Euro Zone Credit Ratings

Euro Bearish ?

*source - Societe General Research


Hedge funds have been building short positions on Euro. position of this scale has not been observed in while. it seems the fund managers are unanimous about the direction of Euro against dollar. but we can see that the last time when market was such bearish about Euro , what followed next was a complete reversal. i think one needs to be extremely cautious going short at this stage .

The Great Euro Escape Plan

Markets were very volatile last week, featuring European Central bankers, the EU summit, potential credit rating downgrades, falling demand for eurozone government bonds and downward revisions of economic growth, all related to the on‐going sovereign debt crisis. After the downgrades of Belgium, Hungary and Portugal two weeks ago Standard and Poor did not beat around the bush. They placed 15 out of 17 of the eurozone bloc on watch for possible downgrade. On Friday, Moody's downgraded the three biggest French banks SocGen, Credit Agricole, and BNP Paribas by one notch. On global growth the IMF warned that it could lower estimates in January, just as the OECD did two weeks ago, lowering 2012 to 3.4% from earlier estimates of 4.6%, then 3.8%. The ECB, in cutting its interest rate to 1%, also cut its eurozone GDP growth for 2012 to 0.3% from 1.3% in September. The attempts to solve the eurozone problems and save the common currency continue to struggle. Last week's summit ended up with 23 out of the 27 EU members agreeing to treaty changes, with three more ‐ Hungary, Sweden and the Czech Republic ‐ expected to join once their parliaments approve. Britain was left as the odd one out, but David Cameron had no choice after he was unable to persuade his EU colleagues to drop the Financial Transaction Tax that they believe is essential. Presumably we will now see financial firms moving to the UK, or Switzerland now that the tax is destined to be implemented just about everywhere else in Europe. The European Stability Mechanism ceiling will be 500 billion euros, but because of German opposition, the facility will not receive banking licence, and therefore will not be able to borrow from the ECB to lend to troubled EU states. However, the EU did manage to find an additional 200 billion euros from individual central banks to lend to the IMF for onward lending. Serious efforts are being made but the progress is slow and the markets do not seem to be convinced yet

US Dollar - Will the trend sustain

Dollar bounced back from its low and was trading around its 50 DMA. A close above 50 DMA will be a very bullish setup for US dollar. With QE 2 in its last leg and no QE 3 in offing, US dollar might bounce back harder then expected souring the commodity rally. All commodities are below their 50 dma which is quiet bearish for commoditites

10 REASONS TO STOP THE EURO BAILOUTS

Guillermo de la Dehesa, Chairman of CEPR says there 10 reasons why the bailouts should end with Ireland:


1. Eurozone leaders are supposed to have learned from their previous mistakes in the handling of the present Eurozone sovereign debt crisis.

2. Neither Portugal nor Belgium and even less Spain have net debt levels as high as those of Greece.

3. The actual bail-outs are not well designed and tend to make solvency problems worse for the bailed-out member country.

4. These confusing signals have led many investors to sell the debt of Eurozone countries and even a minority of investors to sell them short with a high leverage making huge profits.

5. As a consequence of reason number 4, an increasing number of investors will start to believe that this debt crisis will end breaking-up the Eurozone, threatening the survival of the euro.

6. Even Germany cannot exit the euro because, even though its exit would not lead it to default – on the contrary, its solvency would improve, it will stop growing or suffer another recession.

7. The Eurozone is almost in equilibrium versus the rest of the world, given that its current account shows a tiny surplus of 0.2% of GDP.

8. Spain is too big to be bailed out.

9. A euro crisis would produce very negative externalities for the rest of the world.

10. Finally, Eurozone leaders cannot dare to risk 52 years of European economic integration and 16 years of European monetary integration.

http://www.voxeu.org/index.php?q=node/6004

The Debt Web

The Mesh or the Mess of th Debt tangle in The Continent.

PIIGS Debt Crisis

The so called PIIGS debt blunder. Its consequences on Germany's economy and Euro can be imagined.