Forex Industry Quietly Prepares for Euro Break-Up

Before the euro's launch in January 1999, the Bank of England issued a 110-page plan — everything from settlement timetables to roadworks on the big day — to ensure a smooth introduction of the common currency in the world's largest financial center.

The plan was among quarterly reports, complete with euro-themed cartoons by the BoE's resident artist, issued by the bank from 1996 to 2002 to iron out bumps as euro zone members abandoned their old currencies.

Britain stayed out.

Fast forward to 2012 and banks and brokerages in London are quietly preparing for a more unpredictable but potentially more destabilizing event — thepossible break-up of the euro [EUR=X 1.2705 -0.0081 (-0.63%) ].

This time they do not have the luxury of such detailed and leisurely preparations as they seek to minimize the volatility and disruption to their business that could follow if a country left the euro zone or the whole bloc broke up.

Such moves would not only trigger deep economic and credit risks, the unprepared could face the nightmare of having to quote and trade euro-replacement currencies in the $4 trillion a day FX market.

Many of the industry's big FX banks, clearing houses and trading platforms say they are looking at ways to ensure their systems can quickly deal with any change in the composition in the euro, the world's most traded currency after the dollar.

Some institutions say they have been preparing for a possible break-up since mid-2010, when Greek default fears flared. Read more

Eurousd -upward biased.

Expect Euro to move up as it is oversold and macd shows upward biased.

'No Way' Europe Will Hold Itself Together: CIO

The European debt crisis has revealed that the euro zone is in a final phase and cannot be saved as a single entity, David Murrin, chief investment officer at Emergent Asset Management, told CNBC.

"Europe is in a terminal phase of its life. There is no way I can see a glomeration being a successful way of smaller entities into bigger entities without growth. There will be fractures. (There is) no way Europe is ever going to hold it together," Murrin said.

He added that the management of the crisis by European leaders had now become desperate.

"It's fascinating watching the European politicians desperately trying to hold the system together, which is bankrupt financially and in terms of its mechanisms for encouraging growth economies that move forward. Now they have to make pacts with each other, their desperation is very apparent," he said.

However, he said that Germany—which is in an incredibly strong position now—will never let anything lower its standard of living, but the "end phase" for Europe had already begun.

"We're right in the end phase right now. The general appreciation of these constant political meetings which produce absolutely nothing is that there is no substance behind the proposals with European leaders," Murrin said. Read more

Ten days of secret planning to rescue markets

Ten days of secret planning to rescue markets
December 02, 2011

Bank of England governor Mervyn King presents the Financial Stability Report in London December 1, 2011. — Reuters pic
LONDON, Dec 2 — Britain orchestrated this week’s bold move by central banks to stave off a cash crunch in global markets, helping drive a plan that began to take shape around 10 days ago.
For months, central bankers have tracked with growing concern how the deleveraging among European banks, hurt by the tumbling value of euro-zone debt, was hurting global funding as banks sold off assets and brought cash back home.

Indeed, some central banks had urged the Federal Reserve for some months to put in place cheaper dollar funding, but the Fed had resisted, said a source with direct knowledge of this week’s deal.

Last week, conditions grew particularly acute after a German bond auction failed to attract enough buyers. The Federal Reserve and the European Central Bank started serious discussions around the middle of last week, banking officials in Europe and the United States told Reuters.

Bank of England Governor Mervyn King said he called the meetings that led to the decision by six of the world’s major central banks to cut dollar funding rates to keep money flowing through the world’s financial arteries.

“It was the result of conversations which I initiated as chairman of what used to be known as the G10 governors, now the economic consultative committee, among a limited number of central banks,” he told a news conference in London yesterday. Read More

Moody’s Signals Possible Cut for Europe Banks

Banks in 15 European nations, including the largest lenders in France,Italy and Spain, may have their subordinated debt ratings cut by Moody’s Investors Service Inc. to reflect the potential removal of government support.

All subordinated, junior-subordinated and Tier 3 debt ratings of 87 banks in countries where the subordinated debt incorporates an assumption of government support were placed on review for downgrade, the ratings company said in a statement today. The subordinated debt may be cut on average by two levels, with the rest lowered by one grade, Moody’s said.

Lenders in Spain, Italy, Austria and France have the most ratings to be reviewed as governments in Europe face limited financial flexibility and consider reducing support to creditors, the rating company said. Moody’s has said that a “rapid escalation” of Europe’s sovereign debt crisis threatens the entire region. U.S. President Barack Obamarenewed pressure on European leaders to prevent a dismantling of the euro. More

American Airlines Parent AMR Files for Bankruptcy

AMR, the parent company of American Airlines, filed for voluntary Chapter 11 bankruptcy protection in a New York court on Tuesday.

AP

The company [AMR 1.62 0.01 (+0.62%) ]listed assets of about $24.72 billion, while it has liabilities of $29.55 billion. more

Further consolidation for KL stocks in near term

Mah Sing, MRCB, UEM Land and Dialog should see stronger buying interest on dips for medium-term gains, says a head of research.

Blue chips extended their slump for a fourth week in volatile trade as investors shunned the local stock market due to worries over further downside volatility in global markets. The lower-than-expected US third quarter GDP growth of two per cent, contraction in China factory output, disappointing German bond auction and resistance from Germany on the issuance of euro-bonds to contain the debt crisis all combined to dampen sentiment last week.

As a consequence, the blue-chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) slumped 22.85 points, or 1.57 per cent last week to 1,431.55, with about 70 per cent of the losses coming from Maybank (-30 sen), Genting Bhd (-58 sen), MISC (-65 sen) and Petronas Chemicals (-26 sen). Average daily traded volume and value declined to 1.45 billion shares and RM1.1 billion from 2.18 billion shares and RM1.45 billion in the previous week. Trading momentum on the ACE Market and in penny stocks dwindled further as they fell into correction mode.

External concerns dictated the FBM KLCI's direction last week and this trend will last. Issues stemming from Europe continue to evolve and do not show any signs of dissipating anytime soon. There are no easy solutions either with even the bigger and stronger European countries trying to walk a tight rope, worried that any wrong moves will affect them as well. Germany's failure to secure takers for all its bonds in an auction last week underscored reducing risk appetite among investors if the return from the corresponding investment does not match its risk profile. So, it is not surprising to see Germans being adamant in not wanting a joint eurobond as it is tantamount to the largest economy in Europe carrying the burden of guarantee on its shoulders.

Read more: Further consolidation for KL stocks in near term http://www.btimes.com.my/Current_News/BTIMES/articles/marketoutlooknov28/Article/index_html#ixzz1ez04Vgo2

KL stocks expected to head south

Share prices on Bursa Malaysia are expected to be lower next week with the market barometer, FTSE Bursa Malaysia KLCI (FBM KLCI), likely to hover around the 1,400-level due to deteriorating outlook in global markets.

Affin Investment Bank head of retail research, Dr Nazri Khan, said more downside risk remained in view of the lack of confidence in the market on fears of the impact from the escalating debt crisis in Europe.

"More investors are unlocking European assets because they expect tough capital requirement for European business with rising funding cost," he said.

He said the local bourse now was oversold and counters looked cheap.

"However, there is no short-term profit. People are looking for markets to calm down and for the debt crisis in Europe to end. However, this will take time," he said.

Nazri said currently, there were no new leads to boost the local market and external factors would still dominate sentiment.

During the week just-ended, the local bourse was mostly lower reflecting weaknesses in regional markets dominated by fears of escalating debt crisis in Europe and the still fragile US economy.


Read more: KL stocks expected to head south http://www.btimes.com.my/Current_News/BTIMES/articles/20111126112036/Article/index_html#ixzz1emwlWioZ