, the previous value was reconsidered towards increase from 387 thousands to 392 thousands. Meanwhile, the index of business activity in the industry of FRB of Kansas was reduced in June from 17 points month earlier to 12 points, and GDP, according to final data, increased in the first quarter by 1,9 %, as expected, having coincided with the previous reading.

Towards the end of trading session the American indexes could restore a part of losses due to the news which have arrived from the EU summit, which begun yesterday in Brussels. So, it became known that for urgent measures for stimulation of economic growth and employment the European Union will mobilize about 120 billion euro ($149 billion) what the president of the European Union X. van Rompey officially declared during the press conference. According to him, credit possibilities of the European investment bank will be increased by 60 billion euro and other 60 billion euro will be collected at the expense of not used EU structural funds to which means will be added funds from the pilot program of the European bonds calculated on specific projects fewer than 5 billion.

Following the results of the trading session the indicator of "blue counters" the index of Dow Jones decreased by 0,196 % to value 12602,26 points, the index of the wide market S&P 500 left in a minus for 0,211 % to level 1329,04 points, and the index of the hi-tech companies Nasdaq reached level of 2849,49 points.

Oil prices are still pointing up. Brent is is traded on a level of 92.951$.

Copyright: United World Capital

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BOND SUPPORT FOR SPAIN AND ITALY LIKELY OUTCOME OF EU-SUMMIT (29/06/2012)

WEEKLY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

It has been mixed week in global markets dominated once again by the sovereign debt crisis in Western Europe and banks striving for survival. Brussels and the EU-summit at the end of the week has been the focus for attention with low expectations for a final breakthrough.
The fate of Euro is hanging in the air. Strong contradictions between the leading German economy and countries in the European periphery have led to new question marks. Germany has demonstrated no willingness to share the debt burden with countries like Greece, Spain, Portugal, Italy and now last Cyprus. Why should Germany contribute to mistakes and failures of states, which have not kept their house in order?

The outcome of the Euro crisis seems again to be some kind of a compromise most probably intended to stop the spiraling costs on Spain and Italy's bonds. Global markets see a glimmer of hope in these developments. Might be, that there is a light at the end of the tunnel after all?
The new European "iron lady", Angela Merkel, has all through the increased and bitter rhetoric being steadfast in her demands: There is no quick fix on the sovereign debt crisis. Short term measures to help lower Spanish and Italian borrowing costs, are likely the outcome of the summit. However, as Merkel has been stressing such quick remedies are eyewash and fake solutions. They do not solve the fundamental questions.

However, markets and investors with big money bags are waiting on the sideline happy; to jump on whatever seems better than no decision at all. When Merkel postponed an announced press conference on Thursday night, markets saw this as a positive token and as an expression that Germany as the key player, was still considering some temporary solutions. This led to a mini rally at the end of the session in New York. In addition, this morning, Asia is clinging to the postponement as a sign that something, in spite of all down plaid expectations are happening behind the closed doors. It has even created some excitement among currency traders. Might it be some hope for the Euro after all?

Over the week, markets have been clinging to the smallest tokens of positive movements. US-housing sales had analysts once again to jump on the expected American growth wagon. The enthusiasm lasted 36 hours until the jobless claims number Thursday night poured cold water in the head of optimists.

A reduction on 6000 in the jobless claims, do not create a spring. Add to the global misery that Cyprus, one of the smallest economies inside the Euro, had to ask for Emergency assistance for its banks. In the midst of the crisis, their banks gambled on the high interests’ rates on Greek treasury bills, and private Greek customer’s appetite for loans, which no others were willing to give them. Now they want that Europe shall share with them and pay the price.

For bankers, it has in general been a miserable week. Barclays bank was fined record $ 450 million fby English regulators for manipulating with the Libor interest rate set by the Central banks as basis rate or private banks lending to borrowers. Barclay has possibly colluded in their fraudulent action with other leading international banks. Such facts does not increase the credibility of bankers, which over the crisis years have been known more for their greed than clever investments and managing of clients funds.

Copyright: United World Capital

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Once again a one day rally?

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Asian stocks rose for a fourth day in row with the composite Asian stock index rising 0,48 %, confirming Friday’s positive sentiment from the rallies in Europe and United States following the EU-summit. The Euro/USD is falling back from its Friday peak trading at 1.2626. Brent crude is at 97,00 and Gold 1591.

Stocks ended the first half year of 2012 with a bang after the EU summit contrary to expectations, seems to have taken steps towards solving the 30 months debt crisis. European leaders agreed to stabilize the region’s troubled banks. Under pressure to avoid a catastrophic breakup of the Euro, it was reached agreement to inject funds directly into stricken banks and to intervene to drive bond interest rates down. During the last week, interest rates on Spanish and Italian bonds passed the 7 % threshold, which is seen as crucial.

A single banking supervision system for the Euro-zone banks around the European Central Bank (ECB) is seen as the first step towards a European banking union. Member states that comply with the austerity measures would be supported by the already created rescue mechanisms, the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF). With regards to the content of concrete measures, all eyes will the week be on the ECB.

At first glance it seems that the big winners from Europe’s latest euro-saving summit are the leaders of France, Italy and Spain with Germany’s Angela Merkel forced on the defensive. This is probably an over simplification. Merkel’s biggest concession seems to be that she has given the permanent rescue fund, ESM power to inject aid directly into stricken banks. Merkel signalized, however, willingness to adopt this step days before the summit, but preferred of tactical reasons to keep it low key.

The big question this week is whether the boost of optimism after the summit shall develop into something more permanent than a one-day rally. New industrial production figures for China are again down, and markets are neither optimistic in front of the release of US job figures Friday.

Copyright: United World Capital

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EURO slide may continue

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Asian shares rose for the fifth consecutive days with the MSCI index up 0,78 %. Simultaneously the US manufacturing production index (MPI) surprisingly dropped. US manufacturing contracted for the first time in nearly three years resulting in immediate drops in US stock market.
Markets, however, rebound during the session on renewed expectations of monetary easing. The protracted euro zone debt crisis has a devastating effect on the global markets. The sluggish manufacturing data, however, gave investors hopes that major central banks will take further steps to support the fragile economy.

The EURO got a welcomed boost after the EU-summit with 1,7 % rally to 1,27. Euro fall back to 1,2570 yesterday, but has recovered to 1.2599 in morning trade. But there are still political uncertainties and doubts regarding the European Central Bank’s following up. Two Northern European member states, Finland and Netherlands, expressed yesterday strong hesitations as to the financial impact the summit decisions would have on their own economies. Leading economists see the initiatives to support Spanish and Italian banks and measures to dampen upward bond interest rates as just temporary. It might have saved the common currency for now, but the Euro’s downward slide is with great likelihood going to continue.

The Australian dollar gets a boost this morning. Oil prices are up on EU sanctions against Iranian oil and Norwegian oil strike. Gold has again broken through the 1600 threshold trading at 1604. Silver is also stronger. USD/JPY is trading at 79,695.

The English Barclay’s boss, Bob Diamond, is under continued pressure to resign after a market rigging labor scandal. Barclay was given a 450 million Euro fee. The scandal which most probably also involve other major international banks have created an uproar and demands for criminal fraud cases against the bosses involved. Before meetings in the British Parliament today, Barclay has countered indicating that regulators as well were involved. In the US one of the biggest pharmaceutical companies in the world, British GlaxoSmithKline has settled a health fraud case for USD 3 Billion.

Copyright: United World Capital

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Rate rigging hits banking system

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Barclays Bank’s rate rigging scandal has strongly hit the international banking community, and is threatening to affect several reputed banks. J. P. Morgan, UBS and Citibank are among those rumored to be next in line. Excessive salaries and bonuses have for long put question marks with the healthiness of a banking sector more known for its greediness than the quality of their business. Barclays Chief Executive, Bob Diamond, quit his position yesterday, and is today facing a grilling session with and under committee of the British House of Commons.

As part of an offensive defense, Barclays yesterday released a 2008 internal memo implicating the deputy governor of the Bank of England in the scandal. The Deputy Governor, Paul Tucker, had according to the to the memo implicitly encouraged Barclays to massage the interest rates figures lower during the peak of the financial crisis. In order to present a better picture of the bank’s financial position. Tucker had in his turn received calls from senior government officials.

Libor, which is the interest rate set for inter bank transactions involve up to USD 500 trillion in daily trades, and is seen a reliable and trustworthy barometer. The manipulations now revealed might have a devastating effect on the banking system and seriously undermine its trustworthiness.

The rally in the markets, which started last week with EUs decisions to support ailing banks in Spain and Italy, continue. Asia is up for the sixth day, and experiences its longest lasting rally since last December.
Investors are betting that the decreased manufacturing data from US and China along with other gloomy macro and micro economic figures on top of the crisis in Europe, will force central banks into actions.
Monetary easing is expected and encourages the market rally. US stocks rose before taking half day off for Fourth of July celebrations. Oil prices are up. Brent has been trading above the critical USD 100 barrel level for the last 24 hours. NYMEX is above 84. Currencies are stabile waiting for central bankers decisions. Euro/USD is at 1.2592.

Copyright: United World Capital

[UWC Neeraj]

Diamond blames traders for rigging

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Grilled by a parliamentarian committee Barclays, Bob Diamond, yesterday blamed traders for “reprehensible behavior” and acquitted himself and top management for all responsibility for the Libor, interest rate rigging scandal. The rigging has sent shock waves through the international financial system. Diamond claimed that he had been shocked by the bank’s mail revelations. Member of the investigative committee found his claims not plausible.

A five-day stock rally in Asia fizzled out this morning before the European Central Bank’s interest rate decision later today. The Euro/USD is under renewed pressure trading at 1.2529, on widespread expectations that ECB will cut interest rate to support the economy in a fragile euro zone in deep recession. Oil prices are falling slightly with Brent hovering around the USD 100 mark. Gold is stabilizing on 1616.

The USD index shows that dollar is gaining toward most currencies. The Yen is falling; USD/JPY is at 79,855. The strengthening of USD is expected to continue until the markets see how ECB intends to respond to debt crisis in the Euro zone. British Pounds, GBP, is also under pressure in front a Bank of England decision on interest rate today. The Swedish Central Bank yesterday kept interest rate at 1,5 % leading to heavy pressure on the Swedish Krone.

It is expected that ECB is going to cut its main interest rate by 25 basis points to 0,75 %. There are also rumors that ECB will restart purchases of troubled euro zone bonds under its Securities Markets Program (SMP) to push down especially Italy and Spain’s borrowing costs. ECB is also considered to use the long-term refinancing operation mechanism, LTRO, to inject additional funds into the financial system.

This would be a form of quantitative easing as the US Government did to prop up their banks and financial institutions following the financial crack down in 2008/2009. In Asia, an international credit rating agency upgraded the creditworthiness of the Philippines, which has had a record strong economic growth this year.

Copyright: United World Capital

[UWC Neeraj]

Despite cuts shares falling

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Both the European (ECB) and the Chinese Central Banks yesterday cut their interest rates to encourage economic growth, but to no avail. Both European and American markets reacted by sending stocks down. Asian stocks also slipped despite the new stimulus steps taken by the central banks. The Bank of England kept its interest rate at the low 0,25 % as an indication that there are limited tools left in the central banks arsenal for further monetary actions.

The Chinese interest cut is the second in one month, increasing investors fear that the Chinese economy is sinking faster than earlier expected. The non-farm payrolls numbers that the US Labor Department is expected to release today, is neither giving raise to market optimism. US employers have most likely hired more labor last month, but not enough to allay worries that Europe’s debt crisis is shifting the global economy into low gear.

ECB’s decision to cut interest rate with 25 basis points to 0,75 immediately led to new pressure on the Euro, which is trading at 1.2384. The American dollar is strengthened against many currencies. A decision from the Swedish Central Bank to keep the interest rate at the same level, led to a rally in Swedish krones at the expense of the EURO.

While commodities and precious metals are trading down; gold is at 1605, Brent crude is continuing to trade above the critical 100-dollar level pr. Barrel. In addition to implementation of EU sanctions on oil import from Iran, the US has increased its military presence in the straits of Hormuz, which Iran has threatened to mine to block oil transports from the Middle East, if further sanctions were executed.

Copyright: United World Capital

[UWC Neeraj]

Cyprus tries to play hard ball (06/07/2012)

WEEKLY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

As the fifth country inside the euro zone, Cyprus, which this month also took over the chairmanship of the European Union, has asked for a bail out for its debt stricken banks.

At a press conference together with the Head of the European Commission, Jose Manuel Barroso on Friday, the island’s president Demetris Christofias, again plaid the Russian card and stressed that Russia is still a candidate for stepping in and bail out his country.

With the “mother land” Greece’s misery in fresh memory, Christofias, don’t want “Greek austerities” to be impressed upon Cyprus. He has continuously stressed that Cyprus is facing a banking and not a sovereign crisis. Therefore, Cyprus feels free to ask whatever country for help. And then why not Russia which generously have helped out before; as they did two years ago. Then the loan was on 2,1 Billion Euro. This time the price tag has increased to 6,1 Billion Euro to save Cypriot banks which have acted irresponsible.

Christofias is playing hard ball logic, but that does not stand up to European orthodoxy. Cyprus is member of the European family, and EU-countries inside the Euro zone are treated equally with regards to bail-outs. Why should Cyprus be given better loan terms and conditions by going outside the zone and ask a third country for help? Barosso then gave Christofias a frosty answer. That Christofias is the only communist leader in the European Union does not help either.

For European bureaucrats principles are more important than practical realities. The medicines ordained for Greece, Spain, Ireland and Portugal have to be the same for Cyprus. To ask for better terms and conditions in Russia, represent a serious break with the EU code of conduct and their “solidarity”.

Barosso was tiff lipped. Neither did it make any impression when Minister of Finance, Vassos Shiarly, stressed that Cyprus had been forced to take extremely big losses on the Euro zone’s haircuts for Greece. Cyprus creditors had a 80 % loss equal to 4,2 Billion Euro, a quarter of Cyprus’ GDP. Cyprus demonstrated disproportionate European solidarity then so why not a little generosity now?

But this kind of logic does simply not work in relation to a striving periphery in Southern Europe. Striving member countries in the outskirts start to awaken to the harsh reality that the EU and the EURO are something quite different from the European dream they had before entry.

Copyright: United World Capital