Stock market of Brussels (Photo credit: Wikipedia)
There was quite a bit of dispersion among European equity indices today (with Italy worst and Spain actually holding up - albeit down 1.4%) but the European equivalent of the S&P 500 (the BE500) dropped 2% - its biggest single-day plunge in 10 months.
Credit markets - just as in the US - have been warning of a disconnect for two weeks and today's equity dive has more than halved that divergence. European sovereigns are wider by 10-15bps. Europe's VIX is over 2 vols higher at 18.4% (its highest in a month).
European financial stocks dropped by their most in 3 months and European high-yield credit worsened by its most in 3 months. A late-day ramp made things look a little better than they had earlier with a 100 pip rally in EURUSD off earlier lows seemingly providing some help. Read more >>
Google's new privacy policy is under legal attack from regulators in its largest European markets, who want the company to overhaul practices they say let it create a data goldmine at the expense of unwitting users.
Led by the French, organizations in Britain, the Netherlands, Germany, Spain and Italy agreed Tuesday on the joint action, with the ultimate possibility of imposing fines or restrictions on operations across the entire 27-country European Union.
Last year the company merged 60 separate privacy policies from around the world into one universal procedure. The European organizations complain that the new policy doesn't allow users to figure out which information is kept, how it is combined by Google services, or how long the company retains it. Read more >>
The euro-area jobless rate rose to a record in January as austerity measures taken to counter the debt crisis deepened the currency bloc’s recession.
Unemployment in the 17-nation euro area rose to 11.9 percent from a revised 11.8 percent in December, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995. The figure is higher than the 11.8 percent median estimate of 33 economists in a Bloomberg News survey.
“The situation is very serious,” said Alexander Krueger, chief economist at Bankhaus Lampe in Dusseldorf. “There’s no support any more from Germany. It’s more or less a sideways movement which I expect to continue. Other economies like Italy, Spain and Portugal are very bad at the moment, so in the end the unemployment rate can only climb.”
The euro-area economy recorded its worst performance in four years in the fourth quarter with a contraction of 0.6 percent. Gross domestic product will decline again in the first three months before returning to growth in the second quarter, according to the median of 21 economists’ estimates in a separate Bloomberg survey. The European Commission forecasts unemployment rates of 12.2 percent and 12.1 percent for this year and next. Read more >>
Smoked and salted horse meat on a sandwich. (Photo credit: Wikipedia)
The escalating crisis over horse meat in beef products in Europe claimed another big retail victim Monday when the Swedish furniture giant, Ikea, withdrew meatballs from sale in 14 European countries.
The retailer said it had removed some products from its stores in Sweden after the authorities in the Czech Republic detected horse meat in Ikea meatballs. The company said it had made the decision even though its own tests two weeks ago had not detected horse DNA.
Ikea also announced that it was stopping sales “of the concerned batch” of meatballs in Slovakia, the Czech Republic, Hungary, France, Britain, Portugal, Italy, Netherlands, Belgium, Spain, Greece, Cyprus and Ireland.
“We are now initiating further tests on the same production batch in which the Czech Republic authorities found indications of horse meat,” Ikea added in a statement. It said results were expected in the coming days. Read more >>
Regardless of who wins next weekend's parliamentary election, Italy's long economic decline is likely to continue because the next government won't be strong enough to pursue the tough reforms needed to make its economy competitive again.
Bankers, diplomats and industrialists in Rome and Milan despair at how Italians are shifting allegiances ahead of the February 24-25 vote to favor anti-establishment upstarts and show disgust with the established parties.
That makes it more likely that no bloc will have the political strength to tackle Italy's deep-rooted economic crisis, which has made it Europe's most sluggish large economy for the past two decades.
Final opinion polls predict that the vote will deliver a working majority in both houses for a centre-left coalition governing in alliance with technocrat former prime minister Mario Monti. Political risk consultancy Eurasia assigns this scenario a 50-60 percent probability.
But Italy's election for both chambers of parliament has the potential to tip the euro zone back into instability if the outcome does not produce that result. Read more >>
The escalating horsemeat scandal has ensnared two of the biggest names in the food industry, Nestlé, the world’s number-one food maker, and JBS, the largest beef producer by sales.
Switzerland-based Nestlé on Monday removed pasta meals from shelves in Italy and Spain and suspended deliveries of all processed products containing meat from German supplier, H.J. Schypke, after tests revealed traces of horse DNA above 1 per cent. Nestlé said it had informed the authorities.
H.J. Schypke was subcontracted by JBS Toledo, part of Brazil-based JBS, which claims on its website “to supply the ready meals and catering industry with only the highest quality processed meat without concessions. From the selection of animals to the final packing, every facet of the production flow meets the most exacting requirements.”
JBS late on Monday moved to distance itself from the scandal, saying none of the tainted products came from its factories and clarifying that H.J. Schypke “is not in any way part of the JBS Group”.
Nestlé withdrew two chilled pasta products, Buitoni Beef Ravioli and Beef Tortellini from sale in Italy and Spain. Lasagnes à la Bolognaise Gourmandes, a frozen meat product for catering businesses produced in France, will also be withdrawn. Read more >>
By hiding losses of hundreds of millions of euros, the 540-year-old Monte dei Paschi di Siena has threatened to trip up the leading Democratic Party – to Silvio Berlusconi's benefit.
A scandal engulfing the world’s oldest bank has emerged as a potential game changer in Italy’s national election, threatening to drag down the leading party in the polls and give a critical boost to Silvio Berlusconi’s bid to regain office.
Monte dei Paschi di Siena was founded in 1472, 20 years before Columbus discovered America, but its centuries-old reputation has been severely tarnished by a still-unraveling scandal over derivatives deals worth hundreds of millions of euros and hidden by the bank until brought to light in recent days.
The derivative deals could cost the 540-year-old bank losses of up to 720 million euros ($970 million). What makes it so politically damaging is the banks ties to the center-left Democratic Party. Read more >>
Police and protesters clashed in Spain on Wednesday as millions of workers went on strike across Europe to protest spending cuts they say have made the economic crisis worse. Hundreds of flights were cancelled, car factories and ports were at a standstill and trains barely ran in Spain and Portugal where unions held their first ever coordinated general strike.
Riot police arrested at least two protesters in Madrid and hit others with batons, witnesses said, and in Rome students pelted police with rocks in a protest over money-saving plans for the school system. International rail services were disrupted by strikes in Belgium and workers in Greece, Italy and France planned work stoppages or demonstrations as part of a "European Day of Action and Solidarity".
"We're on strike to stop these suicidal policies," said Candido Mendez, head of Spain's second-biggest labor federation, the General Workers' Union, or UGT. Read more >>
Innocente Marcolini, 60, an Italian businessman, fell ill after using a handset at work for up to six hours every day for 12 years. Now Italy's Supreme Court in Rome has blamed his phone saying there is a "causal link" between his illness and phone use, the Sun has reported.
Mr Marcolini said: "This is significant for very many people. I wanted this problem to become public because many people still do not know the risks. "I was on the phone, usually the mobile, for at least five or six hours every day at work. "I wanted it recognized that there was a link between my illness and the use of mobile and cordless phones.
"Parents need to know their children are at risk of this illness."
British scientists have claimed there is insufficient evidence to prove any link to mobiles. But the respected oncologist and professor of environmental mutagenesis Angelo Gino Levis gave evidence for Mr Marcolini — along with neurosurgeon Dr Giuseppe Grasso. They said electromagnetic radiation emitted by mobile and cordless phones can damage cells, making tumours more likely. Read more >>
Moody's credit rating agency on Thursday downgraded the world's oldest bank, Italy's Banca Monte dei Paschi di Siena, to "junk" status on worries government recapitalisation plans will prove insufficient.
The lowering of BMPS's rating by two notches to "Baaa3", a non-investment grade, reflects Moody's view that "there remains a material probability that the bank will need to seek further external support," the agency said.
Critically exposed to the eurozone debt crisis, in June BMPS was forced to accept a government bailout, borrowing roughly 1.5 billion euros ($1.87 billion) in order to pay off debt and shore up its capital.
The bank has also said it would reduce its workforce by 4,600 people by 2015.
The big news this morning is coming from an interview Italy’s Mario Monti gave to German magazine Der Spiegel, in which he warned that growing Italian resentment against Germany risks the break-up of not just the eurozone but the European Union itself.
He said the eurozone tensions “bear the traits of a psychological dissolution of Europe,” adding that Europe “must work hard to contain it.” Asked about a strengthening in resentment between the allegedly profligate southern European nations and the bloc’s thrifty northern members, Monti told Der Spiegel “it is very alarming, and we have to fight against it. Yes, there is a front line in this area between north and south, there are reciprocal prejudices,” according to AP’s report of the interview.
In the meantime, tensions between Germany and Italy appear to be on the rise. The news comes after an Italian newspaper splashed its front page on a photo of Angela Merkel with her arm raised and the headline “Quarto Reich.” Read more >>
The financial chess game in Europe is still being played out, but in the
end it is going to boil down to one very fundamental decision. Is
Germany going to allow the ECB to print up trillions of euros and use
those euros to buy up the sovereign debt of troubled eurozone members
such as Spain and Italy or not?
Nothing short of this is going to solve
the problems in Europe. You can forget the ESM and the EFSF. Anyone
that thinks they are going to solve the problems in Europe is someone
that would also take a water pistol to fight a raging wildfire. No, the
only thing that is going to keep Spain and Italy from collapsing under
the weight of a mountain of debt is a financial nuke.
The ECB needs to
have the power to print up trillions of euros and use that money to buy
up massive amounts of sovereign debt in order to guarantee that Spain
and Italy will be able to borrow lots more money at very low interest
rates. In fact, this is probably what European Central Bank President
Mario Draghi has in mind when he says that he is going to "do whatever
it takes to preserve the euro".
However, there is one giant problem.
The ECB is not going to be able to do this unless Germany allows them
to. And after enduring the horror of hyperinflation under the Weimar
Republic, Germany is not too keen on introducing trillions upon
trillions of new euros into the European economy.
If Germany allows the
ECB to go down this path, Germany will end up experiencing tremendous
inflation and the only benefit for Germany will be that the eurozone was
kept together. That doesn't sound like a very good deal for Germany. Read more >>
Heat waves in southern Europe are withering the corn crop and reducing yields in a region that accounts for 16 percent of global exports at a time when U.S. drought already drove prices to a record.
Temperatures in a band running from eastern Italy across the Black Sea region into Ukraine reached 35 degrees Celsius (95 degrees Fahrenheit) or more this month, about 5 degrees above normal, U.S. government data show. Corn, now in the pollination phase that creates kernels, risks damage above 32 degrees, said Cedric Weber, the head of market analysis at Bourges, France- based Offre et Demande Agricole, which advises farmers on sales.
The heat wave in Europe is adding to concern about global food supplies as U.S. farmers face the worst drought since 1956, India delays sowing because of a late monsoon and Australian crops endure below-average rainfall. Soybeans and corn rose to all-time highs yesterday and wheat surged 42 percent since June 1. The United Nations says food prices will probably rebound after falling the most in three years in the second quarter.
“Everyone is looking to the U.S., but clearly in Europe we’ll need to import a lot of wheat and corn,” said Weber, whose company advises about 5,000 farmers. “That’s just adding to the problems we’ve got everywhere.” Read more >>
Countries using the Euro de jure Countries and territories using the Euro de facto Countries in the EU not using the Euro (Photo credit: Wikipedia)
The euro-zone debt crisis deepened Tuesday as a sharp rise in Spanish
government bond yields to their highest levels since the inception of
the euro fanned speculation that the country might need a bailout of its
own, just days after Spain sought a support package for its beleaguered
banking system.
The market turmoil also spread to Italy, the euro-zone's third largest
economy, where bond yields leapt higher ahead of a crucial bond sale
later this week and weekend elections in Greece that could decide the
country's fate in the common-currency region.
The deepening gloom surrounding Spain's credit-worthiness could have
grave implications. A sovereign bailout for Spain will severely test the
firepower of the euro area's rescue funds, hardly leaving any money in
the pot if Italy were to be shut out of bond markets.
"It is quite likely that Spain needs a full bailout in the near future
although policymakers will try all possible options to avoid this
outcome, including a revival of bond purchases by the ECB as well as
another three-year liquidity operation," said Pavan Wadhwa, global head
of interest rate strategy at JPMorgan. "The concern is that the more peripheral debt the official sector
holds, worries over subordination mean that the private sector will be
less willing to lend to these countries," he said. Read more >>
Business Insider
While analysts have been making a big deal about the bank bailout in
Spain this morning, it is important not to forget about Europe's
next-biggest problem: Italy.
Yields on Italian government bonds are shooting through the roof
today, as investors wonder how much stronger Italy's banks are than
Spain's. In neither case, it would appear, to they believe that the
bailout has divorced financial sector stress from that on the
government.
The Italian FTSE MIB has also lost all its earlier gains, now down 0.6 percent today.
Check out Italian 10-year yields, up 23 bps so far today:
The German scheme -- known as the European Redemption Pact -- offers a form of "Eurobonds Lite" that can be squared with the German constitution and breaks the political logjam. It is a highly creative way out of the debt crisis, but is not a soft option for Italy, Spain, Portugal, and other states in trouble.
The plan is drafted by the German Council of Economic Experts and inspired by Alexander Hamilton’s Sinking Fund in the United States -- created in 1790 to clean up the morass of debts left by the Revolutionary War. Flourishing Virginia was comparable to Germany today.
Chancellor Angela Merkel shot down the proposals last November as "completely impossible", but Europe’s crisis has since festered, and her Christian Democrat party has since suffered crushing defeats in regional elections. Read more >>
ROME – Italians marched through cities and towns in a general strike protesting an austerity budget they say bleeds workers but spares the rich.
The left-leaning CGIL union called the strike in an effort to force prime minister Silvio Berlusconi’s government to redraft a €25 billion austerity package he says is an essential part of European efforts to save the currency.
The website of the CGIL, Italy’s largest union, said more than one million people took part in various demonstrations in large and small cities around the country.
About 100,000 people, according to union estimates, demonstrated in the central city of Bologna, capital of a traditionally leftist area with a strong labour movement.
In Rome, a long line of protesters blowing whistles and waving red CGIL flags snaked past the Colosseum. Organisers put the turnout at 40,000 people.
In Milan, the CGIL said 80,000 attended a rally, but police estimated the figure at 35,000.
Many of Friday’s marchers also bore placards against car maker Fiat, which is wrangling with unions over plans to improve labour productivity at a plant in southern Italy.
“We say No to this budget. It is wrong, unjust, it stunts growth, it does not kick-start production, it doesn’t touch the rich and it punishes workers,” said union leader Fulvio Mammoni to a crowd of tens of thousands in Naples.
After months of telling Italians they were immune to a Greek-style debt crisis, Mr Berlusconi’s cabinet in May approved an austerity plan, including cuts to funding for municipalities and freezing of public sector salaries.
The government said a random poll of 30 per cent of state workers showed that fewer than 3 per cent of them had heeded the strike call as of early yesterday afternoon.
Support for the stoppage seemed mixed in some areas, despite the union’s judgment that adherence was “massive”. Several bus and metro services in Rome still ran.
The strike was a test of strength for Mr Berlusconi, whose poll ratings have sunk to new lows as unemployment has risen and the euro zone’s third largest economy has struggled to emerge from its worst post-second World War recession.
The strike has split Italy’s trade union movement, which is divided along political lines. The other two main unions have asked their members to stay on the job.
presstv The Bank of the Vatican has been accused of laundering USD 200 million by proxy through an Italian creditor, a report indicates.
The allegation of the Vatican bank's financial corruption has been made by an Italian magazine that pointed to the financial institute's purported involvement in stealth fiscal transactions —via several accounts —with Italy's UniCredit Bank, Russia Today television network quoted the Panorama magazine as reporting.
“This corruption is continuing on a regular basis in the Vatican,” claimed Janathan Levy, a lawyer familiar with the bank.
“Again, there's no reason for a religion to have a bank that does worldwide commercial activities, dealing in gold, dealing in insurance, dealing in property and then hiding behind the Roman Catholic Church," Levy pointed out.
“I had the privilege to walk inside this bank. It's nothing like a bank,” the Russian news channel quoted another lawyer, Massimiliano Gabrieli, as saying.
“If you go there you deposit or withdraw money without limit, without any kind of receipt for the bank and for the client. All you have is a single card with a number,” he stated.
The British London Telegraph, has recently ranked the Bank of the Vatican ahead of the Bahamas, Switzerland and Liechtenstein in banking secrecy.
Bloomberg reports Russian President Dmitry Medvedev pulled from his pocket a sample coin at the G8 meeting that he claims will replace the dollar as the world currency -- a “united future world currency,” he called it.
“Here it is,” Medvedev told reporters...in L’Aquila, Italy, after a summit of the Group of Eight nations. “You can see it and touch it.”
The coin, which bears the words “unity in diversity,” was minted in Belgium and presented to the heads of G-8 delegations, Medvedev said.
The question of a supranational currency “concerns everyone now, even the mints,” Medvedev said. The test coin “means they’re getting ready. I think it’s a good sign that we understand how interdependent we are.”
Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, says Bloomberg, while questioning the U.S. dollar’s future as a global reserve currency. Russia’s proposals for the G-20 meeting in London in April included the creation of a supranational currency.
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