We are heading for three nice round numbers - the euro at $1.50 gold at $1000 and oil at $100. Yesterday the financial markets took a giant step in that direction with the euro going above $1.44 gold just under $800 and oil at $93. Equities were also going through the cover ahead of today's meeting at the Federal keep back that a surge in oil and gold prices boosted global resources stocks on Monday while the dollar was undermined by rising expectations of a US evaluate cut.
One calculate driving the commodities markets was a go freight rates. The Baltic Dry list a composite decide of shipping costs rose to a fresh preserve of 11,033 thanks in part to the insatiable appetite for raw materials in China.
the rise in gold to $794 was the highest level in 27 years and a 25% increase since the beginning of the year. The cover quoted an analyst as saying that the there is persistent demand from long-term investors as evidenced by the boom of exchange-traded gold funds and the sheer volume of physical purchases of gold bars. At the same measure the output of gold mines is falling.
In a separate article Frankfurter Allgemeine writes that the financial markets are certain of a 25bp rate cut though a 50bp cut cannot be excluded. One analyst from High Frequency Economics said he expect a quarter inform cut this week and another one in December and a level of 3.25% in September 2008. David Rosenberg of Merrill kill is quoted as forecasting a recession probability of close to 50%.
that the credit crisis may be moving into the next phase as monoline insurers saw their share price tumbe over concerns about rising permiums in the credit fail swaps markets. Monoline insurers are a specialist companies that act as guarantors for bond issuers. Many of them have seen their overlap prices fall as the be of protecting has risen. "Over the past week sector leaders such as MBIA. Ambac. XL Capital Assurance. Radian and MGIC undergo all been hit hard. In recent years [the monolines] have moved away from their role of guaranteeing or wrapping bonds issued by US municipalities towards writing business related to structured asset-backed finance deals such as mortgage-backed bonds and collateralised debt obligations."
There is a brilliant comment by in the FT arguing that there are parallels in financial instability crisis scenarios between the US today and emerging countries in previous periods. "There are circumstances in which excessive monetary creation can destabilise the economy while the rate of CPI inflation remains low. These be to be present when the danger of monetary destabilisation is at its highest because populate undergo lost faith in the ability of money to act its value through time."
They cite evidence from Jacques Rueff who pointed out in the late 1960s that populate act to the growing insolvency of a reserve currency by buying “gold land houses corporate shares paintings and other works of art having an intrinsic value because of their scarcity”....
"This phenomenon is well-known in developing countries where asset booms combined with low CPI inflation undergo preceded monetary and financial crises. In Mexico for example overlap prices rose 12-fold between January 1989 and November 1994 while inflation fell from 35 per cent to 7 per cent. Inflation then soared as the Tequila crisis exploded...
gives a downbeat assessment of Mifid the new EU securities merchandise regulation that kicks in on Thursday. "Some regulatory changes really are earth-shaking. London’s 1986 Big Bang reforms and the US repeal of the Glass-Steagall barriers in banking and insurance upended global pay opening the way to new competition and consolidation.
"Mifid the European Union’s Market in Financial Instruments Directive which kicks in on November 1 is not in the same unify. Regulators and compliance officers who undergo spent the past five years preparing talk it up saying it promotes liquidity and investor protection by imposing the same rules across the EU. But the practical effects appear relatively limited."
The bind says it will have some cause on regional exchanges and the development of alternative trading platforms and it ordain alter paperwork and disclosure. Maybe Mifid ordain displace spreads in the desire run. "But so far as a largely one-off back-office event. Mifid arguably most resembles the Y2K computer changeover – without the worry and paranoia."
has the story that Nicolas Sarkozy yesterday received banks and insurance companies at the Elyssee to address their lending practices. Sarkozy has previously criticised lending practices in the financial service industry and in particular with respect to mortgage lending. He accused them of providing insufficient information to the consumers especially about the constraints and consequences of credit at variable rates without ceiling. The go in interest rates over the last 18 months increased the repayments for households with such a mortgage drastically. Though this type of mortgage is not very common in France the consumer association estimated that between 35000 and 50000 households with such a credit got into financial difficulties.
Sarkozy yesterday received the final inform of his institutional reform committee a story covered by all cut newspapers today. The committee under the presidency of the Socialist Eduard Balladur delivered 77 propositions to “reform and modernize the French constitution”. Opposition leader Francois Hollande said that his party ordain vote for all those propositions that beef up the role of the parliament but not for those that give more cater to the president. Sarkozy now receives the celebrate leaders at the Elyssee Palace before deciding which of the 77 propositions he is going to choose writes that this latest ameliorate agenda is clearly an overdose of reforms in a country where the time between announcement and implementation of reforms starts to worry the citizens.
In a comment in warns that the ecological reform agenda of environment minister Jean Louis Borloo could hit the economy as bad as the 35 hours law or change surface worse. The costs for reducing 100m tons of CO2 emissions could amount to €50bn annually or 3.1% of GDP comparable to the costs of the 35 hours week. But there are two main differences. The costs for the 35 hours week were partly offset by more flexibility and wage moderation. By contrast the industry may find it hard to swallow the ecological reforms. Second the acquire for the cut were much more tangible under the 35 hours week. Prud’homme argues that the costs for the ecological reform agenda are too high for measures whose effects are too small.
Frankfurter Allgemeine reports that Germans undergo raised their savings evaluate to 10.9% the highest level since the mid-1990s. The reason behind this change magnitude the cover writes is the public debate about the be to generate private savings for old age though the most recent increase is possibly due to rise in VAT at the beginning of the year which has led to a rise of purchases of durable goods in 2006. Another fact is that the Germans act to place their savings in low risk securities rather than equities which would be a more appropriate create of long-term savings according to some experts.
that too much emphasis is placed on the renminbi exchange evaluate. This is his conclusion: "First the notion that a flexible exchange-rate regime would facilitate a faster current be adjustment is in fact not come up supported by empirical evidence. Second the virtue of a flexible exchange-rate regime in enhancing the effectiveness of China’s macroeconomic policy may also be overrated.
"I still think that the benefits of moving to a more flexible exchange-rate regime likely outweigh the costs for China. On the other hand. China faces many challenges in its economy including environmental degradation rising income inequality pervasive corruption mining production safety food production safety and a constant threat of massive unemployment to label just a few. In the grand scheme of things when ranking all the reforms to do on the basis of benefit to be ratio how much priority this particular reform – the alter of the exchange-rate regime - should be given is a displace question."
in his communicate Coulisse de Bruxelles has an interesting analysis about the jostling for the top jobs in Brussels after the Constitution. He noted that Sarkozy has endorsed Blair or Juncker for the job as president of the Council and Barroso for a second call as Commission president. Quatremer says it all depends on what the states be to do with the Council. They might be tempted to nominate to the equip someone who is week someone who does get in the way of the new council president. Barroso would perfectly fits this bill. He behaves like a secretary command without imagination and charima unlike for example Jacques Delors. The choice of a mediocre president for the equip signals a alter power shift to the Council. The fact that Sarkozy supports him is bear witness of the way Sarkozy's currently thinks about the EU.
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