The Banking and Strategy Initiative

Chillin' out till it needs to be funded

The US Morning Report (Global Markets Pre S&P Open) : Get back into those Financials

The EUR 100 B in cash to be provided to the FROB or the Fund for Orderly Restructuring of Banks will add a 10% of Spanish GDP to its debt, taking its Official Public Debt to 77% while other debt would of course take it to more unwieldy amounts. However, as Fitch in rating agencies and US Treasury have otherwise noted in the last 3 years , the amount of debt does not matter, domicile does. Spanish ratings and that of France are likely to be shored up as Financials continue to the US shores for a remarkable comeback having on average gained at least 3% in European trading in the afternoon. if you have gone long on the Euro, congratulations, you have probably outlasted yourself and should no get short on the Euro again in the last to hours or even no as the Euro comes back to 1.2550 in anticipation of events that now roll out the various problems before handing out the money. The ESM lending would make the money primary and first lien for Spain to return as per the charter of the EUR 500B fund and one reads that Euro bonds are likely to be serious chowder for policymakers this week too.  The Greek elections this Sunday are also important events to watch and I agree with Reuters commentators that this may not be the last Greek election this year.

Anyay the respite for the Spanish banks means that JP Morgan could no breathe a sigh of relief on its European exposure and its performance otherwise on the big board ahead of Dimon’s testimony on Wednesday. The Healthcare Act Opinion from the Supreme Court would also be out soon and the risk on trade is likely to continue after the week. Economic data  later in the week includes the May Budget Deficit data and the Inflation reports before the Empire State Index on Friday starts another debate on whether there is a recovery or not. Goldman Sachs ould likely be among the best of a bad lot of trading banks in Q2 and JP Morgan should be able to absorb the $4B loss from the Whale trader to produce at least $2 in EPS in July reports for Q2 as well. Citi has probably put behind the debate on pay and the Capital return plans and ells Fargo probabbly also pulled a rabbit out of its hat for new mortgages aas BofA looks around for mortgage business and pays for the settlement inked ith the government in Q1 However at $7.50 Bank of America does not look like a good comeback candidate unless the news flow leading to Q2 results is extremely positive.

Facebook meanwhile has started up as of Friday from $25 levels

 

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