Forex Market Commentaries - Italy and Greece to make Sacrifices

The Greeks And Romans Are To Make Sacrifices

Sacrifices were the essential elements in Greek and Roman religious rituals. Sacrifices could be offered for thanksgiving, to ask for something, or to satisfy the gods. Sacrifices could be of meat, other food, or drink. The last are usually called libations. There were various types of animal sacrifice, including suovetaurilia, for a pig, ox, or sheep. Humans could also be sacrificed. The sacrifice of meat could be accompanied by barley meal. It was burned for the gods, but much of the meat was usually reserved for and eaten by people. The gods were thought to enjoy the smoke…

The headline from Reuters reads;

[quote]Prime Minister-designate Mario Monti meets the leaders of Italy’s biggest two parties on Tuesday to discuss the “many sacrifices” needed to reverse a collapse in market confidence that is driving an ever deepening euro zone debt crisis[/quote]

This paragraph struck me as being odd from several perspectives. Firstly the thought Mario Monti is anything but a shoe-in for the job is preposterous, it’s as certain as succession within the UK monarchy. Secondly the “sacrifices” are quite simply a euphemism for the critical austerity measures the people will have to endure in order to satisfy the bond holders by way of bank bailouts. However, more alarming is that the general populous of Italy will have to endure such hardship to simply satisfy the markets’ confidence when the general populous played no give part in the creation of the calamity, unless we count paying too much to own property as a direct result of the gargantuan levels of liquidity pumped into the banks and money markets since 2000.

If the markets were ‘left alone’ to find their own natural organic level would the system heal far quicker than the technocrats can engineer? Certainly us millions of forex traders could simply go about our daily toil and ‘do our bit’ to ensure that, for example, cable, the kiwi and the loonie find a true level and equilibrium.

One glaring statistic illustrates the potential futility of the situation perhaps shining a light into the reasons why Berlusconi chose an uncharacteristically dignified exit. Italy has to refinance some €200 billion of bonds by the end of April, a daunting prospect given it was forced Monday to pay a euro-lifetime record yield of 6.3 percent to sell five-year bonds to wary investors. As to whether or not this is a ‘world record’ for debt recycling through the bond market is difficult to establish, but what is for sure it’s an incredibly large sum and will attract costs likely to exceed the current Italian debt cost at auctions. Recycling circa €40 billion a month in a five month period to simply tread water and stagnate is an incredible statistic, we’ll only know if Italy can cope with this burden once the process begins.

The urgency of resolving the persistent Eurozone crisis was underscored by a report by the Lisbon Council, which said France’s inability to make rapid adjustments to its economy was a serious issue and should be of acute concern for the euro zone. Whilst not a direct threat to their credit rating this report does suggest France is holding onto its AAA rating by its fingernails.

“Among the six euro zone countries with a AAA rating, France achieves by far the lowest ranking in the study’s fundamental health check,” the Brussels-based think-tank found in the 75-page report, called the Euro Plus Monitor.

 

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Equities have fallen for a second day on european markets following the the Asia/Pacific sell off in the overnight early morning session, whilst credit-default swaps have risen after a surge in Italian borrowing costs intensified concern that Europe’s debt crisis will worsen. The MSCI All-Country World Index slumped 0.3 percent as of 8:09 a.m. in London. The cost of protecting Asia-Pacific bonds from default climbed, with the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increasing 4 basis points. The euro lost 0.2 percent against the dollar, extending yesterday’s 0.9 percent retreat. Gold declined 0.6 percent.

Economic reports may show German investor confidence this month fell to a three-year low, while gross domestic product in the 17-nation euro area rose 0.2 percent in the third quarter from the previous three months, according to estimates from Bloomberg surveys taken before official data today. Standard & Poor’s 500 Index futures expiring in December rose less than 0.1 percent to 1,253.1. The U.S. equity benchmark dropped 1 percent yesterday. The euro weakened against 9 of its 16 major peers.

The ZEW Centre for European Economic Research in Mannheim, Germany, will say today its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 52.5 this month from minus 48.3 in October, according to economists surveyed by Bloomberg News. That would be the lowest level since November 2008. Copper in London fell 0.2 percent to $7,746.75 a metric ton, reversing an earlier gain of as much as 0.4 percent. Gold for immediate delivery dropped to $1,767.82 an ounce and silver declined as much as 1.2 percent to $33.8425 an ounce.

Market snapshot as of 10:45 am GMT (UK time)

Asia/Pacific markets fell in overnight/early morning trade, the Nikkei closed down 0.72%, the Hang Seng closed down 0.82% and the CSI closed down 0.2%. the ASX 200 closed down 0.44%. European markets have fallen across the board in the morning session; the STOXX is down 1.35%, the UK FTSE is down 0.65%, the CAC is down 1.36%, the DAX is down 1.33% and the MIB is down 1.78%, 27.3% down year on year. The main Athens exchange index the ASE is down 2.8% down 50.46% year on year.

Economic calendar data releases that may affect the afternoon session sentiment

13:30 US – PPI October
13:30 US – Retail Sales October
13:30 US – Empire State Manufacturing Index November
15:00 US – Business Inventories September

Of the economists surveyed by Bloomberg, the median consensus for the month stood at -0.1% from a previous figure of 0.8% for the price index. For the year this stood at 6.3% from 6.9% previously. PPI excluding food and energy is expected to be +0.1% from 0.2% month-on-month and year on year this was predicted to be 2.9%, from 2.5% previously.

Economists surveyed gave a median consensus of 0.3% for Advance Retail Sales from last month’s figure of 1.1%. Retail sales less autos was expected to be 0.2% from 0.6% previously. The figure excluding autos and gas was predicted at 0.2% from 0.5% previously.

Of the analysts surveyed by Bloomberg, the average consensus for the month stood at -2.2, from last month’s figure of -8.48 for empire state manufacturing. Economists surveyed by Bloomberg gave a median consensus of 0.1%, compared with last month’s figure of 0.5%.

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