Chillin' out till it needs to be funded
In a twist on Tuesday’ stales, Wednesday opened with another resounding thud for the Euro as China’s Wen rebuffed by the Eurozone administrators for seeking “Market Economy” status apparently reiterated instead that the Eurozone should look after its debt and fiscal management problems and should take care of the contagion
A “Market Economy status would have meant China would not be accused of dumping goods in the Common Market anymore a status it gets under the WO by 2016
However India Brazil and Russia are considering upping their weightage of Euro denominated debt to hold their reserves upping it from the current 25-30% of reserves by another 5-10% Russia already holds a higher 40% weightage of Euros that it may increase further in a coordinated buying effort Euro holdings globally are a EUR 300 tln or $400 tln(Geoffery Yu, UBS Strategist, Reuters Insider).
However it means that the Euro will get its quasi safe haven status contrastingly in the midst of the crisis and the US will lose that much of sheen in Global trade. With the swissie already giving its nomination as haven to the Euro it could be a worthwhile song to sing and given that Russia has earlier been given the coveted Market Economy status in european trade, the others would want some trade benefits from friends too.
A safe haven status for the Euro segueways nicely into the European Commission’s other big announcement today of going ahead with designing the Common Euro bond that will not hold any individual country to ransom and thus increase Euro appetite for debt instead of fighting over the size of the EFSF
After a mini downgrade yesterday when Moody’s toyed with Socgen and Credit Agricole ratings without much impact, BNP Paribas announced a grandiose asset sales plan to get rid of its excess baggafe. The bank has the largest exposure to sovereigns of all shapes and sizes within the Eurozone and has committed to reducing its Risk Weighted assets by Eur 70 bln or $96 bln (Reuters Breaking Views on Reuters Insider) immediately by end 2012. The bank’s capital of $58 bln stands to lose nearly 30% capital if default happens in the Euro zone
More immediately, BNP has been stung by its reliance on U.S. money market funds, which reduced their purchases of its paper by a fifth over August.
SocGen gets a rating check http://service.insider.thomsonreuters.com/news/nep/nL3E7KE09F.html
French banks well Capitalised http://service.insider.thomsonreuters.com/news/nep/nLDE78D02F.html
BNP plans asset sales like Socgen http://service.insider.thomsonreuters.com/news/nep/nL5E7KE048.html
A leaner BNP – would it survive? http://service.insider.thomsonreuters.com/news/nep/nL5E7KE0U6.html