Wednesday, May 05, 2010
Oh dear
The Telegraph: Euro plunges as Club Med debt fears spread
Yields on German two-year debt reached a record low, falling to 0.71pc on safe-haven demand in echoes of credit stress at the height of the financial crisis."This is very unusual and indicates concern about systemic risk from sovereign debt," said Stephen Lewis from Monument Securities.
German Chancellor Angela Merkel told ARD television that banks and creditors should be forced to share the pain if further rescues are ever needed, suggesting "an orderly restructuring" of debt in future. The words were an icy warning to investors that the €110bn (£95bn) aid package for Greece is a one-off case.
"This is dangerously ill-timed," said Marco Annunziata, of UniCredit.
Posted by devo @ 07:00 AM (737 views) Add Comment
8 Comments
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1. techieman said...
This all looks to be the first leg of dollar strength, when most thunk the dollar was finitoed. The move looks quite mature now so expect some bottoming out of the Euro against the greenback "soon". [Especially since now EVERYONE thinks the Euro is farquaharsened.]
That will then provide the rationale for a further bought of EUR weakness / dollar strength. Pretty much goes for the £. Probably gets sold off first to mid 140s and then a bounce. Having said that its good to take out some profits and relax and wait and see what we do on Friday. I wouldn't be surprised to see initial falls in the £ on the hung parliament and then a major squeeze to punish the shorts. Of course if the result is an overall majority (for any party) then a (potentially major) relief rally will be on the cards!
2. quiet guy said...
Another gloomy take on this from the Guardian:
This Greek bailout is not a recovery plan – it is an economic death spiral
Elliott thinks the Greeks are in an impossible situation and the bailout will just be a waste of good money.
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4. cynicalsoothsayer said...
It may not be that bad. The Greeks need to shake out a lot of overpayment, corruption, graft and largesse from their government spending. The Germans are trying to force this as condition of the bailout.
5. uncle tom said...
- As I noted yesterday, the new Greek austerity plan was too lite on detail - the markets seem to agree.
- Santander's share price crashed 7% yesterday - that's big! I've had major doubts about Santander for a long time now; it's apparent ability to shrug off the consequences of economic calamity in it's core markets has been too good to be true. Not quite the same story as the Icelandic banks, but the potential for similar consequences on a much larger scale..
- Much is made of tax evasion in Greece, but these unpaid taxes are not free money - most of the unpaid tax is being spent, not squirreled away; so any attempt to tighten up will have the same effect as tax increases, and depress the Greek economy.
- It is clear that the Greeks would be better off quitting the eurozone; Portugal would be well advised to do likewise. When will the national politicians in these countries stop trying to flog a dead horse?
6. britishblue said...
Greece should take a look at what happened to the UK when the UK left the exchange rate mechanism.
If they left the euro and crashed their currency they could be well on the road to recovery in 18 months. I have just left Marbella, in Spain where a cauliflower is 3 euros in a supermarket. Holidays in the Sun are now so expensive in Eurozone. 19% of Greeces economy is Tourism. they could clean up in this area if they left the euro, especially with many other people in Europe looking for cheap holidays in the Sun. 22% of Greeces GDP is manifacture and 5% is agriculture. In all of these areas they could work their way out of their problems with a currency worth 60% of what it is now.
7. rumble said...
"I wouldn't be surprised to see initial falls in the £ on the hung parliament and then a major squeeze to punish the shorts. Of course if the result is an overall majority (for any party) then a (potentially major) relief rally will be on the cards!"
Just to clarify... I should be short £ unless I should be long £ ...?
8. techieman said...
rumble - this is "event risk" which position traders actually hate. When in doubt stay out. [which is exactly what i will be doing, whereas in years gone by i would have been having some fun].
To clarify if a hung parliament then you should be short (of GBP) on the news BUT then there will be a squeeze (IMO), to get the weak shorts out. So initialy short then cover, then reverse. Thats not to say the moves wont be big, they will probably just be very quick.
If a majority though for any party then the £ will rally sharply. Either way eventually the falls in the GBP will reinstate and moves up in the Euro and the Greenback. .... IMO.