I'll boil it down to its core

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

I'll boil it down to its core.
Die core schijnt €514 miljard te zijn voor Duitsland ;)

Groet / Cees

May 18, 2010
Stocks Drop After Move by Germany
By DAVID JOLLY and BETTINA WASSENER

PARIS — Global stocks fell Wednesday and the euro slid again after
Germany announced strict measures to reduce speculation in government
bonds and bank stocks. Wall Street was headed for a lower opening.

The German financial regulator BaFin announced late Tuesday that it
would ban naked short-selling in shares of 10 of the country’s most
important financial institutions. The ban, which took effect Wednesday
and will last until March 31, 2011, would also apply to naked
short-selling of credit-default swaps and euro-zone government bonds.

In a short sale, an investor sells borrowed shares, hoping to buy them
back later at a lower price and profit from the difference. In a naked
short sale, they sell without borrowing the shares first.

Such bans were enacted at the height of the crisis in autumn 2008, but
analysts said Germany’s move suggested that the situation might be
getting worse.

German Chancellor Angela Merkel said in a speech to parliament that the
euro was in danger and urged speedy action to stop market "extortion,"
saying the European Union needed a process for "orderly" insolvency of
its members.

"I'll boil it down to its core," Ms. Merkel said. "The euro is the
foundation for growth and prosperity, along with the common market --
also for Germany. The euro is in danger."

Considering that German bank stocks are nowhere near their lows of the
last couple years, Derek Halpenny, a currency strategist at Bank of
Tokyo-Mitsubishi UFJ in London, wrote in a research note, “investors are
questioning whether the authorities see something we don’t and are
preempting renewed bank stock selling.”

He noted that the Swiss-based Bank for International Settlements, which
is known as the central bank of central banks, had recently released
data showing the banking sector in Germany — Europe’s biggest economy —
had the greatest exposure to Greece, Spain, Ireland and Portugal of any
euro-zone country, at €514 billion.

The Dutch and Austrian governments said Wednesday that they had no plans
to follow suit. Other European governments did not immediately make
their intentions known. The German announcement came the same day that
European Union governments largely overrode British concerns on a draft
law to impose transparency standards on hedge funds and managers based
outside the 27-nation bloc.

Jacques Cailloux, chief euro-zone economist at Royal Bank of Scotland,
told journalists in Hong Kong that he believed the German move would
sour investor sentiment in the short term at least. While financial
reforms were necessary, he said, the steps “create a lot of uncertainty
about the regulatory environment.”

The lack of more coordination also is a negative, he said. “The problem
is that the messages are not coming with one voice,” he said.

That underlines the challenges when it comes to implementing the far
more fundamental reforms the European Union will need in the longer
term, Mr. Cailloux said.

In early trading, the Euro Stoxx 50 index, a barometer of euro zone blue
chips, fell 2.8 percent, while the FTSE 100 index in London fell 2 percent.

German financial shares fell about 1.4 percent.

Standard & Poor’s 500 index futures were down 0.2 percent, suggesting
New York markets would open with a slight downward bias. On Tuesday, the
Dow Jones industrial average fell 1.1 percent, and the S&P 500 fell 1.4
percent.

The cost of insuring European blue chip bonds against default with
credit default rose 8.6 percent. The Markit Itraxx Europe index, which
combines 125 of the most liquid

As it has during times of stress in recent years, the dollar rose
against major European currencies and fell against its Japanese
counterpart. The euro fell to $1.2199 from $1.2202 late Tuesday in New
York, while the British pound fell to $1.4326 from $1.4334.

The dollar fell to 92.11 yen from 92.23 yen. The euro fell to 112.35 yen
from 112.56.

Asian shares fell. The Tokyo benchmark Nikkei 225 stock average declined
0.5 percent, while the main Sydney market index, the S&P/ASX 200,
dropped 1.9 percent. In Hong Kong, the Hang Seng index fell 1.3 percent
in late trading, and in Shanghai the composite index fell 0.3 percent.

The main Chinese markets — in Hong Kong, Shanghai and Shenzhen — are
down sharply this year, weighed down by local worries rather than the
global Greece-related jitters. Investors fear that the Chinese
government will move to cool down soaring property prices and the
economy, which remains red hot.

The fall of the euro is also beginning to make Chinese goods more
expensive in Europe, since the Chinese currency is pegged to the dollar.

“A weak euro and a slowing global recovery in the second half of this
year are equivalent to tightening for the Chinese economy,” Citigroup
economists said in a research note.

U.S. crude oil for June delivery fell 99 cents to $68.43 a barrel. Comex
gold fell $1.10 to $1,213.50 an ounce.

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