Futures are looking down big this morning as a flurry of negative news hits the tape.
Last night South Korea failed to inform North Korea that they were practicing a live fire drill. Believing they were under attack, North Korea responded by firing 100 rounds of artillery at Yeonpyeong Island in the Yellow Sea. South Korea responded with 80 rounds of artillery and scrambled fighter jets to stop the firing. Two South Korean marines were killed and 15 soldiers and civilians were wounded. Many think this was something of an accident, but others believe it stems from the sanctions placed on North Korea over the Chenoan incident and because NK was found to have a new uranium enrichment facility. Whether a demand for attention or a mistake (unlikely), the markets have been rattled and rightly so. This is a subject that I have cautioned on this blog numerous times that did not simply go away. The best we can do is hope for international assitance and a diplomatic solution.
Spain had a basically failed 3-6 month bond auction. The sovereign sold 3.2B Euro vs. the 4-5B Euro that had been planned. Spanish CDS is approx 20 bps higher and the 10-year is at all time high spreads. The EUR/USD pair is trading a full 0.0156 lower at 1.3469.
Showing posts with label Spain. Show all posts
Showing posts with label Spain. Show all posts
Tuesday, November 23, 2010
Thursday, September 30, 2010
Ireland, Spain, & Portugal Update
Ireland announced this morning that the worst case scenario for bailing out its banks to be 50B Euros ($68B). The cost of Anglo Irish Bank will be approx 34B Euros. This is higher than the original estimate of 25B euros. The nation will also likely raise its stake to a majority in Allied Irish Banks which will need an additional 3B Euros this year.
The public debt in Ireland will now be approximately 99% of GDP and Dublin-based Davy Stockbrokers expects that figure to peak at 105% in 2012.
The support for the banking system will drive up the 2010 deficit to 32% of GDP, which as a reminder is 10x the EU's maximum allowable deficit. (Reuters).
Spain's credit rating was cut one notch by Moody's from AAA to Aa1. This was expected however as Moody's was the last rating agency to still maintain Spain at AAA.
Spain will release its 2011 budget today. Reuters, who obtained a copy of the budget ahead of its presentation to Parliament today showed that the government plans to cut net debt issuance in 2011 to 43.3B euros from the 76.2B that was originally planned for 2010. The budget includes much greater austerity measures with a 7.9% reduction in public spending with 16% average cuts for government departments.
In Portugal, PM Jose Socrates, announced that civil service pay would be cut by 5%, public sector pensions would be frozen, and the VAT will be raised to 23% from 21%.
While it's nice to see Ireland admit its woes (perhaps the rest of the world could learn something here...) the numbers are in fact horrendous, Spain was downgraded, and austerity measures in these three nations will make growth and economic health that much more difficult going forward. One might expect the Euro to be weak this morning on some of these disclosures, but afterall its the last day of the quarter and Brian Sack is on deck with a possible record amount of POMO. We are much more commmitted to destroying the value of the dollar than the Eurozone has been to destroy the Euro. When German exports begin to take a hit from the higher euro, we will likely see more aggressive action by the ECB.
Until then, keep your seatbelt securely fastened...To the moon Alice!
The public debt in Ireland will now be approximately 99% of GDP and Dublin-based Davy Stockbrokers expects that figure to peak at 105% in 2012.
The support for the banking system will drive up the 2010 deficit to 32% of GDP, which as a reminder is 10x the EU's maximum allowable deficit. (Reuters).
Spain's credit rating was cut one notch by Moody's from AAA to Aa1. This was expected however as Moody's was the last rating agency to still maintain Spain at AAA.
Spain will release its 2011 budget today. Reuters, who obtained a copy of the budget ahead of its presentation to Parliament today showed that the government plans to cut net debt issuance in 2011 to 43.3B euros from the 76.2B that was originally planned for 2010. The budget includes much greater austerity measures with a 7.9% reduction in public spending with 16% average cuts for government departments.
In Portugal, PM Jose Socrates, announced that civil service pay would be cut by 5%, public sector pensions would be frozen, and the VAT will be raised to 23% from 21%.
While it's nice to see Ireland admit its woes (perhaps the rest of the world could learn something here...) the numbers are in fact horrendous, Spain was downgraded, and austerity measures in these three nations will make growth and economic health that much more difficult going forward. One might expect the Euro to be weak this morning on some of these disclosures, but afterall its the last day of the quarter and Brian Sack is on deck with a possible record amount of POMO. We are much more commmitted to destroying the value of the dollar than the Eurozone has been to destroy the Euro. When German exports begin to take a hit from the higher euro, we will likely see more aggressive action by the ECB.
Until then, keep your seatbelt securely fastened...To the moon Alice!
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