Global Focus

Italian Auctions

jackkatz — Tue, 29 Nov 2011 16:35:26 +0000

The Conference Board tells us that we (the US consumer) are getting more confident with a rise well above expectations. I think we already knew that based on shopping data over the weekend and Cyber Monday which saw an 18% increase over last year. While confidence is still below “normal” levels we are making progress despite Europe. And over in Europe, Italy had a successful auction which markets viewed as positive even though Rome had to pay at record levels. And so for the second day in a row we are having some early holiday cheer with equities and “risk” currencies and commodities all showing gains although well below yesterday’s unabated enthusiasm.

For a second day in a row markets are in a good mood but not so much as yesterday. The EUR had continued its climb overnight to 1.3440 on what was deemed a successful Italian debt auction (more on that in a moment). But the currency has run out of steam on ECB action and is actually trading a bit lower than at this hour yesterday. Italy had a well subscribed auction selling EUR 7.5B and markets were pleased to note the strong demand after Germany struggled last week. However, yields were pretty steep with Italy forced to pay close to 8% on the 3 year compared with 4.93% a month ago and a 10 year at 7.56% vs 6.06% at the end of October. It is puzzling that such high yields were supportive of the Euro but a couple of ways of looking at this (my uneducated opinion).

The Euro fell off later in the European day after the ECB failed to collect deposits that offset its secondary market purchases. This in effect adds Euro to the market which some analysts are calling QE although it seems a bit premature to call the first shortage since April a sign of ECB QE. But QE would be seen as Euro negative as it would in theory bring down interest rates.

Europe stands on the brink of disaster and only Germany, can avert an “apocalyptic” breakup of the euro zone and the EU’s single market, Poland’s foreign minister Sikorski said. “There is nothing inevitable about Europe’s decline. But we are standing on the edge of a precipice. I demand of Germany that, for your own sake and for ours, you help it (the euro zone) survive and prosper. You know full well that nobody else can do it.” He added “I will probably be the first Polish foreign minister in history to say so but here it is: I fear German power less than I am beginning to fear German inactivity”.
Australia extended yesterday’s gains in part on a move by Fitch to give the country its highest AAA rating. The currency popped above parity rising to 1.0077 but has eased off as the government announced some spending cuts in an effort to honor its promise to return the budget to surplus by 2013. The RBA is meeting next week and futures are already pricing in a 25 point cut.

Japanese private consumption appears to be holding up with data showing a 1.9% increase in retail sales in the year to October. On the negative side, data shows the jobless rate rising to 4.5% in October from 4.1% in September.

The continuing upbeat news for the US has translated into a bounce back in consumer sentiment which rose to a 56.0 reading vs. a forecast of 44.0 and a 2 ½ year low in October. While numbers are historically weak, they are headed in the right direction. Current conditions improved and expectations rose to their highest since July.

The hold back to US is continued poor housing data as the S&P/Case Shiller composite index of 20 metro area housing prices declined .6% in September. Homes with negative equity improved a bit to 10.7Million units or 22.1%. Another 2.4Million are in the less than 5% equity range. Nevada has the highest underwater rate at a staggering 58.3% of mortgages that are “upside down.”

US bank debt ratios in October were at 7 to 1 just off a record low. The all time high was 36 to 1 at the end of 2007 and we know what happened in 2008 so current levels are seen as a positive and a sign that US banks are in a much better health. The most recent Federal Reserve Senior Loan Officer Survey also shows banks are eager to lend with the highest indicator since 1994.

Fitch yesterday revised its outlook for the US to negative citing uncertainty over growth and fiscal prospects.

Italy

jackkatz — Fri, 18 Nov 2011 16:31:42 +0000

The EUR made small gains overnight on increasing talk that the ECB may loan money to the IMF to shore up European countries suffering debt problems rather than making direct loans. The thought is that the IMF has tighter compliance controls. Frankly this makes more sense, that the IMF be more involved as it has historically been the rescue mechanism for sovereign problems albeit so far for emerging nations and for much smaller sums. Markets have bandied around the idea of the ECB ramping up its printing presses (QE) and calling the ECB the lender of last resort. Germany and the ECB have resisted this but the clearest explanation of why this is not the right idea comes from BoE head Mervyn King. To paraphrase, he indicates that “lender of last resort” by a central bank is intended for institutions that are clearly regarded as solvent, done against good collateral and at a penalty rate (think Fed Discount Window). The ECB buying of sovereign debt is just that, “sovereign” and a financing of the current account deficit of those countries. If and when something goes wrong this will create liabilities for the surplus countries. Effectively this is a mechanism of transfer from surplus countries to deficit. No wonder Germany is against the idea. One assumes that by lending to the IMF, the ECB will get repaid full value at some point. Anyway, we have hope for the EUR for the first time this week although risk currency gains are limited.
· New ECB chief Draghi told Euro-zone governments to act fast to get their rescue fund up and running expressing exasperation at their lack of progress. “Where is the implementation of these long-standing decisions? We should not be waiting any longer.” More reason the ECB doesn’t want to lend directly. Too much wishy-washiness.
· Italian 10 year yields dropped back to a more reasonable level of 6.65%. And just a month ago we were calling those levels unreasonable.
· New Italian PM has breezed through confidence votes and unveiled sweeping reforms and also is enjoying a 75% support in opinion polls.
· BoE policy maker Martin Weale said there was a very strong case for extending the central bank’s QE program next year.
· Canada’s annual inflation rate eased to 2.9% in October but markets were disappointed it didn’t ease more. Core which excludes food and fuel dipped to 2.1%. CAD actually gained a bit as market expectations for a rate cut diminished.
· The Yuan was fixed at a slightly weaker level as talk is that the Bank of China may keep the currency in a tight range through next week at least. No official word of such intent and one wonders if this is still a rebuttal to Obama’s slam at their currency manipulation.
· The Russian ruble is not likely to strengthen during the remainder of 2011 according to Central Bank Chair Sergei Ignatyev. “The volatility of both the nominal and real ruble rate has now increased but there is no trend for strengthening this year.”
· As the US keeps reporting increasingly positive economic data some forecasts are for Q4 to grow at a 3.2%. But questions are also emerging on sustainability of growth in light of the European crisis. Seems interruptions keep occurring to the recovery, Arab spring, tsunami and earthquake, Thai floods and now the potential fall out from the debt crisis.
· In a sign of global growth shifting, Boeing inked a record sale of aircraft to an Indonesian airline. Recent aircraft sales by both Boeing and Airbus have largely been to so-called emerging regions of the world with European and N American airlines buying relatively few aircraft. The Indonesian order will be in part financed by the Exim bank and along with other recent Boeing successes, is expected to create a large number of jobs in the US.

Italy Replaces Greece

jackkatz — Thu, 10 Nov 2011 07:35:36 +0000

Greece has announced their new interim PM as Filippos Petsalnikos. But headline focus is squarely on Italy as 10 year yields spiked over 7% and a European clearing house increased margin requirements on Italian debt

Greece is rapidly becoming so yesterday as markets turn their anxiety to Italy. We have a strong “Risk off” day as Italian 10 year yields leapt over the 7% threshold hitting 7.4%. This comes despite PM Berlusconi’s pledge to resign after implementing economic reforms. The 7% yield figure is a benchmark for markets as it is the level where Greece, Portugal and Ireland required bailouts. With the shear size of Italy relative to the others, any sort of haircut would have much deeper ramifications to the global investment market. Needless to say currencies are reflecting the mood with the dollar and JPY showing solid gains while the EUR broke through 1.36 with expectations that we could reach the 1.34s by week end. Equities are down across the board of course with the Dow down nearly 300 pts half an hour into the trading sessions.
· Paris clearing house LCH Clearnet has raised the margin call on Italian bonds by 5 percentage points to 11.65% which will lead to a less healthy primary market for Italian debt
· Unlike Greece, Japanese investors have had a healthy appetite for Italian debt but raising the margin call could see many of them unwinding positions.
· Some speculation is that the only folks buying Italian Bonds this morning is the ECB.
· EU inspectors are in Rome to begin a monitoring mission aimed at ensuring promised economic reforms are being carried out. Most of the reforms are in the budget measures to be voted on by parliament to get Berlusconi out the door.
· IMF Chief Lagarde, speaking at a two day visit to China warned that the European debt crisis risked plunging the global economy into a “lost decade”. “There are clearly clouds on the horizon particularly in the advanced economies and particularly in the EU and the Unites States. Our sense is that if we do not act boldly and if we do not act together, the economy around the world runs the risk of downward spiral of uncertainty, financial instability and potential collapse of global demand…we could run the risk of what some commentators are already calling the lost decade.”
· The former governor of the People’s Bank of China Dai Xianglong asid “The Chinese Yuan will be used to settle many trade deals in the coming two or three years: will be used as an investment currency in the coming 5 to 10 years and to become a major reserve currency after three five year periods.” In the mean time please stop complaining about the lack of any decent reserve currencies for your billions. True, it will take a decade or more to build confidence in a currency as a reserve option. Just look at what is happening with the EUR.
· Risks to Japan’s export reliant economy have heightened even after last months monetary easing says BoJ board member Seiji Nakamura. “Many Japanese companies have strived to overcome various supply constraints from the March earthquake and are just about to swing to full production to recover market share lost at home and overseas. Slowing overseas growth and yen rises at such a time would weigh on business sentiment by hurting revenues, mainly for exporters.” More intervention expected?
· GM, a third of which is owned by US taxpayers beat market expectations on profits although they said that they would not break even in the European market. Their underfunded pensions in the US fell by 8.7B. But their shares fell 4.2%.

Asia Pacific Markets Weaken Due to European Debt | 2011-11-07 | World Trade 100

jackkatz — Tue, 08 Nov 2011 17:10:09 +0000

Asia Pacific Markets Waeken Due to European Debt | 2011-11-07 | World Trade 100.

China’s Manufacturing Index Falls to Three-Year Low | 2011-11-07 | World Trade 100

jackkatz — Tue, 08 Nov 2011 17:08:13 +0000

China’s Manufacturing Index Falls to Three-Year Low | 2011-11-07 | World Trade 100.

Political Tensions

jackkatz — Tue, 08 Nov 2011 07:32:26 +0000

Currency markets look unchanged from Friday at this time but we did have some volatility over the weekend as political headlines and rumors drove markets. The Greek PM has agreed to step down as soon as the bailout package is approved (by the government, not the people) and an interim PM, possible Lucas Papademos will be appointed until general elections next year The bailout needs to be approved before Greece runs out of money mid-December. And as Greece monkeys around, we have more uncertainty from the 800 pound gorilla, Italy. Rumors had PM Berlusconi resigning any second although he has since denied such reports. The rumor had given the EUR and equities a boost but they flipped back after the denial. Nice to be loved. Italian 10 yr bonds are approaching 7% at which point funding costs would become unsustainable. Think of it as only being able to make the minimum payment on a maxed out credit card. Unless the rate is very low, it can’t be done. Italian debt stands at about 5 times Greece’s so any failure to repay will cause a crisis more significant than anything Greece can do to us. On the other hand, Italian debt stands at around 119% of GDP while Greece is around 143% and Italian per capital debt is also smaller.
· While the Greek populace is not sad to see Papandreou stepping down they don’t seem to be expecting any better. “Are we saved? I don’t think so if nothing is done to stop this practice of slapping more and more taxes because people’s pockets will be empty” said a taxi driver. A plumber added, “Why should we celebrate now that they will make sure we bear the pain?”
· France appears to be trying to preempt any debt/fiscal problems by cutting its budget another EUR 7B in 2010 and 11.6B in 2013. Problem is that the public is to bear the burden resulting in less growth, likely less than the government’s 1% forecast which in turn will cause shortfalls in the revenue and worsening debt. It’s a vicious cycle.
· Russian PM Putin said that major emerging economies should provide financial support to the Euro-zone via the IMF. He stopped short of attaching conditions but said this should be reflected in a greater role for them in IMF decision making.
· Swiss National Bank chairman suggested once again that the CHF was overvalued against the EUR reviving speculation that the 1.20 euro/swiss floor may be raised. Swissy eased on the news falling to the upper 1.23s against the EUR.
· The CNY weakened a bit on the heels of the G-20 where they indicated a willingness to loosen FX rate policy. As has been seen previously, China appreciated the Yuan leading up to and through the G-20 but might now be in for a usual pause. To China’s credit they have been guiding the currency higher and trying to adjust its economic structure to be less reliant on exports.
· S&P believes that the holiday retail shopping period will show gains for the second year in a row. In fact, retailers have done better through this year, particularly in back to school sales, this despite the unemployment rate and consumer confidence at the lowest levels since 2009. S&P’s outlook for 2012 is less optimistic.

Jobs, Good, Bad but Not Ugly

jackkatz — Fri, 04 Nov 2011 15:14:47 +0000

80,000 and 9%. Jobs created and the unemployment rate as reported by the Labor Department this morning. The bad part is that expectations were for 90-100K new jobs. Beyond that there is much that is good, at least in the sense that very modest job growth is keeping up with very modest economic growth. One could argue that there are an additional 102,000 jobs created as Sept. was revised up 55K and August another 47K. The private sector added 104K meaning that it was a loss of government jobs that kept October numbers in check. A household survey which is a more precise count of people actually working rose 277K, unemployment rate for teens fell to 24.1, the lowest since Feb. and the “real” unemployment rate which includes discouraged and underemployed fell from 16.5% to 16.2%. So all in all, we are in an improving mode, just not as fast as the unemployed would like. Currencies took little notice of the data as we are still close to yesterday’s level.
· Our friends to the north did not fare as well with their jobs numbers with a loss of 54,000 vs. expectations for a 12k gain. The loss was the highest since Feb. of 2009 and the unemployment rate rose to 7.3%. If one takes that in context of population it would be an equivalent loss of 490K in the US. The data may have some flaws, however as Sept. had shown a 61K gain, equally surprising. Stats Canada may be having some problems with seasonal adjustments to their data. Net net the numbers are a bit more tolerable
· A different kind of vote is hovering over the Euro-zone. Greek PM has given up on the referendum but now faces elimination from office on a confidence vote scheduled later today. There is growing consensus that bailout or not, Greece’s association with the Euro will be coming to an end.
· Italy has agreed to have the IMF and the EU monitor its progress reforms of pensions, labor markets and privatization, a senior EU source said on Friday. PM Berlusconi agreed to the step in late-night talks with euro zone leaders and U.S. President Barack Obama as a sideshow of the G20 summit. “Italy has no problem with surveillance at all, even with the IMF being involved,” he said, adding that the EC and the IMF would each report separately on how Italy was meeting its targets.
· The Eurozone Services PMI fell to 46.4 in October from 48.8 in September, its lowest reading since July 2009 and lower than an earlier flash reading of 47.2. The index stayed below 50 for the second month running and survey complier Markit said conditions are unlikely to improve over the next few months as the threat of an imminent recession takes hold. The new business index tumbled to 45.3 from 47.1, and hiring stagnated for the first time since April 2010.
· Euro zone PPI rose more than expected in September, boosted mainly by a surge in energy costs. The EU’s statistics office Eurostat said prices in the 17 countries using the euro rose 0.3 percent m/m for a 5.8 percent y/y increase. Trichet would not be amused.
· CHF came off against the EUR after SNB board member Danthine said “If the economic outlook and deflationary risks so require further measures will be taken” in referring to the exchange rate.
· As mentioned the G20 has agreed to a move “more rapidly” towards flexible exchange rates and for the first time included China by name. China has committed to this. Other countries have made promises in the first action plan to come out of the G20 including the US which committed to put its debt-GDP ratio on a declining path no later than the middle of the decade. Right. Other promises include: The US is to take timely near-term measures to sustain its recovery; Brazil, China and Germany agree to allow automatic stabilizers to work and support domestic demand; emerging economies pledge to move towards domestic led growth. There’s a nod towards Japan’s FX interventions with the note that disorderly movements in exchange rates could adversely impact economic and financial stability.

Another debit crisis day

jackkatz — Thu, 03 Nov 2011 15:59:11 +0000

In what some view as a surprise move, the ECB cut their main interest rate 25 pts to 1.25% as the debt crisis and economic stagnation weighed more heavily than fears of inflation. Remember that the ECB’s main mandate is inflation control while our Fed also includes job stability, aka economic growth. Newly elected President Draghi may be indicating a bit of a policy shift away from the ultra hawkish tone of his predecessor Trichet. Markets are now thinking we could see a couple more cuts at upcoming ECB meetings. At his first press conference, Draghi said ongoing tensions in financial markets could slow the pace of Euro-zone growth and said he expected real growth rates in the second half of the year to be very moderate and would be downgraded when the ECB releases new forecasts next month. The EUR has lost ground both on the rate cut and the press conference.

The Greek referendum may be a non-event as PM Papandreou may not survive the week. His own party is in a major revolt with FinMin Venizelos the first to declare his opposition. The thinking here is that with him gone, the referendum won’t go to the people. Opposition parties already have come out against the idea.

Sarkozy and Merkel gave Papandreou an ultimatum that Greece would not receive a cent until it votes to meet its commitment to the Euro-zone.

China, Russia, and the US strongly encouraged Europeans to act swiftly. “Europe should aid itself, the EU has everything for that today…the political authority, the financial resources, and the backing of many countries” said Russian President Medvedev.

Merkel told a news conference that while she would prefer to stabilize the Euro WITH Greece, the top priority was saving the Euro, not rescuing the Greeks.

French Europe Minister Leonetti said that the euro could survive without Greece. “Greece is something we can get over, something we can live without.”
Bottom line is Euro area leaders are now talking openly of a Greek exit should the referendum go ahead and the Greeks vote no.

In Italy, pressure is mounting for PM Berlusconi to quit as six former loyalists called for a new government. Caught in Greece’s wake, Italy continues to be at risk.10 yr yields are now above 6.3%

GBP is caught in the EUR slide this morning compounded a bit by a service sector PMI that fell to a 51.3 reading in October vs. 52.9 in the previous month.

The Fed meeting yesterday left policy unchanged, acknowledging recent improvement in growth but lowering its forecasts for the future. Next years growth is expected at a 2.5-2.9% range from a previously projected 3.3-3.7% range. Inflation is expected to remain muted. The jobless rate is seen as going no lower than 8.5-8.7% by the end of 2012, far off of the Fed target of 5.2-6%. They expect unemployment to remain at 6.8-7.7% as late as 2014.

A draft communiqué from the G20 commits to move “more rapidly” toward greater exchange rate flexibility. This of course is directed at China. But while we complain about the artificially low CNY, the currency, at roughly 5% is the fastest appreciating Asian currency against the USD this year. But a further look shows only a 1.1% gain against the EUR, its other big trading partner.

Georgia and Russia have finally agreed to trader terms that will lead to Georgia’s blessing in letting Russia into the WTO. 18 years in the making, this will be the largest economy (at $1.7T) to join the WTO since China 10 years ago. Companies and investors should get the signal that Russia is starting to move towards a rule-based system of doing business.

Greece Again

jackkatz — Wed, 02 Nov 2011 12:50:50 +0000

Just when you think the Euro-zone is getting settled and we can start making progress towards more stable markets Greece yesterday dropped a bombshell and markets are still reeling. In a nut shell, PM Papandreou decided to let the citizens of Greece vote on the bailout package put together last week. Markets quickly reacted late yesterday with the EUR falling a quick penny and then continuing to drop. If you looked at your 401K you know equities also reacted unkindly and this risk sell off has continued overnight. Of immediate concern if the population votes no to the bailout is, and this is a likely event as a recent poll shows a majority feel negatively about the rescue, will Greece hard default and drop from the Euro-zone dragging countries like Italy to the brink?. On the other hand, the wordage of the referendum has not yet been set so we still don’t know what exactly the Greeks will be voting on and in theory a referendum would be non-binding. The worst part perhaps is that no date for the vote has been set (although parliament may vote as early as Friday) meaning prolonged uncertainty which means tough and volatile markets. A complicated issue just became a lot more complicated.
· Greek opposition party members in calling for snap elections to remove the PM said “He cannot govern and instead of withdrawing honorably he dynamites everything”
· Greek fin Min warned citizens that Euro-zone membership was at stake. “It’s crunch time. Citizen will have to answer the question: are we for Europe, the Euro-zone, the Euro?”
· European bank shares have dived with Italian UniCredit off 12.6% and French Credit Agricole off 10%. The thought is that a hard Greek default would cause a write off of 75% or more on Greek holdings.
· Italian bonds in the secondary market were trading at an uncomfortable 6.2%
· Euro-zone inflation came in at 3% again in October, well above the 2% target of the ECB leading to speculation that the ECB will wait until December for any sort of rate cut. Thursday’s meeting will be the first for new president Draghi so it will be interesting how he sets his mark.
· Danish PMI fell to 43.6 in October from a 55.2 reading in Sept. and Norway followed suit but managed to stay on the plus side at 50.8.
· “We are engaging in a war of nerves with markets and we will make timely and appropriate decisions” said Japanese FinMin regarding their intervention. The intervention figure is now put at JPY 7.7T far surpassing the one day total of JPY 4.5T set in August. In regards to the G20 meeting he added “I will tell them exactly what happened. That is, the Yen has not reflected economic fundamentals…”
· While expected, the 25 pt cut by the RBA, in conjunction with the Euro worries knocked Aussie back down to a 6 day low. So on Aug. 1 we were at 1.1050, down to .9426 by Oct. 4, back to 1.0737 on the 27^th and now back to the 1.03s. That is volatility defined.
· The UK had a mixed bag of news with GDP actually showing growth in Q3 of .5% with the strongest growth in business services and financial sectors in 4 years. But a 47.4 reading in the October PMI curbed dampened hopes for future growth.
· Speaking of poor PMIs, China’s came in with a 50.4 reading, its lowest since Oct. of 2009 raising fresh concerns of a slowdown in their growth engine.
· South Korean inflation came in at 3.9% y/y with the core showing a 3.7% rise. And while they also reported an increased trade balance exports grew at their slowest pace in 2 years.
· Brazil chugged along with an October trade surplus equal to $3.1B surpassing expectations of $1B

Intervention

jackkatz — Tue, 01 Nov 2011 01:19:16 +0000

BoJ intervened and while surprising the market a bit, apparently did not scare it that much. After hitting a record high of 75.55 BoJ sold JPY aggressively knocking it to 79.51 vs. the dollar (4.9%) and from 106.97 to 111.5 against the EUR (4.1%). BoJ has an uphill battle as the intervention was unilateral and JPY has already recovered to below 78 on the dollar and 109.20 on the EUR. Finance Minister Azumi: “I have repeatedly said that we would take decisive steps against speculative moves in the market…..I have been frequently in contact with other countries…I have always conveyed Japan’s stance and interests at senior levels.” The timing is probably pretty good as some fundamentals call for a weaker JPY. Particularly on the heels of last week’s easing, the 10 year yield gap against the US has been widening in October. On the flip side, the exchange rate against the dollar when measured against a trade-weighted basket of currencies and adjusted for inflation is not far from its 30 year average according to some statisticians. I find that last stat a bit hard to swallow based on rates 30 years ago but perhaps against non-USD this is true. We next can look forward to Azumi and PM Noda making their case at the G20 later this week where they are not really expected to receive any support. Market participants sense that BoJ will be persistent but will be hard pressed to break and stay above the 80 level. Stay tuned.
· Estimates on the magnitude of intervention range form $64B to $150Bwith either number surpassing the previous record of $59.4B on Aug. 4^th.
· The ISM-Chicago business barometer for the mid-west dipped to a 58.4 reading from 60.4 in September. New orders slipped to 61.3 from 65.3 but the employment component showed improvement 62.3 from 60.6. Yes, higher than 50 means expansion.
· Canada’s monthly GDP report showed a third consecutive month of growth with a plus .3% reading m/m led by oil and gas extraction. Finance and insurance, retail trade and construction also grew while manufacturing, wholesale trade and utilities fell. CAD itself remained near Friday’s levels with a pull from the Japanese intervention and a push from the GDP data.
· Nargis Yadav. An Indian girl and one of the half million babies born on Monday that could be the 7 billionth person. Her parents earn $100 a month. Another 2B are expected to be added by 2050. One hopes the climate will cooperate allowing us to grow plenty of food. Sobering.
· Thailand hopes that industrial estates swamped by recent floods will be up and running in 3 months in a scenario eerily reminiscent of Japan’s tidal inundation of industry. While not of the same magnitude as Japan, Thailand is a major source of auto and computer parts and supply chains are once again affected. Global prices in computer hard drives are apparently rising as Thailand is the 2^nd largest exporter. Honda has shut down car production indefinitely at its Thai plant.
· Australia lost some ground along with other commodity currencies on the Japanese intervention. Further caution on the Aussie is expected ahead of a potential rate cut (implied at an 80% chance) tomorrow. The lack of a cut could send Aussie significantly higher.
· Russian Ruble lost ground as tax payments have been made. The currency had made gains as exporters repatriated earnings to pay their taxes. The purchases of the Ruble have also tightened up money supply with overnight lending rates rising from 3% a couple months ago to 5%
· Georgia is the only country holding up Russia’s entry into the WTO and has Swiss mediators working on final details that will change Georgia’s mind and allow Russian entry into the 153 country block. This will be the biggest entry since China a decade ago. Advocates of membership say that Russian consumers will benefit and force Russia to become more efficient. Some estimates show a potential 15-20% rise on Russian exchanges over time should Russia join
· German FinMin Schaeuble was cited on Saturday saying that Europe still has a long way to go. Meanwhile Chinese Pres. Hu said “We are convinced that Europe has the wisdom and has the competence to overcome the current difficulties” without adding that China was ready to help.