Category: UK & Europe

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Fedex reflects slowing economy

A 30 percent decline on the Fedex weekly chart reflects the slowing rate of economic activity. Recovery above resistance at $70 suggests another bear market rally, but the primary trend is down. Declining 13-week Twiggs Money Flow, below zero, indicates long-term selling pressure.

Fedex

* Target calculation: 70 – (80 – 70 ) = 60

The weekly chart of Deutsche Post AG indicates similar weakness in Europe. We may see a rally test resistance at €11.00 but the primary trend is down and reversal below €9.00 would offer a target of €7.00*.

Deutsche Post DHL

* Target calculation: 9 – ( 11 – 9 ) = 7

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IMF stress tests China/Australia bust – macrobusiness.com.au

I don’t wish to be too alarming. These are stress tests and scenarios not yet reality. But, there is logic in the thought that we currently face the possibility of the final two scenarios happening simultaneously. That is, a Western recession triggered by European and US austerity (not to mention financial tumult) and a Chinese real estate pop.

via IMF stress tests China/Australia bust – macrobusiness.com.au | macrobusiness.com.au.

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Merkel, Sarkozy Claim Broad Agreement to Shore Up Banks – WSJ.com

German Chancellor Angela Merkel and French President Nicolas Sarkozy said Sunday that they have reached broad agreement on a plan to shore up Europe’s battered banks and restore stability to the euro zone.Speaking to reporters in the Berlin chancellery ahead of a working dinner as aides and ministers from both governments looked on, Mrs. Merkel and Mr. Sarkozy provided few details of the plan, pledging to unveil a comprehensive solution to the nearly two-year-old euro zone debt crisis by the end of the month. The plan will include a sweeping recapitalization of European banks endangered by a possible sovereign default in Greece as well as changes to existing European treaties to accelerate integration of the 17 euro-zone countries.

via Merkel, Sarkozy Claim Broad Agreement to Shore Up Banks – WSJ.com.

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America’s Debt Crisis: Why Europe Is Right and Obama Is Wrong – SPIEGEL ONLINE

American economists, central bankers and fiscal policy makers have reinterpreted British economist John Maynard Keynes’s clever idea that government spending is the best way to counteract a serious economic downturn — and have turned it into a permanent prescription. In their version of the Keynesian theory, declining growth or tumbling stock prices should prompt central banks to lower interest rates and governments to come to the rescue with economic stimulus programs. US economists call this “kick-starting” the economy.

….The only problem is that this method of encouraging growth has not stimulated the US economy in recent years, but in fact has put it on a crash course. From the Asian economic crisis to the Internet and subprime mortgage bubbles, economic stimulus programs by monetary and fiscal policy makers have regularly laid the groundwork for the next crash instead of encouraging sustainable growth. In the last decade, the volume of lending in the United States grew five times as fast as the real economy.

via America’s Debt Crisis: Why Europe Is Right and Obama Is Wrong – SPIEGEL ONLINE – News – International.

With thanks to Barry Ritholz

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Bank of England Expands Quantitative Easing – WSJ.com

The Bank of England said Thursday it will buy £75 billion of government bonds in a fresh bout of quantitative easing aimed at stimulating the U.K.’s stagnant economy.

….The decision sent sterling sharply lower. The pound plummeted to a 15-month low against the dollar, trading at $1.5286 from $1.5459 before the decision. Prices for government bonds surged.

via Bank of England Expands Quantitative Easing – WSJ.com.

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ECB to Wield Anticrisis Tools – WSJ.com

Mr. Trichet said it would be inappropriate for the ECB to lend to Europe’s main bailout vehicle, the European Financial Stability Facility. A number of both U.S. and European politicians—not least the European Union’s Economic and Monetary Affairs Commissioner Olli Rehn—have urged that the EFSF be given a banking license, which would allow it to borrow from the central bank. However, a number of ECB officials have said this would break the terms of the EU treaty on monetary financing of governments. “We consider that governments have all capacity to leverage the EFSF themselves,” Mr. Trichet said. “We cannot substitute ourselves for governments.”

via ECB to Wield Anticrisis Tools – WSJ.com.

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Pound joins Euro slide

Apologies. I messed up the links at the bottom of the Trading Diary newsletter. For the correct link click here. Correct links are also available on the Trading Diary web page and under Recent Posts in the right margin of this page.

The euro retraced to test resistance at $1.34 but is likely to continue in its downward trend channel. Reversal below $1.3150 would test our target of $1.30*. 63-Day Momentum declining below zero confirms the primary down-trend.

EURUSD

* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30

The pound has been dragged lower by the euro-zone crisis. Breach of support at $1.53 would offer a target of the 2010 low at $1.43.

GBPUSD

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Tesco’s UK sales slide as consumers cut non-essential spending | Business | guardian.co.uk

Apologies. I messed up the links at the bottom of the Trading Diary newsletter. For the correct link click here. Correct links are also available on the Trading Diary web page and under Recent Posts in the right margin of this page.

Tesco has reported its weakest six-monthly UK sales figures for 20 years as higher food and fuel costs contributed to stark decline in spending on non-essentials such as gadgets, CDs and games in its stores.

UK like-for-likes, excluding petrol and VAT, declined 0.5% in the six months to 27 August, with underlying sales down 0.9% in the final three months of the period.

via Tesco’s UK sales slide as consumers cut non-essential spending | Business | guardian.co.uk.

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How did Europe’s bank stress tests give Dexia a clean bill of health? | Business | guardian.co.uk

It may seem like a lifetime away, but it is only in July that the European Banking Authority published the result of “stress tests” on 90 banks across 21 countries in the EU, covering around 65% of the banking industry.

Eight failed. Sixteen were border line with core tier one capital ratios – a key measure of financial strength – of between 5% and 6%.

So presumably, Dexia, the Franco-Belgian bank on which markets are currently fixated, was in one of the danger-zone categories?

Well no. Its statement issued on the day proclaimed “no need for Dexia to raise additional capital”.

…….The tests have proved to be meaningless even quicker than they were in 2010 when Ireland’s banks were given a clean bill of health, only to be bailed out four months later. In July, 2011 the EBA had been reckoning that the capital shortfall of the banks that failed was just €2.5bn. Now the markets reckon that the hole is more like €300bn.

via How did Europe’s bank stress tests give Dexia a clean bill of health? | Business | guardian.co.uk.

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