Countries & Regions Archives - Page 206 of 378

July 4, 2013

Surprise as BOE, ECB Give Forward Guidance | WSJ

New [BOE] governor Mark Carney has already made changes. In a statement accompanying the widely-expected decision to leave both rates and asset purchases unchanged, the BoE said that rising market rates had shifted expectations for the Bank Rate above levels that were justified by the economic situation.

The fact that there was a statement at all indicated a change in policy. The old BOE just announced its decision and left interpretation to the markets.

This was a clear attempt to talk the markets down and it worked.

July 3, 2013

Forex: Euro hesitant while Aussie falls

The euro is testing support at $1.30, representing a two-thirds retracement of the previous advance. Follow-through below $1.2950 would signal another test of primary support at $1.28 — and a ranging market — while respect of $1.30 would suggest a primary advance to $1.36*. Recovery of 63-day Twiggs Momentum above zero would be a bullish sign.

Euro/USD

* Target calculation: 1.30 + ( 1.34 – 1.28 ) = 1.36

Pound Sterling is ranging between €1.16 and €1.19 against the euro. Upward breakout — and penetration of the descending trendline — would signal a primary advance to €1.22*. But breach of support at €1.16 would indicate another test of primary support at €1.14, while a 13-week Twiggs Momentum peak below zero would suggest continuation of the primary down-trend.
Pound Sterling

The greenback retraced to test the new support level at ¥100 against the Yen. Respect, indicated by follow-through above ¥101, would re-test resistance at ¥103 to ¥104. But reversal below ¥99 seems as likely, and would re-test primary support at ¥94.

USD/JPY

* Target calculation: 104 + ( 104 – 94 ) = 114

Canada’s Loonie is testing support at $0.95 against the greenback. Follow-through below $0.9450 is likely and would signal another decline, with a target of $0.9350*. 63-Day Twiggs Momentum oscillating below zero indicates a strong primary down-trend.

Canadian Loonie

* Target calculation: 0.96 – ( 0.9850 – 0.96 ) = 0.9350

The Aussie Dollar continues to fall, with an immediate target of $0.90* and a long-term target of $0.80* against the greenback. The RBA is cheering this on as they need a softer dollar to cushion the impact of a down-turn in commodity prices.

Aussie Dollar

* Target calculation: 0.92 – ( 0.94 – 0.92 ) = 0.90; 0.95 – ( 1.10 – 0.95 ) = 0.80

July 2, 2013

Australian banks: Who’s been swimming naked?

Margot Patrick at WSJ reports that the Bank of England is enforcing a new “leverage ratio” rule:

Top U.K. banks regulator Andrew Bailey told lawmakers that the requirement for banks to hold at least 3% equity against total assets “is a sensible minimum,” and that those who fall short must act quickly, but without cutting their lending to households and businesses.

The Bank of England’s Prudential Regulation Authority on June 20 said Barclays and mutual lender Nationwide Building Society don’t meet the standard and gave them 10 days to submit plans for achieving it.

I hope that their Australian counterpart APRA are following developments closely. Both UK and Australian banks are particularly vulnerable because of their over-priced housing markets. And while the big four Australian banks’ capital ratios appear comfortably above 10 percent, these rely on risk-weightings of 15% to 20% for residential mortgages.

Only when the tide goes out do you discover who’s been swimming naked. ~ Warren Buffett

July 2, 2013

Rudd? Gillard? Australians have bigger problems | IOL Business

“Australia is a leveraged time bomb waiting to blow,” Albert Edwards, Société Générale’s London-based global strategist, said. “It is not just a CDO, but a CDO squared. All we have in Australia is, at its simplest, a credit bubble built upon a commodity boom dependent for its sustenance on an even greater credit bubble in China.”

From William Pesek at Rudd? Gillard? Australians have bigger problems – Columnists | IOL Business | IOL.co.za.

July 1, 2013

Europe rallies despite broad selling pressure

The FTSE 100 respected its rising trendline and long-term support at 6000, indicating another test of 6750. Bearish divergence on 13-week Twiggs Money Flow, however, continues to warn of selling pressure. Retreat below 6000 would signal a primary reversal.

FTSE 100 Index

Germany’s DAX also signals strong selling pressure, but recovery above 8000 would suggest another primary advance. Continued respect of the long-term rising trendline reflects a healthy up-trend.
DAX Index

Italy’s MIB Index respected primary support at 15000. Follow-through above 15500 would indicate another test of 17500. Respect of the zero line by 13-week Twiggs Money Flow indicates healthy buying pressure.
FTSE 100 Index

Spain’s Madrid General Index is edging lower, while 13-week Twiggs Money Flow falling below zero warns of strong selling pressure. Recovery above 800 would suggest another weak rally, while failure of support at 750/760 would offer a long-term target of the 2012 low at 600*.
FTSE 100 Index

* Target calculation: 750 – ( 900 – 750 ) = 600

July 1, 2013

Asia rallies but ASX meets resistance

Japan’s Nikkei 225 broke resistance at 13500, indicating the correction is over. Expect a re-test of the May high at 16000. Reversal below 13500, however, would mean another test of 12500. A trough above the zero line on 21-day Twiggs Money Flow would indicate a healthy primary up-trend.

Nikkei 225 Index

Dow Jones Shanghai Index respected support at 250, the long tail on both the $DJSH and Shanghai Composite indicating strong buying pressure. Expect a rally to test resistance at 275 (2150 on the Shanghai Composite), but the primary trend remains downward and resistance at 275 (2150) is likely to hold.

Dow Jones Shanghai Index

India’s Sensex rallied off its rising trendline, suggesting that the primary up-trend will continue. Follow-through above 19500 would indicate a test of resistance at 20000/20200. Bearish divergence on 13-week Twiggs Money Flow continues to warn of a reversal and would only be refuted by a breakout above 20200 (or a rise above the May peak on TMF).

BSE Sensex Index

The ASX 200 respected its descending trendline at 4800 and is headed for another test of support at 4650. A peak below zero on 21-day Twiggs Money Flow would indicate a healthy down-trend. Breach of 4650 would test the key long-term support level of 4400, while respect would mean another test of 4900. In the longer term, respect of 4400 would be bullish, but failure of support would be a strong bear signal.

ASX 200 Index

The ASX Small Ordinaries, by contrast, exhibits a stronger bullish divergence on 21-day Twiggs Money Flow, indicating buying support. Breakout above 1960 would indicate the latest primary decline is over, while reversal below 1880 would offer a target of 1800. Small Caps have been badly mauled over the last two years and at some point will present an opportunity to value investors. Unfortunately that end is not yet in sight.
ASX Small Ordinaries Index

July 1, 2013

S&P500 falters while TSX rises

The S&P 500 rally appears to be faltering. Reversal below 1600 would suggest another decline, with a target of 1500*. Breach of support at 1560 would confirm, while reversal of 21-day Twiggs Money Flow below zero would strengthen the signal.

S&P 500 Index

The June quarter ended with the S&P 500 above its new support level at 1550. Respect of the zero line by 13-week Twiggs Money Flow indicates a healthy up-trend, but the tall shadow (or wick as some call it) on the latest candle suggests otherwise. Reversal below 1500 would warn of a correction to the rising trendline, around 1400.

S&P 500 Index
Breakout of VIX above 25 would signal increased market risk.

S&P 500 Index

A false break below primary support on the TSX Composite index was followed by a rally above 12000. Follow-through above the descending trendline would suggest that the correction is over, but a 21-day Twiggs Money Flow peak below zero would warn of selling pressure — and reversal below 11900 would confirm the primary down-trend.

Nikkei 225 Index

June 30, 2013

Bankers’ political influence cause for concern

I am not sure of the background to this, but it certainly looks as if the big UK banks were able to exert enough political pressure to remove Robert Jenkins from the Financial Policy Committee, the UK’s new stability regulator. Anne-Sylvaine Chassany at FT writes:

An outspoken advocate of tough bank regulation who has worked in banking and asset management, Robert Jenkins left the committee earlier this year after not being reappointed by George Osborne, chancellor.

If bankers’ influence was the cause, it certainly is cause for concern.

via Barclays’ threat on lending under fire – FT.com.

June 30, 2013

Barclays’ threat on lending under fire | FT.com

Anne-Sylvaine Chassany at FT writes of the UK’s Prudential Regulation Authority:

The PRA irked banks when it included a 3 per cent leverage ratio target in its assessment of UK lenders’ capital health. It identified shortfalls at Barclays and Nationwide, the UK’s largest building society, which have projected leverage ratios of 2.5 per cent and 2 per cent respectively under PRA tests.

Outrageous isn’t it? That banks should be asked to maintain a minimum share capital of three percent against their lending exposure — to protect the British taxpayer from future bailouts. My view is that the bar should be set at 5 percent, although this would have to be phased-in over an extended period to prevent disruption.

I hope that APRA is following developments closely. The big four Australian banks are also likely to be caught a little short.

June 30, 2013

Lurking beneath Australia’s AAA economy… | On Line Opinion

Kellie Tranter highlights the unstable position of the big Australian banks:

Australia has had a current account deficit since the 1980s. That means we are spending more than we are earning. We’ve had to sell public assets to balance the current account deficit. Put simply, the surplus on the capital account is flogging off the sideboard to buy the fruit.

Our net international financial position is not strong and our gross foreign liabilities are alarming. Banks are the intermediaries between foreign lenders and Australia’s big spenders. The banks have mediated the private household debt and as a result if there is a worldwide recession, banks could be called to pay up.

Our banks have borrowed short (internationally) and lent long (domestically, for mortgages etc.)…….

I have been sounding off about the inadequate capital reserves of the big four banks — because of low risk-weightings attached to residential mortgages — but Kellie also raises the question of their $13.8 trillion derivatives exposure. She concludes:

If the banks are hunky dory why is it necessary [for the RBA] to set up a $380 billion emergency fund and, more importantly, is it enough in light of possible derivatives exposure?