Forex Market Commentaries - France and Eurozone

How Sarkozy Must Wish He Could Be Rip Van Winkle

Oct 24 • Market Commentaries • 3114 Views • 1 Comment on How Sarkozy Must Wish He Could Be Rip Van Winkle

The story of Rip Van Winkle is set in the years before and after the American Revolutionary War. In a pleasant village, at the foot of New York’s “Kaatskill” Mountains, lives the kindly Rip Van Winkle, a colonial British-American villager of Dutch descent. Rip is an amiable though somewhat hermitic man who enjoys solitary activities in the wilderness, but is also loved by all in town—especially the children to whom he tells stories and gives toys. However, a tendency to avoid all gainful labor, for which his nagging wife (Dame Van Winkle) chastises him, allows his home and farm to fall into disarray due to his lazy neglect.

One autumn day, Rip is escaping his wife’s nagging, wandering up the mountains with his dog, Wolf. Hearing his name being shouted, Rip discovers that the speaker is a man dressed in antiquated Dutch clothing, carrying a keg up the mountain, who requires Rip’s help. Without exchanging words, the two hike up to an amphitheatre-like hollow in which Rip discovers the source of previously-heard thunderous noises: there is a group of other ornately-dressed, silent, bearded men who are playing nine-pins. Although there is no conversation and Rip does not ask the men who they are or how they know his name, he discreetly begins to drink some of their liquor, and soon falls asleep.

He awakes in unusual circumstances: it seems to be morning, his gun is rotted and rusty, his beard has grown a foot long, and Wolf is nowhere to be found. Rip returns to his village where he finds that he recognizes no one. Asking around, he discovers that his wife has died and that his close friends have died in a war or gone somewhere else. He immediately gets into trouble when he proclaims himself a loyal subject of King George III, not knowing that the American Revolution has taken place; George III’s portrait on the town inn has been replaced by that of George Washington. Rip is also disturbed to find another man is being called Rip Van Winkle (though this is in fact his son, who has now grown up).

The men he met in the mountains, Rip learns, are rumored to be the ghosts of Hendrick (Henry) Hudson’s crew. Rip is told that he has apparently been away from the village for twenty years. An old local recognizes Rip and Rip’s now-adult daughter takes him in. Rip resumes his habitual idleness, and his tale is solemnly taken to heart by the Dutch settlers, with other hen-pecked husbands, after hearing his story, wishing they could share in Rip’s good luck, and have the luxury of sleeping through the hardships of war. (Wikipedia)

Sleep deprivation hits hard when a new baby arrives, there can be two zombie stages a new Father goes through, the first when the baby arrives and you wander around in a daze for days. The second, the deeper phase, is when the new baby goes home and needs your love and attention 24-7. If you’re lucky your wife breast feeds and your late nights amount to transporting your beautiful gift to the safety of the Mother and you can get a few more hours sleep.

Can France’s President Sarkozy’s outburst versus Prime minister David Cameron be excused as sleep deprivation and the stress of being an older Father, or is the massive burden of trying to obtain a Eurozone solution making him finally ‘crack’? One things for sure in some respects it’s refreshing to witness some passion involved in the events, particularly given that so much is at stake. It’s at times when passion runs high that we’re prone to blurting out the truth, or at least our version of the truth, and it’s normally new Fathers can often be at the end of that truth invective when the Mother points out a few home truths, perhaps Mr. Sarkozy heard the words “absent Father” from his wife during a Skype session and flipped. Unfortunately Sarkozy will not wake like Rip Van Winkle to find a double decade period of stagflation has passed by..

The two leaders clashed during a six-hour EU summit in Brussels on Sunday as leaders sought to hammer out a solution to the Eurozone crisis. The row erupted after Mr Sarkozy tried to insist that a further meeting on Wednesday should be restricted to the 17 eurozone leaders. At one point during the exchanges, the French president was quoted as telling Mr Cameron;

We are sick of you criticising us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings.

All 27 member states would be there. According to EU officials, Mr Sarkozy complained that he was tired of hearing advice Mr Cameron and his Chancellor were offering the eurozone. He said George Osborne had been present on Saturday for the agreement on strengthening banks – an issue which affects all 27 countries, although Britain will not need to take action. On the two remaining issues involving only the eurozone, Sarkozy argued that Britain and the rest should stay away. Mr Cameron finally won a face saving concession involving a one-hour meeting of the 27 leaders before the 17 break away separately for the final negotiations. The Prime Minister’s view is that if the 17 had the final say, Europe would risk destabilising market confidence if the other 10 then tried to “unpick” the deal. Either way it appears we have a breather until Wednesday, perhaps Mr Sarkozy can use the break to spend some time with his wife and new baby girl..

 

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Markets
Asia/Pacific markets enjoyed a very strong performance in overnight early morning trading. Japan’s Nikkei index added 1.9 percent due to the Ministry of Finance revealing government data revealing that exports rose 2.4 percent in September vis a vis the year earlier. The estimate of 26 economists surveyed by Bloomberg was for a 1 percent increase after a 2.8 percent gain in August. Hong Kong’s Hang Seng Index closed up 3.9 percent, China’s Shanghai Composite Index gained 2.2 percent after HSBC Holdings Plc and Markit Economics reported today a reading of 51.1 for a preliminary index of Chinese purchasing managers. This is the highest reading in five months comparing with readings of 49.9 for September and August. A reading above 50 indicates expansion.

European markets have advanced cautiously with investor and speculator attention laser focused on the next series of EU meetings scheduled for Wednesday. By 9.25 London time European bourses had all risen higher by similar percentage gains. The STOXX index has risen by 0.41%, the UK FTSE by 0.52%, the CAC by 0.32%, the DAX. By 0.91%. Brent crude is up $65 a barrel and gold is up $6 an ounce.

Currencies
The $4 trillion-a-day currency market may be signalling that the worst is over for the euro. Foreign-exchange strategists have ceased cutting forecasts for the euro. Between Sept. 12 and Oct. 6 the average year-end estimate of more than 40 analysts surveyed by Bloomberg fell to $1.35 from $1.43. The euro’s fall has now decelerated, ranging between $1.34 and $1.35 since October 6th. The currency closed at $1.3896 on Oct. 21 and has strengthened 2.5 percent from last month’s year on year low on Sept. 12 against a basket of developed-nation peers measured by the respected Bloomberg Correlation-Weighted Indexes. Options traders are significantly less bearish on the euro, currently paying circa 3.42 percentage points more for the right to sell the common currency versus the dollar than buying it. The so-called one-month 25-delta risk reversal rate has narrowed from a closing-price record 4.03 on Sept. 6th.

The euro was static last week, 15.5% stronger than its average of $1.2030 since January 1999 up from this year’s low of $1.2867 in January. It fell 1.2 percent to 105.97 yen. That compares with an average of 128.68. The euro fell 0.2 percent today to $1.3875 at 9:17 a.m. in London. The difference in the number of bets by hedge funds and other large speculators on a drop in the euro compared with those on an advance was 77,720 on Oct. 18, compared with so- called net shorts of 82,697 in the period ended Oct. 4, which was the most since June 2010, according to data from the Commodity Futures Trading Commission in Washington – the COT report. There are no significant data releases scheduled for this afternoon that could significantly affect sentiment on or shorty after New York opening.

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