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'perfect Storm' As Market Tremors Hit China, Europe And The Us

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Its gathering pace, brace yourselves, almost here...

countdown has started.

did you prepare yourself!

'Perfect storm' as market tremors hit China, Europe and the US

Capitulation fever has swept global markets on triple fears of faltering recovery in the US, Chinese credit curbs and Europe's intractable escalating debt crisis.

By Ambrose Evans-Pritchard, International Business Editor

"It is the perfect storm," said Andrew Roberts, credit strategist at RBS. "People have been too complacent about risky assets. This is a global deflation scare and people need to get ready for falls in US and European bond yields to 2pc."

Wall Street shares plunged 3pc after new jobless claims in the US rose to 471,000 last week, the biggest jump in three months. The S&P 500 index of shares fell to 1080, triggering automatic stop-loss sales as it crashed through support on its 200-day moving average.

The US Conference Board leading indicator turned negative in April, the first drop since the depths of the Great Recession. This follows data showing an 11pc slide in building permits, pointing to a double-dip slump in the US housing market later this year. Lumber prices have fallen 26pc from their peak in April.

David Rosenberg from Gluskin Sheff said a fresh "train wreck" may be coming in the US mortgage market as rates on a wave of "option ARM" contracts reset upwards in September. This may compound a deflationary process already eating at the US economy as Washington's fiscal stimulus wears off and the effects of a stronger dollar feed through. Core inflation has dropped to the lowest since 1964.

Meanwhile, monetary tightening in China has begun to set off tremors. Shanghai's bourse has tumbled 20pc since mid-April (or 58pc from its 2007 peak), dragging down oil and base metals.

This may prove more than a refreshing pause. Ben Simpfendorfer, RBS's China economist, said credit tightening since April was needed to cool the property bubble, but "regulatory tightening is not a precise science and there is a risk the measures cause an abrupt correction in property prices and construction. It might be that China provides the next surprise."

Goldman Sachs said that there were signs "beneath the radar" that China may be slowing, citing reports that property sales had dropped 80pc in Beijing in the first half of May compared to a month earlier.

Above all, nothing has been resolved in Europe. The short-ban on bond trades this week by Germany's regulator BaFin comes as the Libor-OIS spread used to gauge strains in the interbank market flashes warning signs, rising to a nine-month high of 25 basis points. The iTraxx Crossover measuring corporate bond risk jumped 45 points to 620 yesterday. "The way the market is behaving right now suggests that investors are getting set for something nasty to happen," said Suki Mann from Societe Generale.

Regulatory clamp-downs are often symptomatic of stress. Wall Street crashed 28pc over eight days after the US Securities and Exchange Commission imposed a short ban in September 2008. While BaFin's move has been dismissed political posturing, the story may be more complicated.

An internal BaFin note in February said German banks held €522bn of exposure to state bonds in Portugal, Italy, Ireland, Greece and Spain. It warned of "violent market disruptions" if contagion spread beyond Greece, triggering a "downward spiral in these countries, as in the case of Argentina".

Investors are baffled by the cacophony of voices in Europe. A day after German Chancellor Angela Merkel said the euro was in "existential danger", French finance minister Christine Lagarde replied that "the euro is absolutely not in danger".

Details of last week's EU summit confirm early reports that Ms Merkel was ambushed by a French-led bloc, agreeing to demands for a €750bn rescue package for Club Med under duress.

Karl Otto Pöhl, ex-head of the Bundesbank, told Der Spiegel that the bail-out offers no help to Greece. The country can never repay its debts and needs "partial" forgiveness. "This was about was about protecting German banks, especially the French banks, from debt write-offs," he said.

While Ms Merkel is likely to win backing for the rescue in the Bundestag on Friday, this does not settle the deeper issue of whether Germany will accept an EU debt union. Articles in the German media have questioned whether the country should remain part of EMU. "Should we bring back the Deutschemark?" screamed a front-page story in Bild Zeitung. Fresh cases challenging Germany's EMU membership are certain.

France may have won a Pyhrric victory, securing a short-term triumph at the cost of alienating the German people and setting off a political process that may cause Germany to turn its back on EMU.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7746915/Perfect-storm-as-market-tremors-hit-China-Europe-and-the-US.html

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Its gathering pace, brace yourselves, almost here...

countdown has started.

did you prepare yourself!

I bought two extra tins of rice pudding

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http://www.telegraph.co.uk/finance/markets/7746884/City-fears-of-Great-Depression-Mark-II.html

Markets on both sides of the Atlantic dipped to fresh lows as fears surrounding the fate of the euro project transmuted into worries about the wider global economic system.

Bill Gross of bond fund Pimco said that hedge funds were starting to liquidate their positions in a bid to preserve their capital – a worrying "mini relapse" towards 2008 territory.

Andrew Roberts, head of European rates strategy at RBS, said "Great Depression II" could now be approaching, adding: "It now has potential to speed toward its conclusion; a European $1trn package which does little and political panic tells you we are about to reach the end of the road. The world should be discussing deflation, not inflation."

The FTSE 100 flirted briefly with the 5,000 point mark, eventually finishing the day down 84.95, or 1.7pc, at 5073.13, while the French CAC 40 index was 2.3pc lower and Germany's Dax dropped 2pc. The S&P 500 and the Dow Jones index both suffered their sharpest one-day falls in more than a year. The S&P fell 3.9pc to 1071.59, while the Dow closed 3.6pc lower at 10,068.01.

Fears that Europe's debt crisis could hurt a global recovery pushed Asian shares down for a third day. Japan's Nikkei 225 plunged 2.5pc to 9,782.02. Markets in Australia, Taiwan, mainland China, and Singapore also retreated. Hong Kong amd South Korean bourses were closed for public holidays.

Today is going to be interesting.

PPT out later?

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http://www.nytimes.com/2010/05/21/business/21stabilize.html?ref=business

A top Federal Reserve official warned Thursday that Europe’s debt problems could amount to a “significant external shock” to the United States economy, harming American banks and exporters and stalling the global recovery.

The official, Daniel K. Tarullo, said in testimony at a House hearing that the Fed’s decision last week to reinstate dollar liquidity swap lines with the European Central Bank and four other central banks was a crucial measure to minimize the risk of further financial turmoil arising from the Greek fiscal crisis.

“In the worst case, such turmoil could lead to a replay of the freezing up of financial markets that we witnessed in 2008,” Mr. Tarullo told members of the Financial Services Committee.

Despite a nearly $1 trillion financing package assembled by the European Union and the International Monetary Fund, the downturn in stock markets and continued tight financing in Europe reflected persistent uncertainties, said Mr. Tarullo, who was President Obama’s first appointment to the Fed’s board of governors.

The United States is “in a very different position” than the debt-stricken European countries, he said. But their problems could hold lessons.

“Their experience is another reminder, if one were needed, that every country with sustained budget deficits and rising debt — including the United States — needs to act in a timely manner to put in place a credible program for sustainable fiscal policies,” he said.

The Fed getting concerned over the 94:0 vote in the US?

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Have people suddenly discovered the global economy is full of bu115h1t?

It was Fine last Friday...I checked.

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Guest theboltonfury

Its gathering pace, brace yourselves, almost here...

countdown has started.

did you prepare yourself!

You said almost exactly the same thing nearly two years ago.

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You said almost exactly the same thing nearly two years ago.

you've been here long enough to know that markets are rigged, they're kept on life support since then, but game is almost over.

watch it happening in slow motion.

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you've been here long enough to know that markets are rigged, they're kept on life support since then, but game is almost over.

watch it happening in slow motion.

I'd rather it just happened in normal time - preferably by 12 noon today.

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Guest theboltonfury

you've been here long enough to know that markets are rigged, they're kept on life support since then, but game is almost over.

watch it happening in slow motion.

Yes, but then what happens? We don't all just die. The world carries on spinning. Just with a few less to55ers.

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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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