Hollande Faces Europe’s Glass-half-empty Test On Budget Plan
In order to put money to work, investors needed a greater degree of certainty. People just didnt like the overall environment in Europe, be it the regulatory angle or the macro uncertainty. Short Bans Countries from Spain (GSPG10YR) to Belgium and Italy prohibited short selling during market retreats in recent years. While regulators have lifted the restrictions, traders are still required to report positions that exceed preset levels. The U.S. and Asia are better investments because European economies are expanding too slowly, according to Julian Lewis at Cavendish Asset Management Ltd. Euro-zone unemployment held at a record 12.1 percent in July and European car sales have slipped to the lowest since records began in 1990, signs that the recovery lacks momentum after the bloc exited a record-long recession in the second quarter. While yields in Spain and Italy have fallen by more than 3 percentage points from their highs to 4.30 percent and 4.29 percent, respectively, they are still at least 24 basis points above the average rate in 2006, before the financial crisis. The extra yield investors demand to hold the nations debt over benchmark German bunds has fallen to less than 2.4 percentage points, the lowest in two years, Bloomberg data show. Draghi said on Sept. 16 that the improvement in the euro area isnt fully reflected in the cost of credit. Little Growth Although it looks now as if the euro zone is not going to collapse, we see little signs of growth, Lewis, who helps oversee $800 million in London, said in a phone interview on Sept. 18. Despite the recovery in Europe, we dont see as much upside there as we see in emerging markets and the U.S. Europes economy helps make the ECBs commitment to loose monetary policy more credible for investors, who have been skeptical of pledges of long-term easing from the Fed and the Bank of England , Pierre Lapointe , the Montreal-based head of global strategy and research at Pavilion Global Markets Ltd., wrote in a Sept.
Investors remained on edge as congressional authorisation for the U.S. government to spend money runs out at the end of the fiscal year on Sept. 30, and a small number of Tea Party-backed U.S. senators have been threatening to stall a bill to renew the funding. The market has also been fretting about next month’s negotiations in Washington to raise the federal debt ceiling to prevent a default, as well as the outlook for the Federal Reserve’s stimulus measures after the Fed decided not to scale back the measures last week. “Investors are still confused about the Fed’s monetary policy, and now the focus is switching to negotiations between Democrats and Republicans in Washington. After such a rally, people are now very cautious,” said Guillaume Dumans, co-head of research firm 2Bremans. The Fed’s quantitative easing programme has been a major factor behind the global equity market rally of the past year, which has propelled European shares to a 12-month forward price-to-earnings ratio of 13, a level not seen since October 2009, according to Thomson Reuters Datastream. The broad STOXX Europe 600 is up about 5 percent so far this month, on track to post its best monthly performance in two years, and its best month of September since 1997. The sharp rise in the valuation ratio, however, suggests that the equity rally has been more about excess liquidity in the financial markets than underlying company profit growth. Data shows that analysts continue to steadily downgrade earnings forecast for European companies, with the region’s earnings momentum – upgrades minus downgrades as a percentage of total – currently at minus 2.9 percent. Riccardo Designori, analyst at Brown Editore, in Milan, said risks remain for stocks, but on a relative basis, the asset class offer the most value when compared with fixed income.
Europe shares steady, ThyssenKrupp rallies
Were marking a sea change today, he said in Le Monde newspaper. The 2014 budget is aimed at a return to growth and the fight against unemployment. Moscovici published the outlines of the government plans Sept. 11 before meeting with Rehn in Vilnius, Lithuania , on Sept. 13. Frances debt burden will start falling in 2015, he said today. The finance ministrys growth forecasts are — in a break from French tradition — in line with those of the commission. GDP will expand 0.1 percent this year and 0.9 percent in 2014, according to its predictions. Pension Plan For Rehn, the priority for Hollande should be keeping down taxes and labor costs in a country where public spending amounts to 57.1 percent of GDP — the European Unions second-highest after Denmark — and unemployment is at a 14-year high. France expects public spending to drop to 56.7 percent of GDP in 2014. Hollandes pension plan involves lengthening work lives between 2020 and 2035, requiring 43 years of contributions for a full pension at the end of the period, up from 41 years now. Yet it avoids lifting the retirement age from the current minimum of 62 or cutting the increase in pension payouts to less than inflation, opting instead to lift contributions starting next year. While the government has pledged to compensate businesses by cutting other charges, it has yet to provide details of those plans. The pensions overhaul must not add costs for business or discourage employment, Rehn said Sept.
Europe stocks slide on U.S. debt nervousness
Just add items to create a watchlist now: or Cancel Already have a watchlist? Log In By Sara Sjolin LONDON (MarketWatch) European stock markets traded mostly lower on Wednesday, tracking prior-day losses in the U.S., where discussions among lawmakers about raising the debt ceiling weighed on sentiment. The Stoxx Europe 600 index /quotes/zigman/2380150 XX:SXXP -0.34% dropped 0.2% to 312.45, erasing a 0.2% gain from Tuesday. SABMiller CEO: Whats on tap Alan Clark of SABMiller PLC on sharing power with his predecessor and selling beer on six continents. Among notable movers in the index, shares of Carnival PLC /quotes/zigman/321074 UK:CCL -6.42% /quotes/zigman/322132/quotes/nls/ccl CCL -7.65% lost 6% after Morgan Stanley cut the cruise-line operator to underweight from equal-weight. On Tuesday, the company laid out its profit expectations for the fourth-quarter, which were below analysts forecasts. On a more upbeat note, shares of ThyssenKrupp AG /quotes/zigman/157034 DE:TKA +4.85% jumped 4% after European investor Cevian Capital said it has acquired a 5.2% stake in the German steelmaker. More broadly, worries over the looming U.S. debt ceiling spilled over into Europe. The U.S. Treasury is set to reach its $16.7 trillion borrowing limit around mid-October, unless legislators move to raise the debt ceiling. Meanwhile, Congress has until the end of September to pass a federal budget to avoid the government shutting down and Moodys Investors Service warned on Tuesday that a failure to raise the debt limit would result in a worse outcome for financial markets than a government shutdown. The ratings agency argued that market participants would view a decision not to raise the debt limit as having a higher probability of sovereign default. As we have seen time and time again, markets are of the view that lawmakers will find another … makeshift solution which kicks the can further down the road, said Ishaq Siddiqi, market strategist at ETX Capital, in a note.