Europe - Economic Data & News 01 (May 08 - Oct 08)

[kennynah]

27 Jun 2008 09:32 GMT
Italy May hourly wages up 0.6 pct vs April; up 3.3 pct year-on-year

MILAN (Thomson Financial) - Hourly wages in May rose 0.6 percent from April and were up 3.3 percent year-on-year, the ISTAT statistics office said.

The monthly rise is above the level of inflation.

In May, Italy's consumer prices rose 0.5 percent month-on-month while they increased 3.6 percent year-on-year.


27 Jun 2008 09:17 GMT
Italy April big company employment up 0.2 pct yr-on-yr
MILAN (Thomson Financial) - Employment in big companies, net of workers in temporary lay-offs programmes, rose 0.2 percent year-on-year in April, the statistics bureau ISTAT said.

Including temporarily laid-off workers employment was unchanged on the year.

On a seasonally adjusted basis, employment net of temporarily laid-off workers was up 0.1 percent month-on-month and was flat including temporary lay offs.

ISTAT only surveys companies with 500 or more employees.

[kennynah]

27 Jun 2008 10:00 GMT
BULLET: GERMANY DATA: Bavaria June CPI rose 0.3% m/m
.
GERMANY DATA: Bavaria June CPI rose 0.3% m/m and 3.4% y/y, matching
the MNI pan-German monthly forecast. This follows +3.2% y/y in May.

[winston]

Financial Times: Stagflation fears in eurozone rise

“The eurozone on Monday slid closer to stagflation – low growth combined with rising inflation – as private sector output contracted this month for the first time in five years.

“Weak economic data indicated soaring oil prices had hit growth in June, but not enough to stop the European Central Bank going ahead next week with a planned quarter percentage point rise to 4.25% in its main interest rate.

“The eurozone purchasing managers’ index dropped from 51.1 in May to 49.5 in June, the first contraction in activity since July 2003. The risk of a recession in the 15-country region had increased, analysts said. That contrasted with the robust growth seen at the start of the year.

“But the same survey also showed inflationary pressures mounting – especially in the service sector, where prices rose at the fastest rate for more than seven years. That will alarm the ECB, which saw the annual eurozone inflation rate leap to 3.7% in May, the highest for 16 years, and is braced for a rise as high as 4% in coming months.

“‘The ECB hiking [interest rates] in July would be consistent with a stagflationary feel,’ said Michael Hume at Lehman Brothers.”

Source: Ralph Atkins, Financial Times, June 23, 2008.

[winston]

BNP head sees worst of global crisis over-report
Sun Jun 29, 2008 5:01am EDT

MILAN (Reuters) - The worst of the financial crisis is over and markets should start settling from the second half of this year, the head of France's biggest listed bank, BNP Paribas, told Italy's La Repubblica newspaper.

"The worst should be over and I think that from the second half onwards the crisis should normalize: that is, the phase of exceptional turbulence on the markets should end," Baudouin Prot, chief executive of BNP, said in an interview published on Sunday.

"I still expect (markets) to stay volatile," he added.

He said BNP had only been touched "lightly" by the crisis in the U.S. subprime mortgage market as the bank had only 200 million euros of exposure.

Prot said he was in favor of a pan-European committee to supervise markets "with strong decision-making powers over banking".

But he added that it was also "important to keep a close eye on sectors of the financial industry which are still not supervised".

Prot reiterated that BNP was not interested in buying rival Societe Generale, as it said in March. "We haven't changed our view," he told La Repubblica.

He added that BNP was "under no pressure to make new acquisitions" but would not let any good opportunities slip.

Turning to Italy, where BNP owns lender BNL, Prot said the French bank would continue to invest in the Italian bank's growth.

He added BNP would not sell its 50 percent holding in consumer credit business Findomestic. The other half of the business is owned by Italy's biggest retail bank, Intesa Sanpaolo, and the two are fighting over control.

[millionairemind]

Just found this piece of interesting news.

Fortis Bank predicts US Financial market meltdown within weeks...

---------------------------------------------------------------------------­-----

Fortis is a large bank and insurer in the Netherlands and Belgium. It took over ABN Amro last year, together with RBS and another bank. Last Thursday, its share lost 17% because Fortis attracted foreign capital.

American 'meltdown' reason for money injection Fortis.
28th of June, 9:10
BRUSSELS/AMSTERDAM - Fortis expects a complete collapse of the US financial markets within a few days to weeks. That explains, according to Fortis, the series of interventions of last Thursday to retrieve € 8 billion. "We have been saved just in time.

The situation in the US is much worse than we thought", says Fortis chairman Maurice Lippens. Fortis expects bankruptcies amongst 6000 American banks which have a small coverage currently. But also Citigroup, General Motors, there is starting a complete meltdown in the US"

[kennynah]

i just buy Bear Spreads all the way until market bottoms out...when that happens, it happens...

[millionairemind]

Barclays’ debt treatment questioned
By Peter Thal Larsen and Anousha Sakoui

Published: June 29 2008 18:36 | Last updated: June 29 2008 18:36

Ever since the credit crisis started, Barclays has been the subject of intense speculation from investors trying to gauge the British bank’s exposure to the turmoil. In recent months, its method of accounting for some debt instruments on its balance sheet has become the main topic of debate between the bank and its critics.

The debate flared up again last week when, in the wake of Barclays’ £4.5bn share issue, analysts at Citigroup pointed to what they describe as the bank’s “unusual” accounting practices.


Barclays faces questions over balance sheet - Barclays has written off just £1.7bn on the value of complex debt securities stuck on its balance sheet, less than many of its rivals. Executives believe this demonstrates the bank’s superior risk management.

But the Citigroup analysts contrasted the approach with that of Royal Bank of Scotland, its main UK rival, which wrote off almost £6bn earlier this year. If Barclays adopted what the analysts described as “RBS-style writedowns”, it would have lost a further £7bn, and would need more capital than it has raised so far.

The debate has frustrated Barclays executives, who point out that the bank’s books have been carefully checked by its new investors, its auditors, and by the investment banks sponsoring the share offering.

People close to the bank argue it is wrong to apply RBS’s valuations to Barclays’ assets, because there are big differences between the two. They also point out that, if the bank was at all concerned about its balance sheet, last week would have been the ideal moment to recognise more losses.

The debate centres on the way Barclays treats its £7.5bn portfolio of loans to private equity groups. These so-called leveraged loans, agreed at the peak of the credit bubble, have been on the bank’s balance sheet since the credit crisis struck. For accounting purposes, Barclays treats these loans as if it was holding them for their duration. This means it must only revalue them if the borrower runs into difficulty. So far, Barclays has barely written off anything.

This approach is in stark contrast with other investment banks, most of which are required to value their leveraged loans according to their market value. Rivals including Citigroup, Credit Suisse and Deutsche Bank have marked down the value of their loans and sold some of them to investors.

As a result, loans in which Barclays has participated are now trading at a large discount to their face value. The biggest sale of a European hung leveraged loan to date was the €2.5bn (£1.9bn) sale of senior debt backing the buy-out of Alliance Boots, the European pharmacy group, which was sold at 91 per cent of its face value. Only Barclays and UniCredit, the Italian bank, decided not to sell their share.

Recently, Barclays opted out of the sale of €1.1bn of senior debt backing the buy-out of Endemol, the media group. Other banks sold the debt at a 30 per cent discount to face value.

People close to the bank point out that, of the remaining £5bn of leveraged debt on Barclays’ books, 65 per cent is in the debt of Alliance Boots and AA/Saga, the merger of the motoring group and the senior citizens’ organisation, both of which are performing well.

These people estimate that, if Barclays’ leveraged debt were marked to market prices, the bank would have to write off no more than £300-£400m.

However, the approach is not without its costs. Keeping loans on its book ties up capital, limiting the scope for Barclays to take advantage of wider spreads by underwriting new loans.

Moreover, in valuing its leveraged loans, Barclays has raised suspicions it may be taking a different approach in valuing other parts of its balance sheet, such as complex structures backed by US mortgages, and debt insured by US monoline bond insurers.

Barclays executives insist the bank’s accounting is conservative and prudent. However, until the true value of leveraged loans made at the top of the market becomes clear, the questions are likely to persist.
Copyright The Financial Times Limited 2008

[millionairemind]

As the news gets worse, lets see how the mkt reacts to them to see how much strength or inherent weakness there is in the market. Stay calm and focused... nobody ever made a dime panicking..

BIS renews slump fears as global economy pays the price
Last Updated: 1:19am BST 30/06/2008

The central bankers' bank renews fear of second depression, writes Ambrose Evans-Pritchard

A year ago, the Bank for International Settlements startled the financial world by warning that we might soon face challenges last seen during the onset of the Great Depression. This has proved frighteningly accurate.

The venerable body, the ultimate bank of central bankers, said years of loose monetary policy had fuelled a dangerous credit bubble that would entail "much higher costs than is commonly supposed".

In a pointed attack on the US Federal Reserve, it said central banks would not find it easy to "clean up" once property bubbles have burst.

If only we had all listened to the BIS a long time ago. Ensconced in its Swiss lair, it has fired off anathemas for years, struggling to uphold orthodoxy against the follies of modern central banking.

Bill White, the departing chief economist, has now penned his swansong, the BIS's 78th Annual Report, released today. It is a disconcerting read for those who want to hope the global crisis is over.

"The current market turmoil is without precedent in the postwar period. With a significant risk of recession in the US, compounded by sharply rising inflation in many countries, fears are building that the global economy might be at some kind of tipping point," it said.

"These fears are not groundless. The magnitude of the problems yet to be faced could be much greater than many now perceive," it said. "It is not impossible that the unwinding of the credit bubble could, after a temporary period of higher inflation, culminate in a deflation that might be hard to manage, all the more so given the high debt levels."

Given the constraints under which the BIS must operate, this amounts to a warning that monetary overkill by the Fed, the Bank of England, and above all the European Central Bank could prove dangerous at this juncture.

European banks have suffered worse losses on US property than American banks. Their net dollar liabilities are $900bn, mostly short-term loans that have to be rolled over, a costly business with spreads still near panic levels. Mortgage and consumer credit has "demonstrably worsened".

The BIS cautions the ECB to handle its lending data with great care. "The statistics may understate the contraction in the supply of credit," it said.

The death of securitisation has forced banks to bring portfolios back on to their balance sheets, while firms in need are drawing down pre-arranged credit lines. This is a far cry from a lending recovery.

Warning signs are flashing across Eastern Europe (ex-Russia) where short-term foreign debt is 120pc of reserves, mostly in euros and Swiss francs. Current account deficits are 14.6pc of GDP.

"They could find it difficult to secure foreign funding if global financing conditions were to tighten more severely," it said. Swedish, Austrian and Italian banks have drawn on wholesale markets to lend heavily to subsidiaries across the region. This could "dry up".

China is not immune, although the BIS has dropped last year's comment that growth is "unstable, unbalanced, unco-ordinated and unsustainable".

The US accounts for 20pc of China's exports, but that does not capture the inter-links across Asia that ultimately depend on US shopping malls. "There is a risk that China's imports overall could slow down sharply should the US economy weaken further," it said.

Global banks - with loans of $37 trillion in 2007, or 70pc of world GDP - are still in the eye of the storm.

"Inter-bank money markets have failed to recover. Of greatest concern at the moment is that still tighter credit conditions will be imposed on non-financial borrowers.

"In a number of countries, commercial property prices are beginning to soften, traditionally bad news for lenders. These real-financial interactions are potentially both complex and dangerous," it said.

Do not count on a fiscal rescue. "Explicit and implicit debts of governments are already so high as to raise doubts about whether all non-contractual commitments will be fully honoured."

Dr White says the US sub-prime crisis was the "trigger", not the cause of the disaster. This is not to exonerate the debt-brokers. "It cannot be denied that the originate-to-distribute model (CDOs, CLOs, etc) has had calamitous side-effects. Loans of increasingly poor quality have been made and then sold to the gullible and the greedy," he said.

Nor does it exonerate the watchdogs. "How could such a huge shadow banking system emerge without provoking clear statements of official concern?"

But there have always been excesses in booms. What has made this so bad is that governments set the price of money too low, enticing the banks into self-destruction.

"The fundamental cause of today's emerging problems was excessive and imprudent credit growth over a long period. Policy interest rates in the advanced industrial countries have been unusually low," he said.

The Fed and fellow central banks instinctively cut rates lower with each cycle to avoid facing the pain. The effect has been to put off the day of reckoning.

They could get away with this as long as cheap goods from Asia kept a cap on inflation. It seduced them into letting asset booms get out of hand. This is where the central banks made their colossal blunder.

"Policymakers interpreted the quiescence in inflation to mean that there was no good reason to raise rates when growth accelerated, and no impediment to lowering them when growth faltered," said the report.

After almost two decades of this experiment - more or less the Greenspan years - the game is over. Debt has reached extreme levels, and now inflation has come back to life.

The easy trade-off has metamorphosed into a vicious trade-off. This was utterly predictable, and was indeed forecast by the BIS, which plaintively suggested in this report that central banks might like to think of an "exit strategy" next time they try such ploys.

In effect, this is an indictment of rigid inflation targets (such as Britain's), which prevent central banks from launching a pre-emptive strike against asset bubbles. In the 1990s, they should have torn up the rule-book and let inflation turn negative in light of the Asia effect.

The BIS suggests that a mix of "systemic indicators" should be used. The crucial objective is to slow credit growth and make sure that the punchbowl is taken away before the drunks run riot. "We need policy measures to lean against credit-drive excess," it said.

If there are going to be more bail-outs on both sides of the Atlantic - as there will be - the "socialised risks" should be taken on by political systems, and not dumped on the books of central banks.

"Should governments feel it necessary to take direct actions to alleviate debt burdens, it is crucial that they understand one thing beforehand. If asset prices are unrealistically high, they must fall. If savings rates are unrealistically low, they must rise. If debts cannot be serviced, they must be written off.

"To deny this through the use of gimmicks and palliatives will only make things worse in the end," he said.

Let us all cheer Dr White off the stage.

[kennynah]

many european data to be released on 30Jun08, will put downward pressure on USD
**************

European Economics Preview: Eurozone Inflation To Rise Further In June
6/30/2008 1:59 AM ET

(RTTNews) - Monday, the month of June is set to close with some key inflation reports from Eurozone and mortgage approvals data from the UK.

The day's session begins with the release of German wholesale turnover for May at 2.00 am ET (mon 30jun). Wholesale turnover had increased 9.3% year-on-year in real terms in April.

At 3.00 am ET, the Hungarian jobless report for March to May is slated to be released from the Hungarian Central Statistical Office.

This would be followed by a Swedish report for labor cost for wage earners and salaries employees for April at 3.30 am ET.

At 4.00 am ET, Norwegian retail sales, money supply and credit indicator C2 for May are due from Statistics Norway. At the same time, the Italian statistical office ISTAT is expected to announce producer price inflation data for May. Italian producer prices are forecasted to rise 6.8%, faster than 6.3% reported for May. Meanwhile, the Czech National Bank is slated to issue money supply data for May.

Half an hour later, the 5am ET - Bank of England is projected to release final data for May money supply. Money supply in May had climbed 10% annually and rose 0.4% month-on-month. The central bank is also slated to issue mortgage approval data for May, which is expected to fall to 51,000 from 58,000 in April. Separately, the Building Societies Association is expected to announce mortgage approval data for May.

At 5.00 am ET, the Eurozone inflation estimate for June is due, which is expected to rise further to 3.9% in June from 3.6%. Meanwhile, the ISTAT is projected to issue a preliminary report for Italian consumer price inflation. Inflation is seen at 3.6% annually, same as in May, while EU harmonized inflation is expected to rise slightly to 3.8% from May's 3.7%.

The Central Statistics Office Ireland is predicted to release the first quarter economic growth numbers as well as external debt data at 6.00 am ET.

[millionairemind]

Kind of reminds me of Asian Currency crisis when Singapore and Hong Kong property prices dropped 40-60% from their 96 peak and some of them have still not recovered.

It is when news are the bleakest that the market turns...


UK house prices fall for ninth straight month
By Harry Wallop, Consumer Affairs Correspondent
Last Updated: 6:32am BST 30/06/2008

Home owners are taking a record length of time to sell their houses, according to the latest gloomy house price survey.

The average length of time for a home seller to receive an offer is now 10.3 weeks, up from 6 weeks this time last year, according to Hometrack, the leading property research firm.

Homeowners are having to accept just 91.6pc of the asking price

The figure is published in its monthly housing survey, which shows that the average property have fallen 3.2 per cent in value compared to a year ago.

This is the ninth month in a row that prices have fallen, with the average price now £170, 500, down from £176,100 this time last year.

The housing market has suffered from a torrid month, with a slew of data now suggesting that the UK is in the grip of major house price slump, rather than just a downturn.

At the weekend Professor Stephen Nickell, a leading housing advisor to Gordon Brown, warned that it would take until 2015 for the property market to start booming again. He also warned that the “severe rationing” of mortgages was preventing first time buyers from taking advantage of falling house prices, preventing affordability from improving.

His comments came as official data from the Land Registry showed that house sales had plummeted by 50 per cent compared with a year ago, with central London the worse affected, as first time buyers found it impossible to get on the housing ladder.

The housing transaction figures echoed data from the British Bankers’ Association, which showed that mortgage levels had fallen to a record low in May, with just 28,000 home loans given to home buyers during the month.

Banks and building societies have continued to increase their mortgage rates as the credit crisis makes it increasingly difficult to raise funds.

The average two-year fixed rate mortgage went through the 7 per cent barrier last week. The same deal would have cost just 4.34 per cent two years ago. These high rates have meant that first-time buyers and people wanting to move house are unable to take advantage of the falling prices.

According to Hometrack the number of new buyer registrations – the number of people registering with an estate agent –has fallen by 52 per cent since the start of the credit crisis.

Richard Donnell, Hometrack’s director of research, said: “This drop in volumes was always possible as around half of all transactions in recent years have been driven by aspirational or non needs based movers, who are now sitting on their hands. “The net result is a sizable drop in transaction volumes which look set to reach levels not seen since the 1970s.”

As well as disclosing that homes are now taking 10.3 weeks to sell, the report also shows that home owners are having to accept just 91.6 per cent of the asking price.

Both these figures are the worst recorded by Hometrack since it started its monthly survey in 2001.