Month: March 2013

First quarter scorecard: How did Asia markets fare?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Stock indexes in the US have repeatedly hit fresh highs in the first quarter of 2013 providing stiff competition to Asian equities, which have had a disappointing year so far.

With the exception of Japan and smaller Southeast Asian markets, the region`s stocks have emerged as global laggards in 2013. The MSCI Asia Pacific ex-Japan index has risen just 1.5 percent in the first three months of the year, compared to gains of 5.9 percent for the MSCI All Country World index.

“We`re in this rather unusual situation at the moment in Asia where we`re seeing U.S. equity strength, US dollar strength. That has the effect of sucking capital out of the Asia region back towards the United States with a subsequent underperformance of our markets,” John Woods, chief investment strategist at Citi Private Bank, told CNBC.

The underperformance of the region has been led by major markets including India and China. The benchmark Bombay Sensex, which has declined 3.6 percent year-to-date, after rising about 25 percent in 2012, has been weighed down by concerns over a challenging growth environment and persistent inflation together with worries over political instability in the run-up to next year`s national elections.

The Shanghai Composite (Shanghai Stock Exchange: .SSEC-SZ) is down 1.3 percent year to date after a huge rally between December and February. Beijing`s latest efforts to cool the country`s real estate market sparked caution among investors, which also limited gains in Hong Kong`s Hang Seng Index (Hong Kong Stock Exchange: .HSI-HK), which is down 1.6 percent since the start of the year.

Neighboring North Asian markets including South Korea have risen marginally, up 0.4 percent, as the won`s (Exchange: KRW=) appreciation against the U.S. dollar provided a drag on shares of the country`s exporters.

Going forward, with the outlook improving for major developed economies including the U.S. and Japan, gains for developing market equities in the region will not come easy, say experts.

“Investors are becoming pickier. From the stand point of risk, why risk your money in a more problematic emerging market situation, when you can put it into a safer market like the U.S. Developed markets are going to be investor preference for the next six months,” said Uwe Parpart, chief strategist and head of research, Reorient Financial Markets.

Woods added he is particularly cautious on North Asian export-oriented markets, like China, South Korea and Taiwan, given weakness in Europe.

“If you are an exporter largely to developed markets, you will be suffering. So I don`t think a North Asia story is quite safe,” said Woods, noting that in order to see a reversal in the trend, there would need to be stronger evidence of growth in Europe.

Bright Spots

The bright spots for the rest of the year will likely remain Japan and Southeast Asia, say experts.

Japan`s Nikkei 225 (Nihon Kenzai Shinbun: .N225-JP) has seen unprecedented gains of 20 percent since the start of the year – on optimism over Prime Minister Shinzo Abe`s push for aggressive monetary easing to beat deflation and drive growth in the economy – and strategists are betting on further upside for the market.

“Japan is undergoing a significant policy change, which no other country in Asia is. People are underestimating the change in the elite in Japan. They have really stopped their fatalist, defeatist attitude. They realize their situation is precarious,” said Mark Matthews, head of research, Asia at Bank Julius Baer.

In addition to the political shift, Japanese equities are expected to have the strongest earnings per share growth in Asia this year at 40 percent helped by improving confidence, fiscal spending and yen weakness. This compares to growth of 13 percent for both India and China, according to Matthews.

Despite the run-up in Southeast Asian markets such as Philippines, Vietnam and Thailand, which have risen between 11 percent and 19 percent year-to-date, Woods of Citi says he`s still upbeat on their prospects for the rest of the year.

“Southeast Asia obviously is more domestic oriented. Private consumption has a much larger slice of the economy, so that extends a little more resilience, a little less exposure to global volatility,” said Woods of Citi. “We’ve actually increased our overweight in Southeast Asia.”

In addition, he noted that domestic investors are now playing a bigger role in supporting the markets than foreign investors, making them less reliant on overseas fund flows.

Within Southeast Asia, Mark Mobius, executive chairman at Templeton Emerging Markets Group, said his favorite market at the moment is Vietnam, whose benchmark VN Index is trading at 11.4 times earnings.

“It`s the most interesting because the valuations are very attractive, it`s very illiquid, but that`s changing gradually. And I believe that Vietnam is going to be continuing as an outperformer.”

Discussing his outlook for the Philippines equities, on the back of the country`s sovereign credit rating upgrade to investment grade by Fitch this week, Mobius said the market looks quite pricey at the moment. The benchmark Philippine Stock Exchange is trading at a price-to-earnings ratio of 21.2.

“The stocks are quite expensive in comparison with other stocks in Asia. So what we are hoping for is with this new impetus, with these upgrades, we`ll see more IPOs, we`ll see more stock being listed in the Philippines market. That will give us an opportunity to get invested in a bigger way,” he said.

By CNBC.com`s Ansuya Harjani

Copyright 2011 cnbc.com

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Cyprus risks Euro exit after EU bailout ultimatum

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The European Union gave Cyprus till Monday to raise the billions of euros it needs to secure an international bailout or face a collapse of its financial system that could push it out of the euro currency zone.

In a sign it was at least preparing for the worst, the Cypriot government sought powers on Thursday to imptuose capital controls to stem a flood of funds leaving the island if there is no deal before banks reopen following this week’s shutdown.

Parliament will reconvene later on Friday to debate a raft of government crisis measures after lawmakers adjourned a late-Thursday sitting saying they needed more time for consultation.

(Read More: Russia Aid Not Looking Likely for Cyprus: Eurogroup Chief)

Even those measures looked likely to fall short of a promised “Plan B” to raise the 5.8 billion euros demanded by the EU in return for a 10 billion euro lifeline from the EU and IMF.

The European Central Bank said it would cut off liquidity to Cypriot banks without a deal, and a senior EU official told Reuters the bloc was ready to see the island banished from the euro to contain damage to the wider European economy.

Angry Cypriot lawmakers on Tuesday threw out a tax on deposits, calling the EU-backed proposal “bank robbery”.

After more talks on Thursday, the currency union’s finance ministers urged Cyprus to table a new proposal.

Trying to placate its lenders, the government proposed to parliament a “solidarity fund” that would bundle state assets, including future gas revenues, as the basis for an emergency bond issue, likened by JP Morgan to “a national fire sale”.

It also sought the power to impose capital controls on banks, a type of measure unseen since before the country joined the single currency bloc five years ago.

ECB patience flags

The European Central Bank, which has kept Cyprus’s banks operating with a liquidity lifeline, said the government had until Monday to get a deal in place, or funds would be cut off.

“Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks,” the ECB said.

(Read More: EU ‘Blackmailed’ Cyprus: Ex-Cypriot Central Banker)

In Brussels, a senior European Union official told Reuters that an ECB withdrawal would mean Cyprus’s biggest banks being wound up, wiping out the large deposits it has sought to protect, and probably forcing the country to abandon the euro.

“If the financial sector collapses, then they simply have to face a very significant devaluation, and faced with that situation, they would have no other way but to start having their own currency,” the EU official said.
Cypriot banks, crippled by their exposure to Greece, the center of the euro zone debt crisis, have been closed all week and are not due to reopen until Tuesday.

Long queues formed on Thursday at ATMs still dispensing cash, and there were angry scenes outside parliament where several hundred protesters, many of them bank employees, rallied after rumors the second-largest lender, Cyprus Popular Bank, was to be wound up.

(Read More: Allow Bad Cyprus Banks to Fail, Restructure: Banking Expert)

Chanting “Hands off the bank”, several demonstrators jostled with riot police.

“We have children studying abroad, and next month we need to send them money,” protester Stalou Christodoulido said through tears. “We’ll lose what money we had and saved for so many years if the bank goes down.”

The central bank said it was readying measures to keep Popular Bank afloat. Some banking officials said it could be split between good and bad assets.

Limited options

Under the levy rejected by parliament, EU lenders, notably Germany, had wanted uninsured bank depositors to bear some of the cost of recapitalizing the banks, but Cyprus feared for its future reputation as an offshore banking haven and planned to spread the burden also to small savers whose deposits under 100,000 were covered by state insurance. Lawmakers threw it out.

In Moscow since Tuesday, Cypriot Finance Minister Michael Sarris said he was discussing possible Russian investments in banks and energy resources, as well as an extension of an existing 2.5-billion-euro Russian loan.

(Read More: S&P Cuts Rating on Cyprus by One Notch to Triple-C)

He said Cyprus had no plans to borrow more money from Russia and add to its debt mountain. The Russian Finance Ministry had said on Monday that Nicosia sought an extra 5-billion-euro loan.

The chairman of the euro group of finance ministers, Dutchman Joreon Dijsselbloem, told the European Parliament in Brussels that Moscow informed the EU it had no intention of ploughing more money into Cyprus.

Senior euro zone officials acknowledged in a confidential conference call on Wednesday that they were “in a mess” and discussed imposing capital controls to insulate the currency area from a possible collapse of the small Cypriot economy.

Cyprus itself refused to take part in the call, minutes of which were seen by Reuters. Several participants described its absence as troubling and reflecting the wider confusion surrounding the island’s predicament.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

How tiny Cyprus could still have big market impact

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Investors took a subdued reaction Monday to the bailout chaos in Cyprus, but expect that to change significantly should policy makers stumble further.

What looked like a powerful sell-off instead turned into a session punctuated by a shrug and a collective breath-holding, with investors assuming that the initial plans to stop a potential sovereign debt hemorrhage would get scrapped.

“People are trying not to overreact,” said Justin Wiggs, vice president of trading at Stifel Nicolas. “It’s a big deal if the (original plan) does stick, but until we know, there’s no definitive reason to sell except for taking some profits.”

(Read More: Cyprus Bank Tax Lit ‘Two Sticks of Dynamite’: El-Erian)

Market participants have been waiting for weeks to see stocks take a break as the Standard & Poor’s 500 has popped more than 9 percent higher in 2013.

The market has proven, though, to be resilient to scary headlines.

“When you’re barking at the cusp of an all-time high, traders are looking for an excuse to sell down,” said Jim Paulsen, chief market strategist at Wells Capital Management. “We’re starting to understand that every bit of news is not a crisis.”

A scare from the recent Italian elections sent the market into a brief tailspin from which it quickly recovered, and it looked like the weekend’s Cyprus headlines might have the same temporary effect.

“At a minimum, Cyprus’ pain is certainly providing clear evidence of what not to do in other countries,” said Don Rissmiller, chief economist at Strategas. “The US dollar is fulfilling its role as a reserve currency, though this probably comes through a few risk-off days to start.”

(Read More: Cyprus Can’t Put ‘Genie Back in the Bottle’: O’Neill)

Indeed, traders ran to the US dollar against some currencies, but the greenback actually lagged against the euro and yen despite the geopolitical turmoil.

Overnight equity futures had indicated the market would fall 1 percent or more at the open, and the trading day did start off rough.

But the market regained its footing as hopes turned that European Union leaders would reconsider a plan that tapped savings accounts to pay for the bailout and raised fears of widespread bank runs.

“This weekend the news of course is of Cyprus and there shall be many who will argue that what happens in Cyprus should not…and some will argue cannot… have a material and long standing impact upon the US equity market,” Dennis Gartman, author of the widely read Gartman Letter, wrote. “However, in the modern world that is simply not true.”

(Read More: ‘Unfair, Dangerous’ Cyprus Deal Whacks Rich Russians)

Those worries about global impact on a possibly precedent-setting decision for the future course of European debt rescues grew widespread.

The US Treasury released a statement later in the day saying it would be monitoring the situation and hopes to see the bailout resolved in a “responsible and fair” manner.

“The economy of Cyprus is tiny…but far-reaching financial crises often have small beginnings and wars have been started over less,” Julian Jessop, chief global economist at Capital Economics, said in a note to clients.

“What’s more, if the rest of the EU is unwilling to cut a better deal for such a small economy at minimal cost, what chance is there for the bigger ones?”

Cyprus does present a unique case.

The island has developed a reputation for being a hotspot for international depositors looking for a place to hide funds, and the notion that some of that wealth would be taxed drew support from some quarters, including at the top levels of the International Monetary Fund.

(Read More: Cyprus to Put Forward New Plan, Banks Stay Shut: Report )

“Anyone paying attention wouldn’t see this as the beginning of a worldwide trade,” said Martin Leclerc, chief investment officer and portfolio manager at Barack Yard Advisors.

“I would be surprised if this model is repeated elsewhere. It’s a Cyprus-specific issue.”

In addition to the comparatively minuscule size of the Cyprus economy – about 0.2 percent of total euro zone gross domestic product – investors likely held to their beliefs that global central banks would continue to rush to plug any liquidity gaps.

The US Federal Reserve has expanded its balance sheet past $3 trillion to backstop the financial system, while European Central Bank President Mario Draghi has pledged repeatedly to step in where necessary.

“The Fed is really engaged. The Fed cannot afford to see asset prices go down, and the economy is healing,” Mohamed El-Erian, co-CEO at bond fund manager Pimco, told CNBC. “But there will come a time when we have to make that transition from assisted growth to genuine growth and there’s a big question as to when and how we’re going to do that.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

What you should know about the Cyprus controversy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Yesterday, European officials stunned Cypriots (and many others) by announcing a rescue package for their country that involves a levy on ALL bank deposits. The news is spreading far and wide, causing quite a bit of controversy in the process. There are also questions about what will happen next…in Cyprus and beyond.

Also read: Cyprus bailout ‘disaster’ risks new Euro crisis

Having posted an FT column on this earlier today, here is a summary:

The Context: With massively overextended banks and a stumbling economy, Cyprus is in desperate need of external funding. Like other struggling euro zone members, it turned to its European partners and the International Monetary Fund for help.

After months of negotiation, a 10 billion euros (USD 13 billion) bailout package was announced. It spreads the burden sharing in an unprecedented manner by including a de facto haircut on all bank deposits (de jure, depositors receive an equity claim).

The Controversy: “PSI” (private sector involvement) has been featured in other European rescue packages, but none have imposed losses on deposit holders. This one does, and it covers all deposits—through a tax that ranges from 6.75 percent to 9.99 percent, depending on the size of deposits. In addition to its highly regressive design, this element sets aside decades of convention and laws that protect bank deposits below a certain threshold (100,000 euros, in the case of the European Union).

(Read More: Facing Bailout Tax, Cypriots Try to Get Cash Out of Banks)

The Rationale: European and Cypriot officials argue that, in light of an extremely challenging situation, this was the best among the unpleasant options available to them; and seemingly they could not ignore bank depositors all together since it is their funds that inadvertently enabled the careless over-expansion of the Cypriot banking system.

There is also a feeling among European officials that Cyprus could be a lax offshore jurisdiction that intermediates funds of dubious origins. The levy counters that. It also conveys a message to peripheral countries that have been getting more complacent on the back of ECB support, a signal that hardliners within Europe have been keen to send.

The Risks for Cyprus: Citizens are furious—towards their government, European partners and the IMF—with a bank levy that covers everyone, big and small. The specification of such a small differential (6.75 percent vs 9.99 percent) adds fuel to a fire of discontent. All this serves to increase political tension and the risk of social unrest.

Other Issues: There will be lots of talk about the potential for spillovers. Among the immediate ones: Will this weekend’s noise disrupt the financial tranquility that has prevailed in Europe after the ECB announced its “whatever it takes” approach to stabilizing matters; and how will the ECB and other central banks react?

Will the negative contagion be contained (after all, Cyprus is a small country) or could it spread to global equity markets that have embarked on record runs?

How will this impact the phenomenon of growing distrust between citizens and established political orders and parties? And to what extent will this influence broader investment flows?

(Read More: Cyprus Rescue Not a Fit for Other Countries)

Next Steps: The parliament in Cyprus is scheduled to meet tomorrow to discuss the bailout package. We should expect quite a bit of controversy, and quite a close outcome. The terms could be revised. There are also indications of some divisions within Europe. And the possibility of legal challenges cannot be excluded.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Cyprus bailout ‘disaster’ risks new Euro crisis

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Even as Cyprus’s President Nicos Anastasiades addressed the nation on Sunday night, saying savers would be compensated by shares in banks guaranteed by future natural gas revenues, he was said to be working to renegotiate terms of the highly criticised bailout deal.

Over the weekend, analysts warned the decision by the euro zone to force bank depositors in Cyprus to contribute towards a bailout—a first in the euro zone debt crisis—could hurt other peripheral nations, the euro and the global stock market rally.

That warning appeared to be coming true as the euro edged lower at 1.2934 against the dollar, in early trade on Monday morning local time in New Zealand, the first global market to start trading.

In his televised address, Anastasiades said he had to accept a tax on bank deposits in return for international aid, or else the island would have faced bankruptcy.

“The solution we concluded upon is not what we wanted, but is the least painful under the circumstances,” Anastasiades said.

In that speech, Anastasiades urged lawmakers to approve the tax in a vote Monday.

About 25 lawmakers from the communist-rooted AKEL party, the socialist EDEK and the Greens said they won’t vote for the tax in the 56-seat Cypriot parliament amid deep resentment over a move some called disastrous. If Parliament rejects the tax, that would put the entire aid package in jeopardy. The vote was initially set for Sunday but was postponed until Monday—a national holiday in Cyprus.

The announcement of the vote postponement set off an immediate scramble among top European financial officials. One lawmaker told The Associated Press that European Central Bank was pressuring Cypriot authorities to hold the vote without delay.

Bailout is a ‘disaster’

Still, the structure of the bailout shocked many, including Sharon Bowles, chair of the European parliament’s economic and monetary affairs committee, who called it a “disaster” for European Union rules and the single market.

(Read More: Cyprus Rescue Not a Fit for Other Countries)

Euro zone finance ministers forced Cyprus’ savers to pay as much as 10 percent of their deposits towards a bailout of the country’s troubled banking sector, a move which is expected to raise 5.8 billion euros. In return, the country will get 10 billion euros (USD 13 billion) in assistance.

The arrangement, structured as a bail-in, would give depositors shares in the banks in return for the levy.

According to the Financial Times, Cypriot authorities were trying to shift more of the burden to deposits larger than 100,000 euros, and adding an additional bank holiday on Tuesday to prevent a run on the nation’s banks.

(Read More: Cypriot Authorities in Revised Deal Talks)

Sebastian Galy, senior currency strategist at Societe Generale warned the levy could unleash a sell-off in the euro and the stock and bond markets of peripheral nations on Monday.

“This will probably go down as an ill thought-out rescue plan with consequences for peripheral Europe,” he wrote in a research note. “It breaks a cardinal rule, namely public trust on which money relies…Some peripherals will suffer at the opening in Europe and [it will] hit EUR.”

Doug Kass of Seabreeze Partners on Twitter predicted European stock markets could fall 3 to 4 percent on Monday, while the S&P 500 could fall 1.5 to 2 percent and Spanish and Italian 10-year yields could jump 15 basis points.

“The news is a wake-up call to investors that the European sovereign debt issue is far from being resolved,” Kass said in a note.

But Marshall Gittler, head of global forex strategy at IronFX, an online trading platform, took the opposite view, arguing the bailout could be positive for the single currency.

(Read More: Cyprus Parliament Postpones Key Session)

“This settlement—assuming it passes—removes that tail risk from the market. It also puts Cyprus on a healthy footing, with a debt/GDP ratio estimated at 93 [percent]—not far off the EU average of 90. The economy here can start growing again. So it’s a win-win for the EU and Cyprus and should be well received by the markets,” he said.

Meanwhile, The New York Times reported on Saturday that savers had already been trying to withdraw money from banks via ATMs and that many machines had run out of cash. But it might be too late already. Cyprus has declared a bank holiday on Monday to prevent such a run on the banks and banned electronic transfers.

Cyprus Finance Minister Michael Sarris defended the government’s decision in an interview with CNBC: “It’s not a pleasant outcome, especially of course for the people involved. But we believe it is something that, compared with other possible outcomes, is the least onerous. And we also believe that the exchange of this levy with shares in the banking institutions affected gives an upside potential.”

But the rescue has already been thrown into doubt with Cyprus’ parliament postponing an emergency session on Sunday to discuss the levy and several parties opposing the deal.

“When the dust has settled on this deal, which I hope it never does, we will see that the single market has been sold down the river for a shoddy price,” said the EU parliament’s Bowles.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

No reason to worry about bubble now: US treasury’s Lew

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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With stocks at all-time highs despite only tepid economic growth, there`s little sign of a bubble forming in markets, treasury secretary Jack Lew told CNBC on Thursday.

“There`s always going to be concern not to get to a point where we have the seeds of a future crisis,” Lew said. “The analysis I`ve seen doesn`t give me reason to be worried right now.”

Lew said that policymakers still need to see what`s going on in firms and markets, and have the regulatory tools to deal with problems when they develop.

Lew is also determined to finish implementing the Dodd-Frank financial services reform. “The real problem we saw in 2008 and 2009 is our regulatory institutions had not kept pace with the evolution of our financial institutions,” he said. “We need to always stay ahead of that curve.”

The treasury secretary also said that the economy is moving forward and the sense of imminent crisis in Washington has receded. “Towards the end of the year there was a sense of imminent crisis; we`re a little bit beyond imminent crisis,” Lew said. “We still have a lot of work to do but there doesn`t seem to be any push to create a crisis over the debt limit or over shutting down the government. That`s helpful.”

Lew said that the American economy is resilient and growing, but acknowledged that it needs to grow faster and create more jobs.

And while a strengthening US dollar could undermine US exports, Lew said “A strong dollar is in America`s interest and that will continue to be our policy.”

Politicians must also deal with sequestration which threatens to shave half-a-percentage point off growth and cut 750,000 jobs.

“I think that there is a growing number of members on a bipartisan basis who want to do something sensible and not have sequestration,” Lew said.

He added that “The right thing for the American people would be for us to have a sensible agreement where we do entitlement reform and we raise some more revenue in the context of tax reform.”

While talks are at early stages, the treasury secretary expects the problem can be worked through over the coming weeks and months.

China Trip

Lew`s first overseas trip will be to China given the importance of the relationship in terms of the impact on growth of the world economy. “It`s a good idea to get those conversations going right from the start and to have the kind of relationship where you can raise the issues you need to with each other,” he said.

Lew noted that the US has raised concerns over the years about access to markets, that currencies should be determined through the markets and intellectual property.

He added, “The issues that the US and China have are serious.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Crisis-hit EU states get wiggle room on deficits

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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European leaders meeting in Brussels on Thursday hinted that some countries could be given more time to meet their deficit goals as they address high unemployment and seek to ease the pain of tough austerity measures.

The president of the European Commission told CNBC that while countries should pursue reforms and meet the deficit targets set under EU rules, there was room for maneuver if countries showed that they were making an effort to implement reforms.

“The stability and growth of the EU has incorporated the necessary flexibilities, so provided the members states make the structural adjustments required, we proposed the extensions to fulfill the debt target as we`ve done in Greece two times, in Portugal, in Spain, and may do so again, provided that countries make a structural effort…and France too” Jose Manuel Barroso said.

While these reforms were taking shape, it was important to support the issue of youth employment, he said, adding that the Commission would mobilise funds to help companies employ young people.

“Now we are mobilising…European social funds to help young people find apprenticeships, traineeships in companies in small and medium enterprises that might need that kind of help. It`s better to have this kind of solution for the short term than simply to accept this very high levels of unemployment .

The topic of unemployment in the euro zone is high on the agenda at the EU summit, with a particular focus on youth unemployment. In January, 23.6 percent of young people in the EU under the age of 25 were unemployed, up from 22.4 percent a year before. In Spain and Greece up to 50 percent of young people are struggling to find work as their economies flounder.

“Of course, we know well that the structural solution for youth unemployment, and for employment in general, has to do with the health in the economy and the reforms to increase competitiveness [but in the meantime} while these reforms take place, it is important to support through target policies these very important issues of youth unemployment,” he said.

EU leaders continue their summit in Brussels on Friday. Countries such as France who have said that they will miss the target of a budget deficit below 3 percent of gross domestic product (GDP) have been granted some leeway.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Stock exchanges hit new highs even as volume wilts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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It`s a bit of a surprise, but all the stock exchanges are at 52-week highs: the New York Stock Exchange, the Intercontinental Exchange, the Nasdaq, the CBOE and the CME.

So, what’s up? The CBOE did announce that it had again locked up an exclusive 14-year deal for the SandP 500 options contract (their biggest single contract- 30 percent of their earnings), and this will likely make CBOE a takeover target.

Who would buy them? Nasdaq, NYSE/ICE, Deutsche Boerse maybe.

And you might be able to argue traders are starting to understand the positive synergy in the NYSE-ICE deal.

Still, the new highs are a big of a surprise to me, because–at least in the case of the stock exchanges- volumes are still a primary driver of the business, and volumes continue to decline.

What happened to volume? It started exploding around 2006 as high frequency trading (HFT) kicked into high gear, but after hitting historic highs in 2008 (the financial crisis unleashed titanic volume), volume again started to decline.

What happened? Lower volatility (a byproduct of activist central bank intervention) has meant less trading opportunity for HFT firms, and second the rise of exchange-traded funds (ETFs) made it easier to buy large swaths of the market without having to buy the underlying stocks.

According to Patrick O`Shaugnessy at Raymond James, average daily volume on all stock exchanges has been 6.4 billion shares for the first quarter of 2013; in 2012, it was 6.8 billion shares, a decline of six percent. And 2012 had lower volume than 2011.

His conclusion: 2012 had the lightest volume since 1999.

Here`s a daily average trading volume for several years, once high frequency trading and ETF trading is stripped out:

• 1999: 2.1 Billion
  
• 2007: 3.6 Billion
  
• 2008: 3.7 Billion
  
• 2009: 3.4 Billion
  
• 2012: 2.7 Billion

Why is volume dropping with the trading community? You can offer many explanations:

High frequency trading discourages other types of trading (odd claim since HFT is down as well). Lower volatility has also lessened volume from “trend followers”. The 2008 financial crisis has greatly reduced the public`s appetite for stock trading; a fact amply demonstrated in the huge outflows from mutual funds.

By the way, the above stats imply that high frequency trading and ETFs combined account for about 60 percent of the volume, about in-line with prior published estimates.

Finally, volume is only slightly better for options. The explosive growth we saw in options trading a few years ago has come to a halt. Option volumes are up a modest three percent in Q1 2013, according to O`Shaughnessy.

–By CNBC`s Bob Pisani 

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Fed won’t stop QE until 2014: Roubini analyst

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The U.S. will not end its quantitative easing (QE) program before 2014, according to Christian Menegatti, managing director of research at Roubini Global Economics.

Menegatti, who works alongside well-known economist Nouriel Roubini , said quantitative easing will continue throughout 2013 and an interest rate cut will not be on the cards until 2015.

The U.S. central bank has kept benchmark interest rates close to zero since

2009 and has tried to stimulate the economy also through three rounds of quantitative easing or bond purchases. The latest round was implemented in September last year, known as QE3.

“We are talking about 2014, in terms of winding down quantitative easing.

We`ll have to wait much longer for rate hikes….well into 2015 and maybe towards the end of it,” said Menegatti.

This would spell good news for equity markets which have gotten used to the flow of easy money. Wall Street`s Dow Jones Industrial Average that logged a fresh record high on Tuesday has rallied almost 12 percent so far this year.

However, the rally has been mixed with a touch of fear in recent weeks after the Federal Reserve`s minutes late February hinted that the end of QE maybe coming – a move which could suck liquidity out of markets and derail the strong recovery seen in the U.S. and across global markets.

A drop in unemployment numbers for February to 7.7 percent, with 236,000 new jobs created also ramped up fears that the Fed may start tightening.

In December the Fed said a 6.5 percent unemployment rate would be a trigger for tightening monetary policy and raising interest rates.

“With the latest number last week [the 7.5 percent unemployment rate] the devil is in the detail. The Fed will not just look at unemployment it will look holistically at labor markets and will look at whether improvements are caused by people leaving the work force or actual job creation,” said Menegatti.

“The Fed has sent a signal that at 7.25 percent they will start winding down QE. We think it will take a while to get there and we don`t expect to get there before the end of 2013. By then we will be somewhere between 7.5 and 7.7 percent depending on what happens with `sequestration`,” he added.

Investors have recently been fretting over the implications of the U.S. “sequestration” , an extensive round of budget cuts across defense, transportation, social security and healthcare, and their potential to impinge on the economy.

Menegatti added the polarization of views between the Democrat and Republican politicians remained a key risk to the U.S. economy.

He warned that the U.S. government could face another downgrade, if bickering over how to tackle the debt ceiling crisis continues. The U.S. lost its prized AAA credit rating from Standard and Poor`s credit rating agency in August 2011.

“Polarization is the word of the day and that`s what caused the downgrade in 2011 and who knows, that`s what we might get again,” he said.

However, markets have proven resilient to the headwind and have continued to climb regardless. Menegatti said this resilience was due to the fact that investors now have renewed faith in the U.S. government.

“The market has been trained and learned that at the 11th hour we get a solution to these things. The market is looking at the fundamentals in the U.S. which are better than many other parts of the advanced world. The market is pricing in the fact that the Fed might take a bit more insurance rather than let this recovery fade away again,” he added.

Investors have turned more bullish on progress within the U.S. after a deal that prevented the economy from falling off the “fiscal cliff” of tax hikes and spending cuts on January 1. Plus the recent jobs data have added to optimism over the state of the world`s largest economy.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow