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Europe Debt Woes Hit Euro, Asian Shares

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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7732080/Europe-debt-woes-hit-euro-Asian-shares.html

Japan's benchmark Nikkei 225 stock average dropped 2pc, Hong Kong's Hang Seng index lost 2.5pc and the Shanghai Composite 3.4pc. In South Korea, the Kospi slid 2.8pc and Australia's S&P/ASX 200 index was down 2.8pc.

Asian investors' mood turned downbeat on growing concerns that cost-cutting fiscal measures being taken by Greece, Portugal and Spain could hamper a recovery in the eurozone economy.

The euro fell as low as $1.2235 against the dollar and the pound weakened further, hitting $1.4252 at one stage against the US currency.

European stock markets are expected to open lower.

Investor panic hit markets worldwide on Friday as fears grew that austerity measures facing troubled eurozone countries would derail recovery and spark social unrest.

..........

The sharp drop was a clear signal that the confidence provided by a $1 trillion (£685bn) eurozone rescue package has vanished amid deep concerns over the situation in Greece, Portugal and Spain, and the stability of the region as a whole.

In an interview with German newspaper Der Spiegel to be published today, the European Central Bank president said Europe's economy "is in its most difficult situation since World War II or perhaps even since World War I."

Jean-Claude Trichet said the eurozone's debt crisis has provoked a market reaction similar to that at the height of the global financial crisis in 2008.

His word echoed those of Axel Weber, a senior policymaker at the European Central Bank and head of Germany's Bundesbank, of Friday who warned: "It is important not to underestimate the dangers to financial stability that still exist.

"The focus of markets has shifted in recent months towards concerns about the situation of public finances in a number of countries across the globe."

Still at least it's contained.

Will the FTSE follow suit?

Will the Euro sink below $1.20 before the week is out?

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Will the Euro sink below $1.20 before the week is out?

I recon 1.10 is what the German government is secretly aiming at, that would give the German export oriented economy a nice boost this year.

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http://www.nytimes.com/2010/05/17/business/global/17fear.html?hp

After a brief respite following the announcement last week of a nearly $1 trillion bailout plan for Europe, fear in the financial markets is building again, this time over worries that the Continent’s biggest banks face strains that will hobble European economies.

In a sign of the depth of the anxiety, the euro fell Friday to its lowest level since the depth of the financial crisis, as investors abandoned the currency as well as stocks in favor of gold and other assets seen as offering more safety.

In trading early Monday morning, the euro declined again, managing at one time to reach a four-year low relative to the dollar.

The president of the European Central Bank, Jean-Claude Trichet, in an interview published Saturday, warned that Europe was facing “severe tensions” and that the markets were fragile.

For Europe’s banks, the problems are twofold. Short-term borrowing costs are rising, which could lead institutions to cut back on new loans and call in old ones, crimping economic growth.

At the same time, seemingly safe institutions in more solid economies like France and Germany hold vast amounts of bonds from their more shaky neighbors, like Spain, Portugal and Greece.

Investors fear that with many governments groaning under the weight of huge deficits, the debt of weaker nations that use the euro currency will have to be restructured, deeply lowering the value of their bonds. That would hit European financial institutions hard, and may ricochet through the global banking system.

Bourses and bank shares in Europe plunged on Friday because of these fears, with Wall Street following suit. Shares were also down in Tokyo and Australia in early trading on Monday.

“This bailout wasn’t done to help the Greeks; it was done to help the French and German banks,” said Niall Ferguson, an economic historian at Harvard. “They’ve poured some water on the fire, but the fire has not gone out.”

The European rescue plan, totaling 750 billion euros, is intended to head off the risk of default but would vastly increase borrowing. That could hamstring Europe’s nascent recovery.

Indeed, it was too much debt that caused the problem in the first place: a new report by the International Monetary Fund warns that “high levels of public indebtedness could weigh on economic growth for years.”

The world’s budget deficit as a percentage of gross domestic product now stands at 6 percent, up from just 0.3 percent before the financial crisis. If public debt is not lowered back to precrisis levels, the I.M.F. report said, growth in advanced economies could decline by half a percentage point annually.

To be sure, not all of the trends are negative. A lower euro will actually make European exports — be it German automobiles or Italian leather — more affordable and more competitive around the world. And Greece, Spain and Portugal took the first steps last week toward enacting austerity measures that would reduce their budget deficits.

Seems a bargain rescue for $1tr in money that still doesn't exist and with no framework to use it.

Still at least it can't get any worse...

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Guest Noodle

That could be an interesting wedding, will Superman give away Batman?

No he's a bridesmaid, Wonder Woman giving the caped crusader away.

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http://business.timesonline.co.uk/tol/business/economics/article7128234.ece

The world’s biggest financial bailout has bought time for the euro but not a solution to the financial problems of the eurozone, Angela Merkel said yesterday.

Germany’s Chancellor denounced speculation against the single currency after a week in which euphoria over a €750 billion eurozone rescue quickly turned sour. In a bruising five-day sell-off, the euro slumped to its lowest level against the dollar for 18 months.

Speaking to German union leaders, Mrs Merkel called for more market regulation but said that the cause of the turmoil was the widening gap between the core eurozone states and the weakened economies on the periphery of the European Union.

“We’ve done no more than buy time for ourselves to clear up the differences in competitiveness and in budget deficits of individual eurozone countries. If we simply ignore this problem, we won’t be able to calm down this situation,” she said.

This bailout just gets better and better, even those who've organised it know it's bound to fail.

Still at least it's only taxpayer money.

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The USA and the UK proved themselves as reserve currencies under the pressure in 2008 and 2009. The Euro is looking weak under pressure in 2010.

What I saw in the 1 trillion dollar debt program was a lot of smoke and mirrors and hardly any real meat. Anything less than the power for the ECB to monetize national bonds to protect stability is weak.

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For once, I'll come out and agree with you.....for the following reason.

They need to get sov. debt off bank balance sheets and then allow the sovs to restructure their debts.

The way things are organised at the moment means they cannot allow the sovs to make their debts more affordable without blowing up the banking system.

Lesss than ideal though.

I'm sure that will prove popular with the taxpayer.

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I recon 1.10 is what the German government is secretly aiming at, that would give the German export oriented economy a nice boost this year.

I keep hearing this argument that Germany wants lower exchange rates. I don't think that's what they are after at all. Germany, in the post WW2 period, has never has a penchant for low exchange rates.

The DM never ceased to be legal tender. When Germany joined the Euro, they left in place the instruction that the DM must be accepted indefinitely.

I think they would like to see Europe unwind, so that they may go back to the DM again. They seem quite content to just stand by and watch the show.

Nonetheless there must be an almighty short squeeze in the works...

Edited by Toto deVeer

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I keep hearing this argument that Germany wants lower exchange rates. I don't think that's what they are after at all.

Well, you think wrong and the DM ceased to be legal tender a long time ago.

Think before writing your post makes no sense at all.

Edited by wise_eagle

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"The Deutsche Bundesbank has guaranteed that all German mark in cash form may be changed into euros indefinitely, and one may do so at any branch of the Bundesbank in Germany. Banknotes can even be sent to the bank by mail.[1]"

That's not the same as legal tender. Try paying anything in DM in a shop in Germany then you might get what legal tender means...

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That's not the same as legal tender. Try paying anything in DM in a shop in Germany then you might get what legal tender means...

Semantics. The principle is this. If you've got DM today, or 10 years from today, you can still use them.

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Rubbish.

And that still doesn't change that the Germans are aiming at 1.10 to the dollar to boost their economy.

Read this (providing you can read German):

http://www.heise.de/tp/r4/artikel/32/32638/1.html

Thank you for your article, interesting opinions, but I fail to see how lower exchange rates can help in a world where there is no demand, which is where we are headed. If this is what Germany wants, good luck to them. I would have thought that they would rather reclaim their sovereignity, and not assume the massive debt of other, profligate nations.

In the long run the world economy can only recover when each major economy rebalances it's production and consumption, and reduces it's public and private debt.

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Thank you for your article, interesting opinions, but I fail to see how lower exchange rates can help in a world where there is no demand, which is where we are headed. If this is what Germany wants, good luck to them.

There is plenty of demand far east, with plenty of dollars to pay for German products (hence the need to lower the euro versus the dollar).

Edited by wise_eagle

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http://uk.ibtimes.com/articles/23580/20100513/gold-shops-in-europe-out-of-stock-due-to-panic-buying.htm

Gold shops in Europe out of stock due to panic buying

- ... This is confirmed by the Australian Mint, announcing that they sold 243,500 OZ of physical gold during the last two weeks, more than in the entire first quarter. The orders came nearly exclusively from Europe and the Australian Mint sees signs of "panic buys". -

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There is plenty of demand far east, with plenty of dollars to pay for German products (hence the need to lower the euro versus the dollar).

As long as Germany buys an equal or greater amount of Asian product. The last thing that the Asian economies want is to lose their export surplus, and the last thing the Germans want is to lose their export surplus. And I don't see that Germany, with a low Euro, will replace US consumption any time soon.

The German people have suffered a lot of pain, over the last 20 or 30 years, to build an economy built on exports, whilst maintaining a strong currency. I can't think of any other country that has managed to achieve this. Now I find it hard to believe that they would sudden throw all of that away, by assuming others debts and devaluing their currency. Just does not jibe.

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As long as Germany buys an equal or greater amount of Asian product. The last thing that the Asian economies want is to lose their export surplus, and the last thing the Germans want is to lose their export surplus. And I don't see that Germany, with a low Euro, will replace US consumption any time soon.

Each of them don't just export to each other, the export surplus is towards all countries combined, so there is plenty of scope for both sides to benefit.

The German people have suffered a lot of pain, over the last 20 or 30 years, to build an economy built on exports, whilst maintaining a strong currency. I can't think of any other country that has managed to achieve this. Now I find it hard to believe that they would sudden throw all of that away, by assuming others debts and devaluing their currency. Just does not jibe.

It's fairly logical once you get it, the european market is stagnating (if not worse) and won't give the Germans much growth (if any at all) for the next few years, so they needed to realign the Euro/$ exchange rate to the long term average to be more competitive in Asia.

After all the DM/$ long term average is below 1.20$/Euro.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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