US debt limit worries added to the negative mood on Wall Street on Monday, while the European debt crisis and contagion concerns rolled on.
The Dow fell 95 to 12,385, the Nasdaq dropped 25 to 2,765, while the S&P 500 finished 11 under at 1,305.
With just over two weeks to go before the US is expected to reach the $14.3 trillion debt ceiling, Republicans were still holding out against tax increases, but president Obama hopes that a deal that will close tax loopholes for wealthy American citizens and firms, combined with government spending cuts, can be reached.
"[O]wing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days," credit rating agency Standard & Poor's said last Thursday.
Fellow rating agency Moody's said on Monday, "Moody's considers the probability of a default on interest payments to be low but no longer to be de minimis." The agency added that if the US was to default, it "would fundamentally alter Moody's assessment of the timeliness of future payments."
Meanwhile, Friday’s European banking stress tests were seen as something of a damp squib by markets after they failed to adequately analyse the impact sovereign debt default would have on the Continent's banks.
Financials were under pressure as a result, with Bank of America, Goldman Sachs and Morgan Stanley all falling to two-year lows.
Media conglomerate News Corp was in the red ahead of a meeting in UK parliament with chairman Rupert Murdoch and his son James concerning the phone-hacking scandal first revealed on 4 July. Reports have surfaced calling for a boardroom shake-up following the closure of its UK tabloid newspaper the News of the World. Shares have dropped 17.4% over the past two weeks.
Cisco Systems, the networking and electronics firm, rose in after-hours trading after it said it would cut 6,500 workers in an effort to reduce costs, 2,100 of which who have opted for voluntary early retirement.
IBM jumped higher after the bell after second quarter sales of $26.7bn - which were 12% higher than last year - topped estimates of around $25.4bn.
After the close, gold futures were 1% higher at a record $1,605.70 per ounce.
Tuesday, July 19, 2011
Spain issues €4.45bn in debt auction
Spain's Treasury issued a total of €4.449bn in 12- and 18-month notes on Tuesday, in line with the announced target of €4.5bn.
The Treasury issued a total of €3.788bn in 12-month notes with a yield of 3.76%, compared to the previous 2.728%. The bid-to-cover ratio was 2.2, compared to the previous 2.9.
Spain also issued €661m in 18-month notes with a yield of 3.98% compared to the previous 3.299%. The bid-to-cover ratio was 5.5 compared to the previous 3.9.
"I continue to consider demand and not the yield to be the key factor behind a positive debt auction; like today's," signalled Jose Luis Martinez Campuzano, a strategist for Citi in Spain.
The Treasury issued a total of €3.788bn in 12-month notes with a yield of 3.76%, compared to the previous 2.728%. The bid-to-cover ratio was 2.2, compared to the previous 2.9.
Spain also issued €661m in 18-month notes with a yield of 3.98% compared to the previous 3.299%. The bid-to-cover ratio was 5.5 compared to the previous 3.9.
"I continue to consider demand and not the yield to be the key factor behind a positive debt auction; like today's," signalled Jose Luis Martinez Campuzano, a strategist for Citi in Spain.
European private banks to face new regulatory challenges
LONDON (SHARECAST) - Private banks in Europe sustained their tepid recovery last year, helped by a rebound in the financial markets and cost cutting activities, according to a McKinsey & Co report, but said that profitability and net inflows were “well below” pre-crisis period.
The management consultancy’s European private banking survey showed that on average, assets under management last year grew by more than 9%, of which 2% represented net new inflows.
This was a “modest improvement on 2009,” the report said, and added this may signal that customers are only slowly regaining trust and returning to the industry. The survey included comments from more than 160 banks from 26 countries, of which more than 100 are from Western Europe.
Annual net inflows growth in 2010 remained low, while profit margins improved 4 basis points, albeit 11 basis points below the high of 2005-07. Banks blamed declined trading activity resulting in lower brokerage fee, greater risk aversion and a declining proportion of ‘affluents’ in the customer mix for the reduced margins.
Looking forward, the director of McKinsey’s European private banking practice Frédéric Vandenberghe said, “One of the industry’s key challenges will be increased and changing regulation: demands for greater transparency, the possible pressure on so-called retrocession commissions within some types of mandates, and other regulatory changes will require private banks to further strengthen their advisory processes and will create additional downward pressure on margins.”
Furthermore, the survey confirmed growing appetite for advisory mandates, with assets managed in this way increasing slightly more than the rise in private banking assets under management as a whole.
The management consultancy’s European private banking survey showed that on average, assets under management last year grew by more than 9%, of which 2% represented net new inflows.
This was a “modest improvement on 2009,” the report said, and added this may signal that customers are only slowly regaining trust and returning to the industry. The survey included comments from more than 160 banks from 26 countries, of which more than 100 are from Western Europe.
Annual net inflows growth in 2010 remained low, while profit margins improved 4 basis points, albeit 11 basis points below the high of 2005-07. Banks blamed declined trading activity resulting in lower brokerage fee, greater risk aversion and a declining proportion of ‘affluents’ in the customer mix for the reduced margins.
Looking forward, the director of McKinsey’s European private banking practice Frédéric Vandenberghe said, “One of the industry’s key challenges will be increased and changing regulation: demands for greater transparency, the possible pressure on so-called retrocession commissions within some types of mandates, and other regulatory changes will require private banks to further strengthen their advisory processes and will create additional downward pressure on margins.”
Furthermore, the survey confirmed growing appetite for advisory mandates, with assets managed in this way increasing slightly more than the rise in private banking assets under management as a whole.
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