US stock future indexes are fractionally down (SPY -0.6%), indicating a lower open after being closed yesterday for July 4, crude is slipping to the mid 47's and the USD is melting higher towards the 96 level. Apparently, investors are still edgy from the Brexit and uncertainty in the U.K., the future of the European Union and soft data from China.
Here is the current market situation from CNN Money
European markets are mixed. The FTSE 100 is higher by 0.03%, while the CAC 40 is leading the DAX lower. They are down 1.83% and 1.77% respectively.
LONDON (Reuters) - Investors pushed U.S. government bond yields to an all-time low and the yen sharply higher on Tuesday, as soft data from China added to worries about the impact of Britain's vote to leave the European Union.
TORONTO (Reuters) - The parent company of infidelity dating site Ashley Madison, hit by a devastating hack last year, is now the target of a U.S. Federal Trade Commission investigation, the new executives seeking to revive its credibility told Reuters.
(Reuters) - Hostess Brands LLC, the maker of Twinkies and Ho Hos, said an affiliate of private equity firm Gores Group will buy a majority stake in the company for about $725 million and take it public.
BEIJING (Reuters) - China called on other countries to treat its companies "objectively and fairly" in overseas acquisitions bids on Tuesday as Chinese home appliances maker Midea looked set to secure a controlling stake in German robotics giant Kuka .
STRASBOURG - McDonald's won a trademark dispute with a Singapore rival on Tuesday as Europe's second highest court backed its claim to have exclusive rights to the use of 'Mc' or 'Mac' in trademark names for foodstuffs and beverages.
LONDON (Reuters) - The Bank of England took steps to ensure British banks can keep lending and insurers do not dump corporate bonds in the "challenging" period that is likely to follow the country's shock vote to leave the European Union.
Back in May 2013, we wrote an article titled "Europe's EUR 500 Billion Ticking NPL Time Bomb" in which we laid out very simply what the biggest danger facing European banks was: non-performing, or bad, loans.
We further said, that "Europe's non-performing loan problem is such an issue that there is increasing bluster that the ECB may take this garbage on to its balance sheet since policymakers realize that bad debts and non-performing loans (NPLs) reduce the capacity of banks to lend, hindering the monetary policy transmission mechanism. Bad debts consume capital and make banks more risk averse, especially with respect to lending to higher risk borrowers such as SMEs. With Italy (NPLs 13.4%) now following the same dismal trajectory of Spain's bad debts, the situation is rapidly escalating (at an average of around 2.5% increase per year).
The conclusion was likewise simple:
"The bottom line is that at its core, it is all simply a bad-debt problem, and the more the bad debt, the greater the ultimate liability impairments become, including deposits. As we answered at the time - the real question in Europe is: how much impairment capacity is there in the various European nations before deposits have to be haircut? With Periphery non-performing loans totaling EUR 720bn across the whole of the Euro area in 2012 and EUR 500bn of which were with Peripheral banks."
Now, three years later, the bomb appears to be on the verge of going off (or may have already quietly exploded), and nowhere is it more clear than in an exhaustive article written by the WSJ in wh ...
The Bank of England lowered capital requirements for UK banks Tuesday in an effort to shore up the UK economy, saying that it "strongly expects" banks to support the economy with fresh loans in the wake of Brexit.
In its first official easing act, the Financial Policy Committee lowered the countercyclical-capital buffer rate for UK exposures to zero from .5% of risk-weighted assets in a move that it said would release £5.7bn from the buffer, in which it requires banks to accumulate capital in good times to draw down in bad, and raise the capacity for bank lending to households and businesses by as much as £150 billion.
"This action reinforces the FPC's view that all elements of the substantial capital and liquidity buffers that have been built up by banks are to be drawn on, as necessary" the committee said in a statement.
As the FT adds, the BOE also reminded banks that capital and liquidity buffers put in place during the financial crisis are there to be run down in stressed conditions. In exchange, banks are on notice from the BoE's Prudential Regulation Authority that they are not to increase dividends and other distributions. The moves came as the pound hit a new post-referendum low amid rising concerns over the UK property market following a decision by Standard Life to halt redemptions on one of its flagship sector funds. Sterling fell 1.8 per cent to $1.3113, passing the $1.3118 nadir it reached on June 27.
The festering wound involving Italian banks in general and Italy's third largest bank Monte Paschi, just got worse yet again, as the bank which suddenly everyone is focused on extends yesterday's 14% drop, and is halted in Milan trading after falling 7%, once again dragging down European bank stocks with it, and this time US equity futures are starting to notice.
As a reminder, Matteo Renzi's helplessness at Italy's financial situation, appears to have started to boil over, when as we reported overnight, some testy words were exchanged, in which the Italian PM accused the ECB's head and former Bank of Italy governor, Mario Draghi, of not doing everything in his power to "help Italian banks." Instead it was up to the Italian government to flaunt bail-in rules once again, after La Stampa reported that the government is once again studying a capital plan for Monte Paschi that includes new convertible bonds and support from Atlante fund, the latter worth at least 3 billion even as Brussels says intervention would need to respect principle of "burden sharing" by shareholders and bondholders. As La Stampa also adds, the results of 2016 stress test, due to be published on July 29, could trigger the start of the process to inject new capital in the bank
In short, Italy is desperate to bail out a bank whose failure (or even bail in) may spark a bank run, yet neither the ECB is rushing to help it, nor Europe has given any indication it will budge.
It wasn't just Italian banks, which have become a near-daily fixture of Europe's failing system, that dragged risk lower, but also the latest surge in the Yen and another fresh all time low in DM bond yields. Indeed, the Yen headed for biggest advance in more than a week, with the USDJPY tumbling overnight, down -0.8% to 101.65, a move which started earlier ...
Silver traded at two-year highs Tuesday, maintaining its status as the standout among metals as lingering post-Brexit economic uncertainty underpinned the relative safety of haven investments, including silver and gold.
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