“Every time we see a pull-back, a powerful wave of buyers comes back. Investors who have had pockets of cash, waiting for the rally, are now forced to buy,” Aurel BGC chartist Gerard Sagnier said. Positive signals from talks on Monday between Democrat and Republican Senate leaders fuelled hopes of an imminent deal to reopen shuttered U.S. federal agencies and prevent a default on federal debt, sending world stocks higher. The plan under discussion would end a partial government shutdown and raise the debt ceiling by enough to cover the nation’s borrowing needs at least until mid-February 2014. Also brightening the mood, data showed on Tuesday that German analyst and investor sentiment improved unexpectedly in October on signs that the euro zone economy is over the worst of its downturn. The better mood was also visible in the derivatives market, with the Euro STOXX 50 put/call ratio falling back to 1.2, down from a 4-year high of 3.9 hit two weeks ago. The ratio, which is one of Europe’s widely-used gauges of investor sentiment, measures the trading volume of put options versus call options on the Euro STOXX 50. A ratio below 1 signals bullishness, while a ratio above 1.5 usually signals that investors are turning cautious, buying ‘puts’ as a hedge for their equity portfolios in case of a correction. “The consensus is bullish, everyone believes that a deal will be reached (in Washington), so it could already be priced in,” said Guillaume Dumans, co-head of research firm 2Bremans. “Deal or no deal, the size of the U.S.
Senator Reid and Senator McConnell have re-engaged in negotiations and are optimistic that an agreement is within reach, a spokesman for Reid said in a statement. They had suspended their talks, while they waited for the House to act on Boehners plan. European stocks have climbed for four days, their longest winning streak in two months. A report at 9:30 a.m. today may show that unemployment declined at a slower pace in September, according to economists surveyed by Bloomberg. ASML may move. Europes largest semiconductor-equipment supplier forecast a gross margin in the fourth quarter of 43 percent to 44 percent. Analysts had projected 41.4 percent. The Veldhoven, Netherlands-based company also estimated net sales for the period of 1.8 billion euros, beating the 1.77 billion euros estimated by analysts. LVMH may be active. The Paris-based company said late yesterday that revenue advanced to 7.02 billion euros ($9.5 billion) from 6.9 billion euros. Analysts had predicted 7.24 billion euros, according to the median of 15 estimates compiled by Bloomberg. Sales climbed 8 percent, excluding acquisitions, disposals and currency moves.
But within the European Union, the level of demand was the second lowest on record for the month of September since it began tabulating results for the 27 member states in 2003. Industry watchers have been waiting to see if last month would reveal that the decline in August was merely a blip or a signal of further problems to come, after the EU car market crashed to the lowest level for the first eight months of a year since records began in 1990. “The worst is behind us. The decline in sales has considerably slowed and we are now witnessing signs of recovery in demand,” said Peter Fuss, Senior Advisory Partner at Ernst & Young’s Global Automotive Centre. “The sales, however, continue to be artificially boosted by huge discounts and self-registrations by dealers,” he added, warning it would take at least two years before the market was strong enough to grow on its own without the aid of incentives. In a sign of recovery on the ailing euro zone periphery, car demand in Greece, Ireland and Portugal – which all accepted bailouts during the crisis – jumped by double-digit rates. “The western European auto market continued on its course to recovery in September,” said the German auto industry association VDA. For the first nine months, the ACEA said registrations in Europe still fell 4 percent to 9.33 million new cars on the back of weak demand in Germany, Italy and France but also in the Netherlands, where sales have plummeted 29 percent year-to-date. September volumes are a better gauge of underlying trends in demand than August, since the latter’s results are artificially depressed given many European car buyers are on holiday. It is also a crucial time for the UK market, since it accounts for about 18 percent of annual volumes. Sales grew by 12 percent to over 400,000 vehicles in September, the sixth month in a row where they expanded at a double digit rate. The biggest winner in September was Renault, which increased sales 17 percent at its flagship brand while its low-cost Romanian badge Dacia saw volumes leap by 40 percent. Germany’s Daimler posted a strong month as well, with sales of its Mercedes-Benz luxury brand increasing nearly 14 percent after the French government was forced to end its sales ban of certain vehicles.
Spain unlikely to prolong Europe bank aid programme
Credit: Reuters/Francois Lenoir LUXEMBOURG | Tue Oct 15, 2013 9:46am EDT LUXEMBOURG (Reuters) – Spain will probably bring an end to the programme of international aid for its banks on schedule this year, Economy Minister Luis de Guindos told a news conference in Luxembourg on Tuesday. Madrid turned to Europe last year for 41 billion euros ($56 billion) to help the weakest of its banks, which have been crippled by the collapse of its real estate market and resulting mass of failed loans to developers and houseowners. With the economic fortunes of Europe’s debt-ridden southern half showing signs of improving, a senior official in Brussels told Reuters last week that Spain was unlikely to seek more financial aid for the banks when the current programme runs out. “The central scenario, and the most probable one, is that on November 15 (it will be decided that) Spain’s banking programme will come to a close,” de Guindos told reporters at a meeting of European Union finance ministers. The European Central Bank and the European Commission, which backed the rescue, last month said in a review of Spanish banking reforms that the sector remained comfortably solvent, and praised its turnaround. They stressed, however, that Spain’s weak economy – set to emerge from a two-year recession by the end of the year – and a fall-off in lending still posed a risk. Like their European peers, Spanish banks also face a European review of their balance sheets early next year before the ECB takes over as supervisor. Some believe their restructured or refinanced loans could come under particular scrutiny, and that they could be told to put more cash aside to counter potential losses on these, banking sources in Madrid have said. Any capital gap that that process leaves is likely to be manageable, though smaller banks that are owned by the state are unlikely to be able to turn to the market like some of their peers. The Spanish government currently estimates that lenders will have to put aside an extra 5 billion euros in provisions to counter such losses, a source at the Economy Ministry said. “The general perception is that in Europe the banking system has not been as thoroughly cleaned up as in the United States … which is among the elements holding back economic growth in Europe,” de Guindos told the news conference, in reference to the European review of banks’ books. (Reporting by Robin Emmott and Martin Santa in Luxembourg, Sonya Dowsett, Jose Elias Rodriguez and Jesus Aguado in Madrid; Writing by Sarah White; editing by Patrick Graham) Tweet this
World is waiting for Congress, the Fed, Europe
Click to Play Seib & Wessel: Making Monetary Policy Understandable At a special IMF panel hosted by WSJ’s David Wessel, David Lipton from the IMF and Charles Evans from the Federal Reserve Bank of Chicago discuss the ways in which monetary policy makers could better explain to the world their financial decisions. Meanwhile some important decisions, for example on banking union, are not being made. Decisions will have to be made, in 2014, about writing down important components of Greek government debt. This will involve this time the central banks of Europe taking a hit by accepting a stretching out of Greek maturities on bonds held on their books and a reduction in interest rates towards zero. The European Central Bank and other central banks (especially the Bundesbank) will not like that one bit. But it will probably happen, after unwanted but inevitable histrionics with governments and finance ministers that will inflame fresh passions about bailouts and central bank independence. The unfinished business in Europe, the U.S. shutdown, and declines in emerging market growth are all having an effect on Europe. No one representing (as opposed to promoting investment in) the Old Continent at the Washington meetings was in any way upbeat about Europe. MarketWatch Enlarge Image The IMF is forecasting slower growth for the third straight year. This is still a highly anaemic recovery, with the International Monetary Fund forecasting just 1% growth for the euro area in 2014 after declines of 0.4% this year and 0.6% in 2012.