Archive for the 'The Markets' Category

Canada: Opposition Parties Unite to Oust Conservative Government.

Courtesy CBC.CA:

The Liberals and New Democrats signed an agreement on Monday to form an unprecedented coalition government, with a written pledge of support from the Bloc Québécois, if they are successful in ousting the minority Conservative government in a coming confidence vote.

The accord between parties led by Stéphane Dion, Jack Layton and Gilles Duceppe came just hours after Liberal caucus members agreed unanimously that Dion would stay on to lead the Liberal-NDP coalition, with support in the House of Commons from Bloc MPs.

The six-point accord includes a description of the role of the Liberal and NDP caucuses, which would meet separately and sit next to each other on the government benches in the House of Commons, Dion told a news conference alongside Layton and Duceppe.

Dion said he has advised Gov. Gen. Michaëlle Jean in a letter that he has the confidence of the Commons to form the government should Stephen Harper’s Conservatives be defeated in a confidence vote.

The Liberal leader said the parties reached the accord after watching the “sad spectacle” of other countries’ governments acting to counter the “unprecedented” global economic crisis while Harper’s Conservatives “sat and did nothing.”

“Given the critical situation facing our fellow citizens and the refusal and inability of the Harper government to deal with this critical situation, the opposition parties have decided that it was now time to take action,” he said.

“We are ready to form a new government that will address the best interests of the people instead of plunging Canadians into another election.”

Dion, who previously announced he would step down as Liberal leader, also pledged he would hand over “a strong government for a stronger Canada” to his Liberal successor on May 2.

“I am honoured to do that,” Dion said.

Layton said the accord’s proposed multibillion-dollar stimulus package for the troubled economy, which includes support for the auto and forestry sectors, is “prompt, prudent, competent and, most important, effective.”

“This Parliament has failed to act, and it falls on us to act,” Layton said.

The NDP leader also called on the prime minister to “accept this gracefully” and not bring further instability by fighting the verdict of his colleagues in the House.

“Prime minister, your government has lost the confidence of the House and it is going to be defeated at the earliest opportunity,” he said.

Following the opposition news conference, Harper dispatched Environment Minister Jim Prentice to address the “serious” situation.

Prentice called the opposition pact “irresponsible and undemocratic” and said the government will consider all options.

He wouldn’t rule out the government’s asking Jean to suspend Parliament until late in January, when the Tories have promised to introduce a new budget.

The proposed coalition cabinet will comprise 24 ministers and the prime minister. Six of these ministers will be appointed from within the NDP caucus. The position of finance minister would be held by a Liberal, while the NDP would be allotted six parliamentary secretaries.

The accord between the NDP and Liberals will expire on June 30, 2011, unless it is renewed. The Bloc is only committed to 18 months.

It includes a “policy accord” to address the “present economic crisis,” which states that the accord “is built on a foundation of fiscal responsibility.”

An economic stimulus package will be the new government’s top priority, while other policies include a commitment to improve child benefits and childcare “as finances permit.”

There is also a commitment to “pursue a North American cap-and-trade market” to limit carbon emissions.

-Article continues @ Sourced Site.

Stocks surge after China stimulus

Courtesy BBC News:

Asian markets have risen sharply, a day after China announced a huge investment plan to kick-start its slowing economy.

Stocks leapt in Japan, China and Hong Kong, buoyed by China’s efforts to sustain its growth rates, on which many Asian economies depend.

About $586bn (£370bn) is to go into housing, infrastructure and post-earthquake reconstruction in China over the next two years.

Correspondents say the package is a response to falling growth and exports.

There will also be significant cuts in company tax, while banks will be allowed to lend more to projects involving rural development and technical innovation.

The government also promised a shift to a “moderately easy” monetary policy.

“The investment expansion should be done swiftly and forcefully,” a State Council meeting chaired by Premier Wen Jiabao concluded.

“It’s a huge package,” Dominique Strauss-Kahn, managing director of the International Monetary Fund, was quoted as saying by the Reuters news agency after a meeting of the Group of 20 finance officials in Sao Paulo, Brazil.

“It will have an influence not only on the world economy in supporting demand but also a lot of influence on the Chinese economy itself, and I think it is good news for correcting imbalances.”

Market bounce

-Article Continued @ Sourced Site.

Now Wall Street may shun $700bn bail-out

Courtesy The Guardian (UK)

Fears are mounting that many Wall Street banks and financial firms will refuse to participate in the US government’s $700bn bail-out package, leaving global markets and world economies in a perilous state for months to come.

‘There is a growing feeling that banks … might instead decide to tough it out,’ said Thomas Caldwell, chairman and CEO of Caldwell Financial, a $1bn-plus fund manager.

For the past two weeks all eyes in the market have been focused on US Congress and its attempts to pass Treasury Secretary Henry Paulson’s bail-out package - a bill to allow the US government to buy up to $700bn of toxic mortgage-related assets from American banks, which would in theory free the credit markets and set the gears of global commerce spinning once more.

Last Monday, after the bill was thrown out by the House of Representatives, more than $1 trillion was wiped off the value of US stocks as the market was gripped by panic. The bill was passed on Friday afternoon, however, after the inclusion of $149bn of tax breaks and strict rules for participating banks.

But Wall Street analysts, believe the addition of so many terms to the bill might deter potential participants.

One of the least attractive elements is a section designed to curb executive pay at banks that participate in the bail-out package. These include limiting stock-related pay and banning ‘golden parachutes’ for executives.

Article Continues @ Sourced Site.

Editorial Comment: Is anybody else gettin’ mighly sick of being treated like they got S-U-C-K-E-R printed across their forehead? I know I am! -Shinai.

Russian Emergency Funding Fails to Halt Stock Rout

Sept. 17 (Bloomberg) — Russia poured $44 billion into its three largest banks and halted stock trading for a second day in a bid to stem the worst financial crisis since the devaluation and default a decade ago.

The Finance Ministry extended the repayment period on loans available to OAO Sberbank, VTB Group and OAO Gazprombank to three months from one week. The benchmark Micex stock index plunged as much as 10 percent, bringing its three-day decline to 25 percent. The KIT Finance brokerage said it’s in talks with investors to sell a stake after failing to meet obligations.

Russia’s markets are facing the biggest test since the government defaulted in 1998. The decade-long economic boom is fading, foreign investors have pulled at least $35 billion from the nation’s stocks and bonds since the five-day war in Georgia last month, and the collapse this week of Lehman Brothers Holdings Inc. and American International Group Inc. prompted a flight from emerging markets.

“I will tell my clients today to continue to abstain from buying Russian assets” until economic problems are solved, said Zina Psiola, who manages a $1 billion Russian equities fund at Clariden Leu AG in Zurich.

The cost of lending has soared to a record, with the MosPrime overnight rate reaching 11.1 percent today, deterring speculative bets in equities. Russian stocks have lost more than $425 billion in value since reaching an all-time high May 17.

`Effectively Closed’

“The bond market remains effectively closed and banks are reluctant to lend to one another,” said Julian Rimmer, head of sales trading at UralSib Financial Corp. in London. “The problems experienced by KIT Finance have heightened counterparty risk and reduced liquidity further.”

Moscow-based KIT today said it is seeking to sell a stake after failing to meet some financial obligations related to repurchase agreements.

“Every day Russia falls due to people not being able to meet margin calls,” said Marina Akopian manager of the Hexam EMEA Absolute Return Fund in London.

The cost of protecting bonds sold by Sberbank from default jumped 60 basis points to 3.55 percentage points, according to CMA Datavision prices at 3 p.m. in London. Credit-default swaps on OAO Gazprom, the gas export monopoly, fell 38 basis points to 421. Contracts on VTB Group declined 35 basis points from an all-time high to 6.53 percentage points, according to CMA.

Necessary Measures

Article Continues @ Sourced Site.

Fed’s $85 Billion Loan Rescues Insurer

Courtesy NYTimes:

WASHINGTON — Fearing a financial crisis worldwide, the Federal Reserve reversed course on Tuesday and agreed to an $85 billion bailout that would give the government control of the troubled insurance giant American International Group.

The decision, only two weeks after the Treasury took over the federally chartered mortgage finance companies Fannie Mae and Freddie Mac, is the most radical intervention in private business in the central bank’s history.

With time running out after A.I.G. failed to get a bank loan to avoid bankruptcy, Treasury Secretary Henry M. Paulson Jr. and the Fed chairman, Ben S. Bernanke, convened a meeting with House and Senate leaders on Capitol Hill about 6:30 p.m. Tuesday to explain the rescue plan. They emerged just after 7:30 p.m. with Mr. Paulson and Mr. Bernanke looking grim, but with top lawmakers initially expressing support for the plan. But the bailout is likely to prove controversial, because it effectively puts taxpayer money at risk while protecting bad investments made by A.I.G. and other institutions it does business with.

What frightened Fed and Treasury officials was not simply the prospect of another giant corporate bankruptcy, but A.I.G.’s role as an enormous provider of esoteric financial insurance contracts to investors who bought complex debt securities. They effectively required A.I.G. to cover losses suffered by the buyers in the event the securities defaulted. It meant A.I.G. was potentially on the hook for billions of dollars’ worth of risky securities that were once considered safe.

If A.I.G. had collapsed — and been unable to pay all of its insurance claims — institutional investors around the world would have been instantly forced to reappraise the value of those securities, and that in turn would have reduced their own capital and the value of their own debt. Small investors, including anyone who owned money market funds with A.I.G. securities, could have been hurt, too. And some insurance policy holders were worried, even though they have some protections.

“It would have been a chain reaction,” said Uwe Reinhardt, a professor of economics at Princeton University. “The spillover effects could have been incredible.”

Financial markets, which on Monday had plunged over worries about A.I.G.’s possible collapse and the bankruptcy of Lehman Brothers, reacted with relief to the news of the bailout. In anticipation of a deal, stocks rose about 1 percent in the United States on Tuesday. Asian stock markets opened with strong gains on Wednesday morning, but the rally lost steam as worries returned about the extent of harm to the global financial system.

Still, the move will likely start an intense political debate during the presidential election campaign over who is to blame for the financial crisis that prompted the rescue.

Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, said Mr. Paulson and Mr. Bernanke had not requested any new legislative authority for the bailout at Tuesday night’s meeting. “The secretary and the chairman of the Fed, two Bush appointees, came down here and said, ‘We’re from the government, we’re here to help them,’ ” Mr. Frank said. “I mean this is one more affirmation that the lack of regulation has caused serious problems. That the private market screwed itself up and they need the government to come help them unscrew it.”

House Speaker Nancy Pelosi quickly criticized the rescue, calling the $85 billion a “staggering sum.” Ms. Pelosi said the bailout was “just too enormous for the American people to guarantee.” Her comments suggested that the Bush administration and the Fed would face sharp questioning in Congressional hearings. President Bush was briefed earlier in the afternoon.

A major concern is that the A.I.G. rescue won’t be the last. At Tuesday night’s meeting. lawmakers asked if there was any way of knowing if this would be the final major government intervention. Mr. Bernanke and Mr. Paulson said there was not. Indeed, the markets remain worried about the financial condition of major regional banks as well as that of Washington Mutual, the nation’s largest thrift.

Article Continues with Links @ Sourced Site.

Russia may cut off oil flow to the West

Courtesy Telegraph (UK)

Fears are mounting that Russia may restrict oil deliveries to Western Europe over coming days, in response to the threat of EU sanctions and Nato naval actions in the Black Sea.

Any such move would be a dramatic escalation of the Georgia crisis and play havoc with the oil markets.

Reports have begun to circulate in Moscow that Russian oil companies are under orders from the Kremlin to prepare for a supply cut to Germany and Poland through the Druzhba (Friendship) pipeline. It is believed that executives from lead-producer LUKoil have been put on weekend alert.

“They have been told to be ready to cut off supplies as soon as Monday,” claimed a high-level business source, speaking to The Daily Telegraph. Any move would be timed to coincide with an emergency EU summit in Brussels, where possible sanctions against Russia are on the agenda.

Any evidence that the Kremlin is planning to use the oil weapon to intimidate the West could inflame global energy markets. US crude prices jumped to $119 a barrel yesterday on reports of hurricane warnings in the Gulf of Mexico, before falling back slightly.

Global supplies remain tight despite the economic downturn engulfing North America, Europe and Japan. A supply cut at this delicate juncture could drive crude prices much higher, possibly to record levels of $150 or even $200 a barrel.

With US and European credit spreads already trading at levels of extreme stress, a fresh oil spike would rock financial markets. The Kremlin is undoubtedly aware that it exercises extraordinary leverage, if it strikes right now.

Such action would be seen as economic warfare but Russia has been infuriated by Nato meddling in its “backyard” and threats of punitive measures by the EU. Foreign minister Sergei Lavrov yesterday accused EU diplomats of a “sick imagination”.

Armed with $580bn of foreign reserves (the world’s third largest), Russia appears willing to risk its reputation as a reliable actor on the international stage in order to pursue geo-strategic ambitions.

“We are not afraid of anything, including the prospect of a Cold War,” said President Dmitry Medvedev.

Article Continues @ Sourced Site.

‡Related: Vladimir V. Putin: Neo Con.

‡Courtesy Seattle P.I.




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