The Star Online: Business
The Star Online: Business |
- Asian markets gain on euro-zone speculation
- Wall Street ends 7-day slide
- Possible euro exits unsettling - and alluring - for market
| Asian markets gain on euro-zone speculation Posted: 28 Nov 2011 05:48 PM PST KUALA LUMPUR: Asian markets rose in Tuesday morning trade with the local bourse up 0.43% to 1,437.77 at open as investor sentiments were buoyed by the highest-ever US Thanksgiving sales as well as speculation that more might be done to contain the troubles in the euro-zone. However, analysts said trading on the local bourse would likely be range-bound with a positive bias amid uncertainties in Asia where the Japanese October jobless rate was up 4.5% from the median 4.2% reported in a Bloomberg survey and fears of a slowdown in China's property market. At 9.30am, the FBM KLCI was up 0.58% to 1,439.92 boosted by gains in Genting, Sime Darby and BAT. At Bursa Malaysia, gainers outpaced losers 341 to 73 while 139 other counters were traded unchanged. There were 228.83 million shares traded with a turnover of RM159.60 million. Spot gold prices fluctuated between US$1,708 and US$1,710 per ounce, down between a fifth to a quarter of a percent while Nymex crude oil was two-thirds of a percent lower at US$97 to US$98 per barrel. The ringgit strengthened against the US dollar at 3.179 and against the euro at 4.233. Full content generated by Get Full RSS. |
| Posted: 28 Nov 2011 04:46 PM PST NEW YORK (Reuters) - Stocks rebounded from seven days of losses on Monday as investors used the latest effort from European leaders to resolve the region's debt crisis as an opportunity to cover short positions. Trading was light, a sign skepticism remains high. Just 6.8 billion shares changed hands during the day on U.S. exchanges, below the daily average of 8 billion shares. After the market's close, Fitch Ratings revised to negative the outlook on the United States' AAA credit rating after a special congressional committee failed to agree on at least $1.2 trillion in budget cuts. Retailers were among the strong sectors following an robust start to the U.S. holiday shopping season. Record sales over the Thanksgiving weekend buoyed gains in large retailers, including Macy's, which rose 4.7 percent to $30.84. The gains follow a seven-day string of losses on the benchmark S&P 500. The latest attempt to get the euro zone problems on the path to improvement involve a Franco-German push for tighter budgetary control over euro zone members. Analysts say the move may not be followed by more buying without an actual plan for euro zone help. "Unfortunately, these rallies are short-lived until real dollars or real euros are injected into the financial system," said Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey. Germany and France pushed to acquire powers to reject national budgets in the euro zone that breach European Union rules ahead of an EU summit on December 9. An Italian newspaper report suggested the International Monetary Fund was preparing a rescue plan for Italy, but the IMF denied the report. The Dow Jones industrial average was up 291.23 points, or 2.59 percent, at 11,523.01. The Standard & Poor's 500 Index was up 33.88 points, or 2.92 percent, at 1,192.55. The Nasdaq Composite Index was up 85.83 points, or 3.52 percent, at 2,527.34. Stock futures showed little movement after the announcement from Fitch, and analysts said it was probably expected by the market. "I don't think we're going to see much of a market reaction. It's generally confirmation of what's been built into the market," said Fred Dickson, chief market strategist at The Davidson Cos in Lake Oswego, Oregon. During the regular session, all 10 S&P sectors were up sharply, but energy and consumer discretionary stocks were among sectors with the biggest gains. The S&P energy index was up 3.6 percent, while the S&P consumer discretionary index was up 3 percent and S&P financials rose 3 percent. Weak consumer spending has been a worry for investors, and the holiday period would likely confirm whether there's been any improvement in that area. A report on consumer confidence in November, which is expected to have risen, is due Tuesday. The S&P retail index advanced 3.1 percent, including Best Buy Co Inc, which added 3.4 percent to $26.49. Full content generated by Get Full RSS. |
| Possible euro exits unsettling - and alluring - for market Posted: 28 Nov 2011 04:45 PM PST NEW YORK (Reuters) - News that the world's top foreign exchange broker has been testing its trading system against a possible euro collapse conjures a host of images and ideas for currency traders and investors, not all of them bad. If one or more country ditches the euro, the revival of old currencies would mean more opportunity for profit in the $4 trillion-a-day FX market, traders say. Yet establishing new exchange rates, sorting out how to settle trades and getting a handle on counterparty risk are enough to unnerve even the most intrepid of investors. The cost to nations of leaving the euro zone would be felt in reduced purchasing power that comes with a suddenly weak currency. Banks with large foreign exchange dealing operations, including Barclays and Citigroup , declined comment on whether they had tested their trading systems. But a trader at a global investment bank told Reuters "that conversation is taking place. It (euro zone breakup) is not something we think is going to happen, but as a contingency, it's just prudent to look at all the options." Markets got a reminder about the prospect of a smaller euro zone on Monday after ICAP , the biggest forex broker, confirmed it had tested its EBS currency platform to ensure it could handle a Greek euro exit and a revival of its old currency, the drachma. "No doubt it would be messy," said Jens Nordvig, global head of G10 currency strategy at Nomura Securities. "It could be very hard for the system to manage." Europe's worsening debt crisis has markets on edge. Last week, poor bond auctions in Spain, Germany and Italy, which paid a euro-era high to finance short-term debt, suggested to some that markets were losing confidence in the entire euro project, which began in 1999. According to a Barclays survey conducted in November, nearly 50 percent of respondents expect at least one country to leave the 17-member euro zone in 2012. MORE PROFITS, MORE UNCERTAINTY On the bright side, quoting a revived drachma or Italian lira on an electronic trading platform would be "the easy part," one currency trader at a North American bank said. What's more, giving traders a new host of currencies to trade "would be hugely profitable," he said. "One interesting thing, though, is if you are going to trade drachmas or (Portuguese) escudos or whatever, where are you going to settle?" he said. "Which bank do you trust? It would be awkward. Who would the market maker be? I don't know." Complicating things further is the fear that European banks may face major losses on euro zone sovereign debt holdings, making traders less likely to use those banks to settle trades. One way to get around this, some traders said, would be to trade off-shore via a non-deliverable forward contract, much the way markets trade Brazil's real and China's yuan trade. Per Rasmussen, a retired currency trader who began his career in the 1970s, said things could get even messier if Germany decided to exit the euro and revive the Deutschemark. Demand for the new mark relative to the rump euro could be so great, he said, that the Bundesbank might be unable to print them or credit accounts fast enough. "I could see the markets not trading for several weeks," he said. "It could paralyze things." KEEPING IT TOGETHER These potential complications may be enough to spur European leaders to do what it takes to keep the euro zone together. "I have seen estimates that suggest that the cost to a peripheral country like Greece of exiting the euro zone on a unilateral basis would be more than 40 percent of GDP," said Frances Hudson, who helps manage $250 billion at Standard Life Investments in Edinburgh. "And for Germany at the other extreme it's still around 30 percent - quite a disincentive." She said analysis of how markets would handle a breakup "is being done, but this alone may be enough to discourage any further moves in that direction." Ron Leven, an executive director at Morgan Stanley in New York, said he expects the euro zone to survive intact, with the European Central Bank likely having to give in and guarantee sovereign debt or European banks. "This will require the ECB to increase significantly its balance sheet and money supply, so it's still negative for the euro," Leven said. Full content generated by Get Full RSS. |
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