Chillin' out till it needs to be funded
S&P Warning to Europe
S&P insured itself against trusting the flow of discussions that Merkozy put on everyone”s table on Monday with a surprise Ratings Watch announcement for the 17 nations forming he Eurozone. Ratigns watch means that f the Eurozone does not get its act together which it has seemingly promised in Joint press statements, they will end up fodder in the bond markets as they ar downgraded together within the next 90 days. Even though half the markets in asia are closed today, the Australian and Shanghai exchanges took the snub on the chest and rolled down for another panic global opening in Europe and US
Rio and BHP fell more than 1% as banks, engulfed by funding worries and still considering the rate cuts advised by RBA fell too.
No one expected Germany to fall with the other 5 AAA rated sovereigns in the red zone. With Cyprus already junk rated with Greece above it, the S&P downgrade would end making markets illiquid for all European corporates who have been doing good business, but saving with the ECB even as bailouts and recession mar each Euro zone Economy with or without rules. After German auctions failed mid November, it is a matter of time and Merkozy can’t let anyone renege on their budget plan if the bond market is to survive. EFSF is also put on ratings watch, its 5 yr bond trading down
Sanctions against Iran
In Commodities,Copper’s recovery has been suspect because of the global weakness and the non materialising of buying by China. Weakness in Copper and Iron continued after the S&P warning even as Nymex Sweet fell below the 100 mark. Nymex is likely to trend to below 98 but Brent is rebuilding difference with Iranian sanctions taking away whole of China’s monthly purchases of 9 mln tonnes in one go. Iran’s current production contribution is over 14% of OPEC bloc supplies at over 4.5 million barrels per day before the crisis Iran is being considered for wider sanctions by Europe as it gets to its nuclear ambitions.
Chinese do not want to buy if price is going to fall
Mean while Economists’ have downgraded growth prospects at a host of Asian countries like Thailand and Korea after China’s growth was expected to end up under 7% in the December quarter. ADB warned of greater downside for Asia in the coming few months with global commerce hit by European degrowth and resulting lowering of imports by China, though US imports remain high.
Chinese Property companies’ have come out with 40% less in transaction value this year and have cut down the number of projects active in 2012 as the real estate transactions disappear in China. Rates have not climbed down except in Shanghai but investors are no longer buying property or the Yuan at these prices. China Vanke reported 36% lower results today in Shanghai as the index tanked on the S&P warning on Europe. Despite three monthly declines , property prices have fallen less than 1% in China, falling 0.28% in November
Chinese Banks lend at PBOC call, Retail is down
Shanghai stocks were down 2% and Shenzen down 1% yesterday. In today’s trades both exchanges were relatively unchanged Big Four banks,
initially holding back on lending ended November with $33 bln in new lending even as lending for the year is closer to $250 bln a far cry from the state sponsored run in 2009 Most local banks in China except for the big 4 have reached their Loan deposit ratio limits of 75% and will not lend more till policy changes are affected
Added liquidity from the 0.5% cut in RRR will bring a $50bln(Cn 320 bln) into the system as only $12.5bln will be absorbed by loans due fif all reserves are released into the inter bank market and interest rates are bound to stay lower(Capital)
GM investor SAIC reported sales of 3.6 mln units in China in the first 11 months as Sales rose nearly 12% However consumer Dscretionary and tourism setors remained weak in China trading A Chinese Securities company and a European luxury goods retailer have however been hawking fresh shares at HongKong successfully
Banks were positive in the market today but fell off towards the session’s end