The Banking and Strategy Initiative

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European Sovereign Debt Crisis: Huh! what Spanish downgrades! – Rinse. Lather. Repeat.


Spain (Photo credit: robynejay)

The Global Economy should have roiled hen Monday began with saddening aannouncements from S&P and moodys’ in Spain. as many as 16 Spanish banks were downgraded following the contraction in the Spanish economy ( of 0.3% – no less! ) led to widespread worries on the bad bank plan of the Spanish worth Eur 50 bln in assets , likely to fall short on funding from private sources among other. However, the Euro was strong even as Indian’ sbanks reacted negatively midday on a similar Moodys’ announcement. india’s banks are having a fine upbeat results season under the Asian sun, Credit growing between 16-20% across Private and Public sector players and Gross NPAs falling in the more efficient banks to less than 0.3% and in the public sector banks from above 1%. However moodys’ had earlier reiterated its support for indian Banks’ ratings when last week’s S&P rolodex blasted out the To do items on loan assets of INR 2.5 T of ICICI Bank and INR 1.8 T of Axis bank considered among the largest growing franchises in Asia. Moody’s action there has largely been ignored throughout 2010 and 2011 when so called European deleveraging in Asia only strengthened global franchises in India and China survived the Local government default scare with a 8.4% GDP growth in Q1

German Retail Sales reported a 0.8% rise in the morning and the Italian Inflation and the EMU Inflation (HICP) were also good and strong at 3.3% and 3.3% while money supply remained a little anemic at 2.8% with no further cycles of the LTRO casha nd within the EU tolerance range as the target is 4.5%

Back in Spain, its own 10Y yields stayed well below 6% as the Euro remained strong and the Dollar stronger leading to buoyant equity futures in new York on the big board and elsewhere.  Meanwhile Betty Liu is having fun ( pardont he pun!) with another endless discussion on the “Death spiral in Europe” on Bloomberg while European stocks are also trying and mostly succeeding in ignoring governance and Economy and rewarding performance. the last one of course was long confused with bankers’ pay and shareholders’ set that right again in the Barclays’ AGM yesterday when 32% of the shareholders and 10% of the present at the AGM cast a vote against Bob Diamond’s jumbo largesse on himself ( which may be half the reason why stocks are in a trearing hurry despite the rain in Spain and elsewhere as most of Europe gets ringfenced by Recession rays from UK France, Italy, Greece and even Denmark in the north of Germany

As most have figured out by now, thats just more spending cuts everywhere in Europe and not for the planned two years but likely more, so its on

individual companies to perform and take away the blues. Except for banks most others are responding well based on result reports till now and so equities are unlikely to take a long breather this year.

Moodys’ downgrades are due next, in a couple of weeks from now!

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