Thursday, February 4, 2010

Pop!

Stock markets, euro slide as fears of a sovereign debt crisis rattles investors

The Spanish and Portuguese markets led the declines as investors' fears focused on whether government plans to cut their deficits are tough enough. By late afternoon, Spain's main market, the IBEX, was down more than 5pc and Portugal's benchmark, the PSI-20, was off a similar amount. The prospect of a sovereign debt crisis has been seen as one of the biggest risks facing the global economy this year as the downturn catches up with heavily indebted countries

Posted by cat and canary @ 04:54 PM (4098 views)
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17 thoughts on “Pop!

  • So now investors will seek safe havens en masse. How much will having our own currency help the UK now?

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  • tyrellcorporation says:

    I must admit I sensed a whiff of death about Exeter today for some reason. I think the artificial rally in everything is coming to an end and I’m tempted to get out of equities asap. All those green shoots are now distinctly brown looking.

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  • mountain goat says:

    Good article in FT about sovereign defaults
    http://www.ft.com/cms/s/0/49d36c86-11b7-11df-bceb-00144feab49a.htm

    “…Back in the autumn of 2008, after the collapse of Lehman Brothers, the ECB loosened the rules which govern how banks can get central bank funds. In particular, it let banks use government bonds rated BBB or above in ECB money market operations, instead of merely accepting bonds rated A-, or more.

    This was initially presented as a “temporary” policy, slated to last until late 2009. But last year the ECB extended the policy until the end of 2010. Thus, during 2009, banks which were holding Greek bonds have been merrily exchanging these for other assets via the ECB. This, in turn, has helped to support Greek bond prices (and, by extension, Greek banks that hold a large chunk of outstanding Greek bonds).

    Until recently, many observers thought – or hoped – that this policy would be extended again, perhaps until 2011 or beyond. For although Greek debt currently has a credit rating that meets the old ECB rules, there is a good chance the debt will be downgraded this year. This creates the risk that Greek bonds will be excluded from any newly tightened ECB regime.

    Earlier this year, senior ECB officials indicated that they intended to “normalise” the policy, as planned, at the end of 2010, as part of their exit strategy. That has removed one key source of support for Greek debt (and spooked investors, such as German insurance companies, which also hold large chunks of bonds.) …

    To many European bankers and politicians, however, the focus on raw numbers misses the point. To them, this story is not just about economics, but politics, and the determination of a generation of leaders traumatised by the second world war to maintain European unity, almost at any cost. And as the price of Greek debt has tumbled, and yields have risen, doughty figures at the heart of Europe are increasingly likening this to an “attack” on the euro, on a par with, say, the attack on sterling launched by George Soros two decades ago. The potential for some form of political backlash is running high.

    Nevertheless, as emotions run high, the key point is that in a world where hedge funds tend to make their money by spotting and exploiting systemic fault lines, the Greek debt saga has exposed not one, but two such fault lines: namely the tangible level of government debt, and the exit strategy debate. Or to put it another way, while Greece’s problems might have been partly masked for much of the last year, the day of reckoning is approaching fast.

    Perhaps Greece will manage to get its fiscal affairs in order fast enough to cope with a world where the central bank “tide”, as Buffett might say, goes out. Maybe countries like Spain and the UK will do so too. But some powerful investors are clearly now betting against that. Stand by for more drama, and not just in Greece. “

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  • mountain goat says:

    Those pampered green shoots need to be taken out of the greenhouse now as monetary tightening takes hold.

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  • tyrell

    Have you got a spread trading account where you can short ?

    The Dow is close to 10000 now where it may find some support, if not down towards 9700, if it doesn’t stop there it could be a long way down.

    BTW I’m not even remotely qualified to give advise, but I’m sensing I’m on a roll since I said Gold had formed a double top a few days ago LOL.

    Techiman may have something to say on the matter.

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  • tyrellcorporation says:

    Um, I’m not really that whizzy with trading, etc. I do have a widely balanced portfolio though so hopefully I won’t get battered too badly if things go south for a while.

    Any pro insight is always useful though so fire away guys.

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  • Any ideas why GBP to Euro is still 1.14 like yesterday actually it has strengthed a couple of basis points in the last week?

    Maybe shows the GBP is also falling at a slightly faster rate..

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  • If the dash for trash has come to an end and major profit taking sets in we could see a quick reversal of some or maybe all of the gains made in the last 9 months. The Dow is just 2 points above 10,000 as I type.

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  • I shoved the whole btl fund into instant access dollars last month. Bring it on.

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  • i mean str not btl

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  • Hi Str2007 – actually im a little bit disappointed. I was only short Ftse, S&P and CAC, no DAX, no $ v Euro , no $ v GBP and no SMI etc etc and nothing exotic either ( i mean no “emerging markets” or BRICs)! Still there you go.

    My advice is really this: decide on your direction and a target and stick to it. If you think its right to be short, its a bit like a rollercoaster – you will eventually get to the bottom (assuming you are right), but you will get some moves back up. Personally i still have some FTSE shorts @ 5568 – a core short position if you like, although i have traded around it. In other words i am looking for the moves back up in the rollercoaster to trade around but i wouldnt advise that.

    http://www.housepricecrash.co.uk/newsblog/2010/01/blog-party-of-opportunism-spots-opportunity-27359.php

    No 11 – i was discussing with Jack:

    “Anyway – to answer your question, i am still short FTSE @ 5568 with no pain (half my normal size as it was off the top), and although i got out of some i am looking for 5200 as a conservative level. I actually added to this by shorting the S&Ps – which didnt go so well for a while but are now also firmly in the black. i averaged the short position on the S&Ps – you probably know what that means.

    5200 has both trendline and general support, so would expect it to lose momentum once it gets around there. Then a bit of a pullback then another move lower then a more sensible retracement. Basically this move so far is “off the top” and i generally wouldn’t be involved in it. I would (and will) wait for this more sensible retracement.” Thursday, January 21, 2010 10:49PM.

    The sensible retracement was back to 5300 – that was a fib retracement level, although i was 50/50 as to whether that was part of a retracement or the whole of the retracement from the 5120 prior low.

    If you take a look at the daily bars / candles from 21/1 you will see what i mean. So now effectively short @ 5568 and 5300. Where now??

    Well to be honest i really dont know! It does look very bearish and it may be, but i am feeling a bit skeptical – it just feels too easy really which worries me. I am thinking that a bit lower then a bounce back. I really dont have what i would believe to be a high probability call. If there is a rally i dont think that will be the end of the bear move, and yes i may very well add some more positions, but really i would like to see some more market action before committing myself.

    congrats on the gold double top btw!

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  • Re the US market – Str 2007, you can see my favourite blogger with the pretty pictures. Just to let you know – i didnt record it here, i got short of S&Ps @ 1099 on the 2nd @ 20:41.

    Here’s the pic: http://3.bp.blogspot.com/_TwUS3GyHKsQ/S2tHGyNeobI/AAAAAAAAD10/7MpQPjHCwfo/s1600-h/spx5.png

    Here is the full article : http://danericselliottwaves.blogspot.com/

    Remember we have the employment numbers tomorrow!!!!

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  • Thanks for the feed back techieman

    I missed that thread earlier in January.

    It is difficult getting in short with a decent sized hand.

    I had it going this afternoon on S&P until MFGlobal pulled their charts (guess they’d been loosing too much). So I had to close down my position, nicely in profit though.
    My eSignal is delayed and doesn’t have S&P etc on, which seems odd as it’s the American markets that drive ours.

    I don’t understand the elliotwave stuff yet but when time allows …..

    Will be interesting to see how the FTSE reacts tomorrow as ‘by my charting lines’ it’s finished sitting pretty much on the 50% fib line between peak and March low. It’s also recently just confirmed support from September as resistance, which also fairly closely coincides with a line drawn all the way back across the 2nd Jan ’08 and 19th May’08.

    Time will tell.

    Odd re: the unemployment numbers – no mention of it on Daily FX calender – which is where I usually look for troublesome news evewnts due to occur.

    What time are they out ?

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  • str2007 – “t is difficult getting in short with a decent sized hand.”

    Yes -you always have too much when its not going your way and not enough when it is! 🙂

    Employment numbers are at usual time….. 1:30 ours. [http://www.igindex.co.uk/spread-betting/economic-indicators.html]

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  • Hi techiwman

    Sorry I assumed you meant UK employment figures.

    Your link gives more detail than the one I’m about to give you, but this one’s an easier read.

    http://www.dailyfx.com/calendar/

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  • 9. tpbeta said… I shoved the whole btl fund into instant access dollars last month. Bring it on.

    You are not alone Brother, I’m with you all the way. Say what you want about the Dollar but the downside risks of holding Sterling far outweigh the upside gains right now. Give me a solid Conservative win, a realistic emergency budget, the Triple A secured and a half decent interest rate and I’ll hold the mother currency, until then, no thanks. The fact we still have the wrecking ball of a housing crash to come doesn’t fill me with confidence on Sterling for the next 1-3 years either.

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  • str2007 – i did say “the employment numbers “. Maybe i should have said “THE employment numbers” :-). Yes the US ones, as you know, move the market – and so are really the ones of main consequence for them…. and of course us!

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