Tagged: CDS

U.S. investors still cool on Euro banks after test

Reuters | Sat Jul 24, 2010 | 11:31am IST

Valuations on Europe’s banking sector may look cheap on paper but don’t expect U.S.-based portfolio managers to scoop them up even after stress tests showed a vast majority have sufficient capital. The results of Friday’s assessment, criticized for not being tough enough, found that just seven out of 91 European banks would need to bolster their balance sheets by a total of 3.5 billion euros ($4.5 billion) to withstand another recession. "To us the bank stress test results came out as a non-event. When you look at the results they didn’t look very stressful," said Scott Snyder, portfolio manager of the ICON Advisers Europe fund. The method of the stress test has drawn scrutiny particularly because of the way the tests treated European government debt. Even so, U.S. investors had already shown distaste for the European banking sector as data reveal the massive net selling that has occurred over the last two years.

U.S. mutual funds cut their holdings of publicly traded European banks identified in the tests to just $12.1 billion from $29.8 billion, a whopping 59.2 percent decline in the last two years through May, according to Lipper, a Thomson Reuters company. The bulk of the sell-off was between 2008 and 2009. However even after the U.S. government conducted its own stress tests in May of last year — widely believed to have put a floor underneath U.S. financial shares — holdings in Europe’s banks continued to decline. "It stands to reason the most visible banks in Europe are the most scorned, perhaps because we know more about them. The holdings of ING, Bank of Ireland, Commerzbank, and Royal Bank of Scotland used to account for $4.4 billion in account assets. Now they are less than $800 million," said Jeff Tjornehoj, U.S. and Canada research manager at Lipper. By comparison, U.S. bank shares, as measured by Standard & Poor’s financial index, have risen 13.57 percent since the U.S. government announced its stress test results on May 7, 2009, through Thursday.  

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Dollar Rises, Stocks Fall as Greek Downgrade Fans Safety Demand

Bloomberg | December 17, 2009 | 09:37 EST

The dollar rose to the highest level in three months against the euro while stocks and commodities fell as Greece’s debt downgrade fanned concern that spiraling national debts may hamper the global economic recovery. The U.S. currency advanced against all of the 16 most- traded peers at 9:32 a.m. in New York after the Federal Reserve indicated yesterday that it may begin to scale back emergency lending programs. The Standard & Poor’s 500 Index lost 0.7 percent as Citigroup Inc. sold stock at a discount; FedEx Corp.’s profit forecast trailed estimates and initial jobless claims unexpectedly increased. The MSCI World Index of 23 developed nations’ stocks slipped 1.3 percent. Oil and gold led declines in commodities.

Standard & Poor’s decision yesterday to reduce Greece’s credit rating for the second time this year raised concern among investors that the worst global recession since World War II is still weighing on some economies. At the same time, the Fed said after a two-day meeting that most of its lending programs will expire as scheduled Feb. 1 because of ‘improvements in the functioning of financial markets.’ “All eyes are on Greece, and to a lesser extent Spain and the U.K.,” said Luca Cazzulani, a fixed-income strategist at UniCredit SpA in Milan. “The situation requires a lot of prudence right now” from investors, he said.     Continue reading