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UWC is proud to provide daily market reviews by the well-known financial expert – Mr. Arne Treholt, a former Political Secretary to the Minister of Shipping and Foreign Trade, then Deputy Minister of Law of the Sea of the Norwegian Royal Ministry of Foreign Affairs. He also held the position of Counselor for Economic Development and Social Affairs at the Ministry of Foreign Affairs, and was member of the Norwegian Mission to the United Nations, New York. At the moment Mr. Treholt is a Vice President and a Business Development Director of United World Capital.

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US stocks raise on stimulus expectation Moody’s downgrade Cypriot banks

Arne Treholt Vice-President of Business Development and Investments

US stocks staged a comeback rally to end up more than one percentage on expectations that the Federal Reserve (FED) would have to undertake stimulus measures. Also European stock markets rose for the first time in three days. This as Spanish ten years bonds reached a record high.
Euro/USD is trading at 1.2490 slightly down from yesterday. Oil price still under downward pressure. Brent is trading at year’s low 97.01.

Trading in stocks have been choppy this week as markets struggle for clarity after the USD 125 B bailout of Spain’s banks. Investors are asking whether the agreed bailout will be effective. More than 10 Spanish banks have been downgraded, and bond yields are more and more seen as thermometer for risk aversion.

Sectors, which have been sold off recently, posted the biggest gains in yesterday US rally with Boeing climbing 3 % as the winner. This seems to indicate that investors see value in beaten down shares.
In Greece the Left wing coalition Syriza has rejected to enter into a coalition with PASOK, the former government party, which supported the Memorandum and austerity measures. Syriza is together with the center right New Democracy in head in the opinion polls prior to Sunday’s election.

The outcome of the Greek election might be decisive for whether Greece might have to exit the Euro. The Greek elections are therefore followed with great interest by global market and other Euro-countries.
Moody’s investor Service on Tuesday cut the credit ratings on two Cypriot banks, Bank of Cyprus (BOC) saw its rating cut by one notch to B2. Hellenic Bank got its credit deposits and credit assessments ratings lowered to B2.

The Cypriot banks are heavy exposed to Greek treasury bills and Greek private lenders.
Cyprus Popular Bank, the country’s second biggest lender has till 30th June to find 1,8 billion Euro in fresh capital to meet European regulators conditions. In a statement, the Cypriot Minister of Finance did not rule out an EU bailout to prop up its Greece exposed banks. Cyprus is going to take over the half-yearly chairmanship of the EU from July 1st.

Copyright: United World Capital

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Moodys downgrades Spain and Cyprus

Arne Treholt Vice-President of Business Development and Investments

Moody’s has downgraded Spain and Cyprus after the international rating agency yesterday also downgraded Bank of Cyprus and Hellenic Bank.
Spain has been given rating, Baa3 down from A3, the closest to junk status highlighting the seriousness of the Euro-zone debt crisis.
Moody’s stressed simultaneously that the approved Euro-zone plan to help Spain’s banks will increase the country’s debt burden.

A concrete result of the downgrading is that like Greece, Spain and Cyprus shall have very limited access to international debt markets, and likely further weakness of their national economies.
In following the situation, Moody’s stated that the rating agency shall look carefully into the development in the wider Euro-zone including the result of the upcoming Greek elections, before taking eventual further downgrading steps.

In accompanying news interest rate for German Bonds, which recently have been seen as one of few “safe havens” for investors, unexpectedly rose with 0,1 % following the same upward trend as interest rate on Spanish and Italian bonds.
The turnaround in German’s bond rates is seen as Investors fears that Germany under pressure from France, Italy and other Euro members might give in on their resistance to introduce German supported Euro-bond to ease the debt crisis.

US and European markets ended in red yesterday while the Asian composite MSCI index is slightly down.
Brent crude is trading at 97,66 before the end session of OPEC the Oil producing countries, in Vienna.
While Saudi Arabia wants to increase oil production. Iran wants cut production to keep oil stabile on at least 100 USD/barrel. The opposing views shall most likely end up in a compromise where the conflicting parties agree to disagree, with no increases or cuts in production.

The firmer Euro trend towards USD is continuing. After dipping below 1.25, Euro – USD is trading at 1.2582 in the morning. USD/JPY is at 79,4458.

During congressional hearings JP Morgan Chase Chief Executive apologized for the bank’s multibillion–dollar trading loss. Dimon revealed few new details about the trading losses: struck a contrite tone when needed and punched back when provoked.

Copyright: United World Capital

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Global markets cling to stimulus

Arne Treholt Vice-President of Business Development and Investments

American and Asian stock markets traded up yesterday and this morning on central bankers statements that the time might be ripe in for injecting stimulus to a global economy fighting on the defensive.
Dow Jones added 1,24 %. The Asian Pacific climbs 0,7 % after its best week since December.

Commodities are stabilizing with Brent crude up 1 dollar to 97,03 after the Oil producing countries, OPEC, left the production quota ceilings unchanged. The dollar weakens against most currencies. EURO-USD is trading at 1.2645 before Sunday’s crucial Greek elections.
The yen is stronger; USD/JPY at 78.8875 . Australian and New Zealand dollar post record gains against USD for the week. Dollar is falling on the assumption that Fed shall make a new round of quantitative easing.

Central Bankers representing major economies have in different statements over the last days, declared their willingness to stabilize financial markets by providing liquidity and prevent a credit squeeze in case Sunday’s Greek elections cause panic trading. A US official, however, cautioned that the Greek elections will not provide the definitive signal on what would happen next in the Euro-zone crisis.

Markets are also following crucial elections in France and Egypt over the weekend. The situation in Egypt is complicated, and central bankers stand ready to ensure that enough cash is throwing through the financial system in case of any disruptive turmoil.

Interest rates on European bonds continued to raise. Spanish 10 year bonds ended yesterday on 6,95 %, just below the critical 7 % threshold which the beginning of the real problems for Greece, a couple of years ago.

Central bankers indication that Central Banks are preparing for coordinated action to provide liquidity, lifted the US and Asian markets. Global markets seem to gamble on the hope that central bankers are ready to inject funds into weak under capitalized banks and take steps to stimulate the economy. This was the message also coming out from yesterday’s meeting with England’s Minister of Finance and Bank Head, Mervin King.

Futures for Europe and US are pointing up. Dollar is under pressure and Gold is trading at 1625, close to 10 dollars higher than at the opening in Europe yesterday.

Copyright: United World Capital

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WEEKLY MARKET REVIEWS

by Arne Treholt Vice-President of Business Development and Investments

Greeks are proud to state that their country is the cradle of democracy. Greeks are going to vote on Sunday for the second time in one month. International eyes are on Greece. Never before in their history there has been such an interest for the outcome of a Greek election.

For the first time since Andreas Papandreou dominated the Greek political scene and challenged the power centers in Europe and US with his charismatic, oratory flame, a 37 year former street protester and engineer, Alexis Tsipras, and his Syriza party, makes claim to his position. Tsipras has flatly rejected the austerity measures of IMF (International Monetary Fund), ECB (European Central Bank) and EU (European Union), which the established political parties hesitatingly accepted. This rejection sent shockwaves through international capitals.

SYRIZA’s dilemma is, however, to reconcile a rejection of the troika Memorandum with Greece’s continued EURO membership. Tsipras is well aware of the fact that 75 % of Greeks don’t want to return to the drachma. Greeks see themselves as” Europeans”, and the EURO is the very symbol of being a European. Whether that is in their real national interests, is at present not at the agenda.

During the last week, Tsipras has been all over the place. Yesterday he issued a strong warning to speculators: Don’t gamble on the assumption that a Syriza victory is equal with a Greek exit from the Euro! This message was taken from the violent atmosphere of Athens protesting streets to new forums as Bloomberg News and Financial Times. Syriza claims to renegotiate the austerity measures. That does mean that Syriza shall claim a Greek exit from the Euro.

His message has been received with shrug of shoulders and open mouths in European power centers. They have given their signals to the Greek voters; stay with the austerities and the parties which swallowed them; or else …

The upper hand is, nevertheless, neither with the Greek voters or Tsipras. It rests in Germany.
Germany is at the final stage of deciding the fate of Greece’s fate inside or outside the Euro. That depends primarily not on Alexis Tsipras. But give Tsipras the credit. He has managed the piece of art of having the power corridors of Europe to listen: even if it is with open mouths.

Greece confronts Germany with its own history. Greeks have terrible war time memories of Hitler Germany. The rationale for the establishment of the European Union was to avoid the horrors of the past. In Germany’s case the hyperinflation of 1923 and the death of democracy in 1933 which lead to a destructive war.

It seems, however, that Angela Merkel as the key decisive figure is more occupied with the memories from 1923 than the ones from 1932. Today it is not inflation, but depression and mass unemployment that threatens the stability of Europe, and Germany’s recent prosperity is closely connected with the EURO establishment.

Germany is the big winner of the Euro introduction. The Euro gave German exporters a competitive exchange rate to the old Deutschmark. 42 % of German exports go to the Euro-zone. It is hardly in Germany’s interest to plunge the southern periphery of Europe counts for 25 % of their export into Depression. Angela Merkel obviously realizes this, when she the last weeks has stressed the necessity for a closer European fiscal and political union. Germany and the political and financial elites of Europe might be ready and wish a closer integration.

The big question is whether the streets in Athens and Madrid, which are further and further alienated from the European power centers, think likewise.

That also count for Europe and Greece, which take pride of being the birthplace of democracy.

Copyright: United World Capital

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EURO jumps after pro bail-out victory

Arne Treholt Vice-President of Business Development and Investments

The EURO jumped to a one month high trading at 1.2702 vs. USD, after the political parties supporting Greece international bail-out won the elections on Sunday.
The center-right New Democracy party came first with 29,8 %, and will together with center-left PASOK which also supports the terms and conditions laid down in the Memorandum negotiated with the troika of IMF(the international monetary fund), ECB (European Central Bank) and EU, probably succeed to form a majority government. A small pro-bail out party on the left might also join the coalition.

PASOK and New Democracy have together 161 of the 300 places in Parliament. The anti bail-out leftwing coalition, SYRIZA, which came in second with 26,8 % has rejected to participate in a national salvation government headed by ND’s Antonis Samaras. Before the elections Western European heavy weights as Angela Merkel and Italia’s Mario Monti along with the EU-Commission had warned strongly against the consequences of a victory for the leftwing Syriza.

The outcome of the much anticipated elections had markets to soar. The pro bail-out parties victory is increasing the chances for the debt-laden Greece to stay in the Euro, and came as a relief to global markets ahead of G-20 meeting in Mexico.
The Euro recovered strongly. Asian markets led by the big exporters jumped up to 2 %, and oil prices are at its highest levels in one week. Brent trading at 98.90.
Gold and precious metals are trading flat. Gold at 1622. Japanese Yen is gaining versus USD at 79,1245.

Although the elections are seen as a victory for the pro bail-out camp, SYRIZA and other rejectionist parties also came in strongly. Greece is in deep recession and experiencing its 5th year with negative growth. Unemployment running at 25 %.
The elections have given some clarity, but the fundamental challenges facing both the EURO and Western European economies shall soon be back on the agenda.

Copyright: United World Capital

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Greek relief rally proved short lived

Arne Treholt Vice-President of Business Development and Investments

The relief rally after the Greek elections on Sunday proved short lived. Already few hours into Monday’s trading the positive sentiment, which saw Asia and oil prices raise, turned soar.
Markets were back to normal reacting to the worldwide consequences of the European sovereign and banking crisis. As a worrying sign, interest rate on Spain’s 10 years bond surpassed the critical 7 % threshold, giving a dark reminder of what happened when Greek bonds jumped to 7 % a couple of years ago.

Oil prices dropped back to year’s low. Brent trading at 96. The Euro/USD which reached 1,27 during morning’s trading yesterday fall back to 1,2613 confirming the long term downward trend of the Euro.
The pressure on a Greek exit is temporarily gone. Greece shall probably be able to form a coalition government between the center parties, New Democracy and Pasok, today. But if the new government shall be able to keep, at least, a minimum of credibility towards their electorates, the new Premier, Antonis Samaras, would have to ask and also be given some token concessions from the “troika” of ECB., IMF and EU. Without such concessions and easing of austerities, Greece is going to face a new long and very hot summer in the streets.

After the German Foreign Minister and Brussels had indicating some willingness for concessions, Angela Merkel was on the eve of the G-20 meeting in Mexico steadfastly against giving any concessions. She is, however under strong pressure. The leaders of the 20 strongest countries have urged Europe to take steps to resolve its debt crisis. As a token of their willingness to contribute to a solution, two of the leading BRIX-countries, China and Russia, stated that new billions of dollars would be put at the disposal of IMF, the International Monetary Fund. Christina Laggard, the head of IMF, stated that USD 450 billion would be kept as a contingency for Europe.

The dollar is trading weaker after the last events on expectations that the US Federal Reserve would introduce new stimuli to its stagnating economy.
JPY is stronger, creeping below the 79 mark against the USD.
Gold prices are as silver slowly edging upwards; confirming a trend seen over the last weeks where precious metals again are sought as a safe havens during market upheavals and big volatility in the currency markets. Gold is up 7 % over the last month.

Copyright: United World Capital

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USD dips on monetary stimulus rumors

Arne Treholt Vice-President of Business Development and Investments

Rumors that the Federal Reserve (FED) may feel compelled to launch a new monetary stimulus, dipped the dollar to 1.2672 against Euro in morning trade.
As economic storm clouds gather and the American recovery has stagnated, US authorities seem once again prepared to use the printing press to stimulate in order to get its own and the global economy back on track.

The rumors about immediate action is strengthened by the fact that FED Is wrapping up a today meeting today. A likely outcome is that FED will further prolong their historically low interest rate policies. This would probably have a negative impact on the dollar. USD has during the last months turmoil been seen as a safe haven for investors.

The G-20 meeting in Mexico ended with behind the scene bilateral meetings on the debt crisis in Europe, Syria and Iran. President Obama stated that he saw growing willingness among European leaders to deal actively with the crisis.
The Euro has been extremely volatile. After reaching a month high after the Greek elections on Monday, Spanish borrowing costs fueled fears of an escalating Euro- zone debt crisis. Spanish bond yield rose above the critical 7 %, the highest since the Euro was launched in 1999, threatening Madrid’s ability to finance itself.

Greece, Ireland, and Portugal were all forced to seek international bailouts soon after their 10-year bond yields rose above 7 %.
Cyprus with its close binding to Greek economy risks to be the fifth country to be bailed out after its authorities asked the European Financial Stability Mechanism for support for their struggling banks.
Although Sunday’s election eased the immediate fear that Greece might be forced out of the Euro-zone, the narrow basis for the new government has raised doubts whether it can implement further spending cuts and increase taxes which is a logical consequence of the bail out.

Oil prices continue its downward trend: Brent at 95,81. Copper and gold are also lower. JPY increases vs. USD at 78,905. The Asian composite index, MSCI, rose to its highest level in one month. The US exchanges were solidly up on stimuli expectations.

Copyright: United World Capital

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FED lowers growth outlook

Arne Treholt Vice-President of Business Development and Investments

FED slashed the forecast for economic growth and saw no immediate improvement in the labor market, when FED chairman, Ben Bernanke, summed up US central banker views yesterday.
Markets reacted by sending stocks and commodities down. Brent crude fell to 92,08, the lowest level for the year. EURO/USD is trading flat at 1.2675, while JPY lost vs dollar trading at 79,57. The weaker yen boosted the Japanese export industry. Nikkei was the only positive stock exchange during Asian trading.

While dampening the forecasts for the economy, US Federal Reserve expanded its “Operation Twist” by $ 267 billion till the end of the year. This means selling of short term securities to buy longer-term ones to keep the long-term borrowing costs down.
Bernanke kept the door open for a round of further quantitative easing depending upon the development in the labor market. US unemployment figures were 8,2% in May. Growth forecasts for 2012 are lowered 0,5 % to 1,9 – 2,4 %.

Bernanke stressed that the debt crisis in Europe is weighing heavily on the US markets. The EU-commission is expected to consider proposals for introduction of EURO-bonds and closer banking integration at a meeting later this week. In Greece, Samaras presented his new coalition government yesterday.
Chinese manufacturing figures continue to be weak.

Markets were unimpressed by these new developments. US- and Asian markets ended in the red. The lower growth forecast had an immediate negative effect on commodities, and affected commodity driven currencies.
The currency markets have seen relative stability over the last couple of days, but are extremely sensitive towards any news announcement. Both stocks and currency markets are in for big volatility for the last two trading days of the week.

Copyright: United World Capital

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Stocks and commodities plunge on growth outlook

Arne Treholt Vice-President of Business Development and Investments

The global stock markets plunged on the US growth forecast yesterday. Simultaneously, Moody’s, the international credit rating agency, downgraded 15 of the world’s biggest banks including heavy weights as Credit Suisse which saw its rating reduced with 3 notches.
Oil prices dropped to its lowest level in 8 months with Brent crude spot falling through technical support level on 90 dollar pr. Barrel. In addition US jobless claims and housing numbers came in worse than expected and sent DOW Jones (minus 1,96 %) and Nasdaq down ( 2,44 %).

In Europe the head of the International Monetary Fund, Christine Laggard, warned that the Euro crisis has reached a critical level. She urged for monetary coordination and the establishment of a tight monetary union. The crisis in Spain is going from bad to worse. Estimates presented on Thursday show that Spain’s banks are in need of a capital infusion on up to 78 Billion Euros. This while Spain’s borrowing costs are creeping upwards on higher risk and interest rate on their bonds.

The picture in Asia is equally bleak. The rapid economic growth in China seems to have slowed down. Manufacturing data is lower than expected. This morning India is adding its voice to the choir, reporting on stagnating and sluggish growth.

For the moment there seems to be no light in the global tunnel. Much, however, hang on European leaders. But it is not expected that the EU-summit during the weekend shall lead to a breakthrough.
A tighter monetary coordination in the form of a monetary union shall imply that sovereign states would have to give up authority on their fiscal and taxation policies. It is unlikely that the richer member states like Germany, the Netherlands and Finland are ready to give up their sovereignty bailing out a struggling southern European periphery with taxpayer’s money.

The currency situation continues to be extremely volatile. After sniffing on the 1,27 level again yesterday, EURO/USD has fallen to 1.2555.
USD is strengthened towards JPY trading at 80,4225.
Gold and silver are following the commodities down. Gold is at 1567, 40 dollar down from yesterday’s high, but above bottom levels.
A new onslaught is expected when European equity markets open later today.

Copyright: United World Capital