Daily Market Reviews by UWCFX

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Diamond blames traders for rigging

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Grilled by a parliamentarian committee Barclays, Bob Diamond, yesterday blamed traders for ***8220;reprehensible behavior***8221; and acquitted himself and top management for all responsibility for the Libor, interest rate rigging scandal. The rigging has sent shock waves through the international financial system. Diamond claimed that he had been shocked by the bank***8217;s mail revelations. Member of the investigative committee found his claims not plausible.

A five-day stock rally in Asia fizzled out this morning before the European Central Bank***8217;s interest rate decision later today. The Euro/USD is under renewed pressure trading at 1.2529, on widespread expectations that ECB will cut interest rate to support the economy in a fragile euro zone in deep recession. Oil prices are falling slightly with Brent hovering around the USD 100 mark. Gold is stabilizing on 1616.

The USD index shows that dollar is gaining toward most currencies. The Yen is falling; USD/JPY is at 79,855. The strengthening of USD is expected to continue until the markets see how ECB intends to respond to debt crisis in the Euro zone. British Pounds, GBP, is also under pressure in front a Bank of England decision on interest rate today. The Swedish Central Bank yesterday kept interest rate at 1,5 % leading to heavy pressure on the Swedish Krone.

It is expected that ECB is going to cut its main interest rate by 25 basis points to 0,75 %. There are also rumors that ECB will restart purchases of troubled euro zone bonds under its Securities Markets Program (SMP) to push down especially Italy and Spain***8217;s borrowing costs. ECB is also considered to use the long-term refinancing operation mechanism, LTRO, to inject additional funds into the financial system.

This would be a form of quantitative easing as the US Government did to prop up their banks and financial institutions following the financial crack down in 2008/2009. In Asia, an international credit rating agency upgraded the creditworthiness of the Philippines, which has had a record strong economic growth this year.

Copyright: United World Capital

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Despite cuts shares falling

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

Both the European (ECB) and the Chinese Central Banks yesterday cut their interest rates to encourage economic growth, but to no avail. Both European and American markets reacted by sending stocks down. Asian stocks also slipped despite the new stimulus steps taken by the central banks. The Bank of England kept its interest rate at the low 0,25 % as an indication that there are limited tools left in the central banks arsenal for further monetary actions.

The Chinese interest cut is the second in one month, increasing investors fear that the Chinese economy is sinking faster than earlier expected. The non-farm payrolls numbers that the US Labor Department is expected to release today, is neither giving raise to market optimism. US employers have most likely hired more labor last month, but not enough to allay worries that Europe***8217;s debt crisis is shifting the global economy into low gear.

ECB***8217;s decision to cut interest rate with 25 basis points to 0,75 immediately led to new pressure on the Euro, which is trading at 1.2384. The American dollar is strengthened against many currencies. A decision from the Swedish Central Bank to keep the interest rate at the same level, led to a rally in Swedish krones at the expense of the EURO.

While commodities and precious metals are trading down; gold is at 1605, Brent crude is continuing to trade above the critical 100-dollar level pr. Barrel. In addition to implementation of EU sanctions on oil import from Iran, the US has increased its military presence in the straits of Hormuz, which Iran has threatened to mine to block oil transports from the Middle East, if further sanctions were executed.

Copyright: United World Capital

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Cyprus tries to play hard ball (06/07/2012)

WEEKLY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments

As the fifth country inside the euro zone, Cyprus, which this month also took over the chairmanship of the European Union, has asked for a bail out for its debt stricken banks.

At a press conference together with the Head of the European Commission, Jose Manuel Barroso on Friday, the island***8217;s president Demetris Christofias, again plaid the Russian card and stressed that Russia is still a candidate for stepping in and bail out his country.

With the ***8220;mother land***8221; Greece***8217;s misery in fresh memory, Christofias, don***8217;t want ***8220;Greek austerities***8221; to be impressed upon Cyprus. He has continuously stressed that Cyprus is facing a banking and not a sovereign crisis. Therefore, Cyprus feels free to ask whatever country for help. And then why not Russia which generously have helped out before; as they did two years ago. Then the loan was on 2,1 Billion Euro. This time the price tag has increased to 6,1 Billion Euro to save Cypriot banks which have acted irresponsible.

Christofias is playing hard ball logic, but that does not stand up to European orthodoxy. Cyprus is member of the European family, and EU-countries inside the Euro zone are treated equally with regards to bail-outs. Why should Cyprus be given better loan terms and conditions by going outside the zone and ask a third country for help? Barosso then gave Christofias a frosty answer. That Christofias is the only communist leader in the European Union does not help either.

For European bureaucrats principles are more important than practical realities. The medicines ordained for Greece, Spain, Ireland and Portugal have to be the same for Cyprus. To ask for better terms and conditions in Russia, represent a serious break with the EU code of conduct and their ***8220;solidarity***8221;.

Barosso was tiff lipped. Neither did it make any impression when Minister of Finance, Vassos Shiarly, stressed that Cyprus had been forced to take extremely big losses on the Euro zone***8217;s haircuts for Greece. Cyprus creditors had a 80 % loss equal to 4,2 Billion Euro, a quarter of Cyprus***8217; GDP. Cyprus demonstrated disproportionate European solidarity then so why not a little generosity now?

But this kind of logic does simply not work in relation to a striving periphery in Southern Europe. Striving member countries in the outskirts start to awaken to the harsh reality that the EU and the EURO are something quite different from the European dream they had before entry.

Copyright: United World Capital

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EURO LOWEST IN TWO YEARS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Growth worries after sluggish US job data, took the Euro/USD to its lowest level in two years. The Euro dropped to 1.2225 in early Asiantrade to recover somewhat. It is now trading at 1.2292. Asian shares fall. The MCXI index is down 1,50 %. Cooling inflation numbers from China deepened worries about slower economic growth. The Euro fell as deep as to 1,2225 in early trade in Asia. The US dollar vexes muscles and is gaining towards all currencies. Oil prices are relatively strong with Brent trading at 98,89.

Commodity linked currencies as the Australian and New Zealand dollars, which is a good barometer on the risk appetite in the market, hit one-week lows. The British pound, GBP, is trading below 1,55 towards the USD. Commodity prices continue to fall as do precious metals. Gold is at 1580. Silver just above 27.

Euro zone finance ministers are meeting in Brussels today in an effort to follow up the EU summit decisions a week ago. On the top of the agenda is a rescue plan for Europe***8217;s struggling banks. Bailout requests from Spain and Cyprus shall be considered. The new Greek government has signaled renegotiations in an effort to obtain better terms and conditions to sugar its austerity measures towards a critical public.

The earnings season in the US start with quarterly report cards from blue chip stocks as Alcoa and J. P. Morgan next week. There is no big optimism. Europe***8217;s crisis continues to draw much attention, but with little clarity as to how the euro zone***8217;s debt and banking problems will be fixed. That in spite of numerous meetings as the Finance ministers coming up today.

Copyright: United World Capital

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Euro 30 billion for Spanish bail-out

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The Euro zone ministers of finance yesterday night decided to transfer Euro 30 Billion as a bail out of the striving Spanish banks. The first tranche shall be released in August. By injecting the bail-out funds directly into the banks, this is a banking and not a sovereign state bail out as is the case with Greece. The ministers simultaneously are considering a similar bail-out of Euro 6,1 Billion to the striving Cypriot banks. This is eventually going to be executed in September.

The bail-out of the Spanish banks are a direct following up of decisions taken by the EU-summit ten days ago. It came after the interest rate on Spanish bonds yesterday again went through the critical 7 % level. The initiative of the finance ministers helped to stabilize the Euro, which during early trading on Monday hit its lowest level in 2 years. Euro/USD is trading at 1.2300. The USD has weakened marginally over the last 24 hours. The Japanese Yen has strengthened. USD/JPY is at 79,495. Oil prices have fallen. Brent is at 98,65. Gold and silver stabile with an upward trend.

Stock exchanges in Europe, US and Asia continues to fall. The giant alloy producer, Alcoa, started the quarterly season by reporting better than expected results due to new orders from the car and airplane industry. Chinese numbers for import and export in June show weaker domestic demand, which seems to indicate that the GDP shall fall below 8 % when figures are released in a week. Import figures rose with 6 % much below experts forecasts. Export rose 11 %, higher than forecasts, but lower than May***8217;s 14 %. China has once again a record surplus on its trading balance.

The Finance ministers***8217; decision has calmed markets somewhat, but there are increasing signs that Europe***8217;s economic and monetary union may be fragmenting faster than policy makers can repair. Spanish, Greek and Italian banks have seen a deposit flight gaining pace. Whether a euro zone agreement to lend Madrid Euro 30 of the 100 Billion requested, will reverse these flows, is still an open question. It is expected that national bond rates and the Euro shall come under renewed pressure during the week.

Copyright: United World Capital

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Grim sentiments impact markets

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Asian and Australian stocks dropped for the fifth day in row Wednesday as concerns over Italy***8217;s debt, profit warnings and US corporate earnings damaged regional sentiment. Dow Jones Industrial average closed down 0,78 % on fear that the global economic slowdown will erode corporate earnings.

The EURO/USD fall yesterday, but has recovered trading at 1.2257 in Asia. The Japanese yen continues to strengthen: USD/JPY at 79,3227. The strong yen put pressure on Japanese exports and the Nikkei. Gold dropped from 1600 yesterday, trading at 1573. Oil prices are slightly down. Brent at 98,35. There are no major changes in the overall currencies picture.

Europe returned to the forefront of investors concerns when Italian Prime Minister, Mario Monti, indicated that he will ask European governments to permit that the bailout fund to buy Italian bonds. Monti insisted, however, that Italy do not need a bailout in the scale of Greece. His comments come, however, just weeks after claims that Italy would not ask its European partners to buy Italian debts.

US experienced a new broker scandal when the Iowa-based PFGBest was the latest future broker to collapse. Regulators accused PFG and its owner for over the last two years misappropriating customer funds. In England, new aspects of The Barclays scandal are revealed, portraying a banking culture of greed and mutual accusations.

Copyright: United World Capital

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Oil prices increase on stimulus expectations

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Oil prices jumped 2 % yesterday on hopes for stimulus measures and falling US storages. Brent rose above the 100 dollar mark pr. Barrel, and NYMEX traded at 85,50. Euro/USD is continuing its downward trend at 1.224. Higher unemployment figures from Australia put the Aussie dollar under pressure. The South Korean Central bank has written down interest rate in an effort to encourage growth.

While the direction of future Federal Reserve initiatives remains unclear, investors seem to expect that China shall undertake new measures to boost its economy. China is expected to release new GDP numbers on Friday. Preliminary figures indicate that GDP expansion would be the weakest in 3 years. China has reduced interest rate twice during the last month, and new stimulus measures are expected.

Minutes from Federal Reserve***8217;s meeting in June suggest that the US economy has to worsen before FED is going to consider a third round of bond buying. Such a step would weaken the dollar and re-energize the appetite for risk and dollar nominated commodities. The European debt crisis and the grim outlook for the world economy have dramatically decreased the demand for most commodities.

Oil has been hit hard falling 25 ***8211; 30 % from its high in the beginning of the tear. The positive movement in oil prices over the last days help by shrinking US-storages, a Norwegian oil strike and Iranian worries, might indicate a turnaround in other commodities. US quantitative easing would surely contribute to such a rebound.

The euro zone crisis starts to take new tolls. The CEO of Bank of Cyprus, the biggest bank in the island, resigned yesterday amidst increasing criticism for his bank***8217;s strong exposure to Greece. It is simultaneously announced that state coffers are running out of funds. There is no money left to pay civil servants salaries for August.

Copyright: United World Capital

[UWC Neeraj]

Short relief after China***8217;s 3Q GDP

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Chinese last GDP figures fall to its lowest level in three years. After a long period of double digit growth, China had in last quarter a GDP growth on 7,6 %. The numbers came in slightly better than analyst expectations, and created a short-lived relief rally on Asian stock exchanges, which turned up after six days of losses. The GDP numbers also gave a boost to the Australian dollar.

A weaker real estate market and slowing exports had a negative impact on the GDP numbers. Investments are, however, positive and rose expectations for stronger growth in the last half year of 2012. The government policies change to pro growth and stronger emphasize on the domestic market, has led investors to believe that China shall continue to stimulate growth.

The Euro zone received a new blow yesterday when the international rating agency Moodys downgraded Italy to the same level as Kazakhstan and Bulgaria. The downgrading put the EURO under renewed pressure. Euro/USD falls below 1.22. It has recovered and trades at present at 1.2207. EURO hit 1.2166 during Thursday***8217;s trading. The Yen is again up against the dollar, USD/JPY trading at 79,28. American and European stock markets were down yesterday.

Oil prices are demonstrating some strength. Brent reached 101 yesterday and is presently trading at 100,77. US crude, NYMEX, is trading at 85,88 a barrel. Gold is 1571 after hitting a low on 1555 yesterday. Silver is up trading at 27,20 after falling to 26,55 yesterday.

Copyright: United World Capital

[UWC Neeraj]

Asian shares extend rally

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Asian shares extended their rally on Monday on increased hopes for a smooth Chinese landing. Visiting the Southern, Western province of Sichuan, the Chinese Premier Wen Jiabao raised the prospect of more stimuli if needed. The composite Asian stock index, MCSI, continues 0,3 % up after jumping 1 % on Friday. Euro/USD is inching up at 1.2242 after trading at 1.2169 on Friday. Japan is closed for holidays, but the Yen is, nevertheless, gaining ground, trading up 0,2 % against USD at 79,0955. Brent crude stays above 102 Gold is flat at 1589.

With worries about China off the boil, market concerns are shifting back to the United States and the Federal Reserve***8217;s next policy move. The attention this week is on quarterly results. A slew of US corporate earnings are expected. The main focus is, however, on FED Chairman, Ben Bernanke***8217;s semi-annual testimony to the US Congress on the economy set for Tuesday and Wednesday.

After central banks in Europe, China, South Korea and Brazil all have lowered their interest rates to stimulate growth, markets will seek clues on the Fed***8217;s stance over a stronger monetary policy to support US recovery. Bernanke has earlier stated that the FED will take further easing measures only if necessary.

After the international rating agency Moody***8217;s downgraded Italy to near junk status last week, the outcome of the Italian bond auctions on Friday were better than expected. Three years bond yields were at lowest levels since May. 10-year yields rose to near 6 %. Reflecting investor***8217;s jitters over the Euro, currency speculators last week raised their bets in favor of the US dollar, boosting their positions against the Euro to their highest in one month.

Copyright: United World Capital

[UWC Neeraj]

Grimmer outlook for global economy

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Both Brent crude (103,57) and NYMEX (88,57) rose for the fourth straight session Monday. Oil is up on expectations on stimulus measures for a slowing world economy. Tension on Iran creates increased worries for oil supplies and crude storages in the US is down.

Stocks rise and the dollar eased as investors await Fed Chairman Ben Bernanke***8217;s testimony to Congress. EURO/USD trading at 1.2292 as investors covered short positions and hunted for bargains. Australian dollar is up on expectations (1.0300 vs USD) that further Chinese stimulus shall increase demand for coal and other commodities exported to China.

US retail sales numbers came weaker than expected yesterday. Together with the International Monetary Fund***8217;s (IMF) new low forecast for global growth in 2013, the weaker retails has increased investors expectations for FED monetary stimulus. IMF is predicting 8,5 % economic growth for China and reduces India***8217;s growth to 6,5 %. IMF has a grim outlook for both the US and Euro zone.

In its midyear ***8220;health check***8221; on the global economy, IMF said that emerging markets were dragged down by the economic turmoil in Europe. IMF has reduced their global forecast for 2013 from 4,1 to 3,9 %. Its outlook for 2012 is kept at 3,5 %.

Copyright: United World Capital