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Daily Market Reviews By Uwcfx


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#1
UWC Neeraj

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UWC is proud to provide daily market reviews by the well-known financial expert – Mr. Arne Treholt, a former Political Secretary to the Minister of Shipping and Foreign Trade, then Deputy Minister of Law of the Sea of the Norwegian Royal Ministry of Foreign Affairs. He also held the position of Counselor for Economic Development and Social Affairs at the Ministry of Foreign Affairs, and was member of the Norwegian Mission to the United Nations, New York. At the moment Mr. Treholt is a Vice President and a Business Development Director of United World Capital.

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#2
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CHINA CUTS INTERESTS FIRST TIME SINCE 2008

by Arne Treholt Vice-President of Business Development and Investments

China cuts interest rate to 3,25 % for the first time since 2008. The initiative comes prior to release of major Chinese economic data tomorrow. These results are feared to be weaker than expected. The interest cut is probably going to be followed by steps to ease access to credits. This gave the Chinese stock markets a boost.
Shanghai composite is up this morning. An easing of banking restrictions normally lead to stronger domestic demand and higher stock prices.

In his congressional testimony yesterday, Federal Reserve Chairman, Ben Bernanke kept the door open for monetary stimulus of a stagnating US economy, but did not specify when and in which form.
The Federal Reserve BOD meeting in August is now seen as the most likely date for an eventual announcement. The testimony disappointed those who had hoped for immediate action.
Dow Jones was up 0,37 %. Nasdaq fell 0,49 %, and the last days rally in Asia turned to red this morning.
The futures for Europe and US are negative following Bernanke’s comments and a downgrading of Spain to BBB status or the same level as Thailand and Mexico.

After a positive turn around in oil prices earlier in the week, both NYMEX (92) and Brent 98,69 gave up earlier week gains. The volatility and market nervousness were also illustrated by the jump in precious metals.
After reaching 1640 on Wednesday, gold fell dramatically during yesterday’s session now trading at 1570. Silver saw a similar development; 28,23 at present. Commodities are again following the falling trend of precious metals and oil.

The EURO/USD has fallen back from the high 1,25 levels yesterday to 1.2525. USD/JPY is 79,3175 after Japan released good growth in GDP.
Aussie dollar and New Zealand currency are under downward pressure after more promising GDP and jobless number from Australia earlier in the week.

The surprise move by the Chinese central bank has helped ease worries about faltering global demand, but stresses at the same time that the world’s fastest growing economy feels the pressure of faltering export due mainly to the problems in the Euro-zone. After concentrating in measures to cool down the economy, the Chinese leadership is for the first time in years looking to stimulus for growth, especially in the domestic economy.

Copyright: United World Capital

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#3
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WEEKLY MARKET REVIEWS

by Arne Treholt Vice-President of Business Development and Investments

After the onslaught in global markets in May, June is off to a better start. Stock prices jumped helped by technical over sell and built in optimism that Federal Reserve Chairman, Ben Bernanke, testimony to a congressional committee yesterday, should give markets the needed sugar energy. Bernanke has still a way to go before he reaches his predecessor, Allan Greenspan’s “guru” level, but Bernanke is listened and paid attention to. This time he did not live up market’s expectations for immediate action. Bernanke kept the door open for monetary stimulus. In which form and eventually when he did say.

For global markets waiting for certainty and clear directions, that was disappointing news.

China’s surprise cut in interest rate for the first time since 2008, is what markets long have demanded and waited for. When the announcement comes, Western economic analysts are quick to conclude that this is somewhat of a ploy meant to overshadow negative economic monthly and quarterly results to be published over the weekend. Might be, but nevertheless does the initiative underline Chinese willingness to encourage economic growth in a situation where Western leaders talk and don’t act as they see their economies sinking even deeper into recession.

Fitch rating agency has downgraded Spain to BBB and puts the fourth biggest economy in Western Europe on line with Mexico and Thailand. Last GDP numbers demonstrates that Greece is seeing its fifth year of recession with no signs in sight for a turn around. A practical effect of Greece’s membership in the Euro is that the country has been reduced from a promising developed economy to a struggling third world country. So much for belt tightening and austerities.

There are clear signs that European political and financial leaders slowly are starting to wake up from their conventional austerity dream ideas. As John Maynard Keynes stated 75 years ago; a boom economy, not the slump is the right time for austerity. This economic philosophy lifted the United States out of the 1930 depression. Similar bold initiatives are called for especially in the Euro zone today.

Spain has followed Greece as the odd country out. Spain’s problems are much more serious for the future of the EURO than smaller sized Greece. European leaders were this week scrambling for a solution to Spain’s banking crisis after the European Central Bank had no immediate aid to offer expect for supplying banks with unlimited short-term low interest rate loans.

In the meantime, the countdown for the Greek June 17th elections is ticking. It comes in an environment where the troika of IMF, ECB and EU are putting maximum pressure on the Greek government and electorate, withholding 1 billion Euro of the bailout funds earmarked for government financing. While Athens has problems in paying its bills, bailout payments are running on schedule for German, French banks and interestingly enough to the ECB, which bought Greek treasury bills at discount and now is rewarded with 10 % interest rate on their investment.

Economics today are full of paradoxes. Regardless of pains and strains an overwhelming majority of Greeks nevertheless want to be “Europeans” and stay in the Euro. The big question is whether this makes a difference. Even with a victory for the “austerity” parties, Greece’s days in the Euro might run to an end in an orderly retreat. Another question mark is what would be the cost and the consequences of an eventual Greek exit? In such a situation other countries in the periphery of Europe might also be start to wonder as former Italian premier Berlusconi did some days ago: is the EURO the right tool for the periphery of Europe.

The Greek elections might as Mr. Tsirapas and SYRIZA’s appearance on the European arena, accelerate this debate.

Copyright: United World Capital

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Markets rally on Spain’s bail out

Arne Treholt Vice-President of Business Development and Investments

Spain’s 125 Billion Euro bailout of banks sent Asian markets 2 % higher this morning. Yesterday’s news that Spain’s government had asked the European Ministers of finance for a 125 Billion Euro package for their struggling banks strengthen the Euro.

The Euro is trading 1,22 % higher vs. USD at 1.2632. The EU-funded rescue for the debt-stricken Spanish banks are seen as a preemptive effort to avoid a bank run if Greece’s debt crisis again flares. The respite for Madrid and the Euro might, however be, short lived.

The bailout is coming after the Rajoy-government for weeks have insisted that no outside assistance was needed to capitalize lenders crippled by bad debts from the burst real estate bubble.

European officials involved in the negotiations say informally that Prime Minister Mariano Rajoy was pushed into requesting the aid package. Rajoy has tried to put a positive spin on the bailout package for the banks. It was done at Spain’s request and unlike the situation in Greece, Ireland and Portugal it is a banking, not a sovereign bailout. Totally, an approximate 350 billion Euro have been raised inside the Euro area for the different bailouts.

But the Euro-zone’s last lifeline could easily be swept away as early as next Sunday when angry Greek voters are casting their votes, possibly rekindling market turmoil. That would in the first place hit Spain and Italy, but also a country like Cyprus might be strongly affected.

In the following up of the French presidential elections, voters gave Francoise Holland a vote of confidence in the first round of the Parliamentarian elections. The French socialists seem to have secured an absolute majority in Parliament supported by the socialist left and green parties.

The bailout package for Spain is also seen as an effort to stem further capital flight and reestablish confidence in the banking system. . Spain’s banks had a net outflow of 66 billion Euros only in March.

Greece and other countries in the European periphery have seen similar capital flights. The risk appetite seems stronger this morning.
Oil prices are jumping with Brent trading above 101, copper, gold (1599) and silver (28,95) are also up. Australian and New Zealand dollars HIT highest levels in four weeks.

USD is falling against most currencies. USD/Yen is slightly changed at 79,63. Futures for the European and Asian markets are up.

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#4
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Market euphoria turns into sellout

Arne Treholt Vice-President of Business Development and Investments

After some few hours’ euphoria over the bailout of Spain’s bank turned around. A morning relief rally in Europe quickly transformed into a sellout when Investors struggled to come to grip with the content of bank bailout.
While Spain’ Prime Minister Rioja, tried to sell the “bailout” as en extended credit line for the banks, he was quickly corrected European officials stressing the necessity for cuts and austerity measures.

Investors came to the same conclusion. European stock exchanges changed from optimistic blue into red.
Dow Jones fell, and Nasdaq plunged 1,70 %. Banks as Bank of America and J.P.Morgan along with Hewlett-Packard, Alcoa and Microsoft being the big losers.

The downtrend continues in Asia. All Asian stock exchanges trade down.
Oil prices, which got a boost from an optimistic interpretation of news from Spain, are trading at the lowest level for the year.
Brent at 97. Copper falls as Gold (1591) and silver (28,35).

The Euro came under renewed pressure. After trading above 1.26 in the morning it fell back to 1.2499. The fundamental questions surrounding the survival of the Euro persists.
Euphoria over temporary measures as the bailout of USD 125 billion of Spain’s banks on Sunday, is quickly substituted by a vicious circle of negative growth and growing debt burdens. The markets experienced a similar spark when Greece first bailout package was presented in 2010.
The markets rallied 1,3 %. This time it was even shorter lived.
US stocks fell into negative territory within an hour after Monday’s opening and continued down.

Even the most bearish analysts were taken aback by the negative way markets reacted in rejecting the bailout.
The prior bailouts; Greece and Ireland in 2010, Portugal (2011) and Greece in 2012, also led to rallies. The Euro’s rallies then faded within a month with mixed stock markets.
Japanese Yen is the winner after the last 24 hours turmoil. USD/JPY is slightly higher at 79,456.
The Australian and New Zealand dollars are losing towards the YEN as the Euro.

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#5
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US stocks raise on stimulus expectation Moody’s downgrade Cypriot banks

Arne Treholt Vice-President of Business Development and Investments

US stocks staged a comeback rally to end up more than one percentage on expectations that the Federal Reserve (FED) would have to undertake stimulus measures. Also European stock markets rose for the first time in three days. This as Spanish ten years bonds reached a record high.
Euro/USD is trading at 1.2490 slightly down from yesterday. Oil price still under downward pressure. Brent is trading at year’s low 97.01.

Trading in stocks have been choppy this week as markets struggle for clarity after the USD 125 B bailout of Spain’s banks. Investors are asking whether the agreed bailout will be effective. More than 10 Spanish banks have been downgraded, and bond yields are more and more seen as thermometer for risk aversion.

Sectors, which have been sold off recently, posted the biggest gains in yesterday US rally with Boeing climbing 3 % as the winner. This seems to indicate that investors see value in beaten down shares.
In Greece the Left wing coalition Syriza has rejected to enter into a coalition with PASOK, the former government party, which supported the Memorandum and austerity measures. Syriza is together with the center right New Democracy in head in the opinion polls prior to Sunday’s election.

The outcome of the Greek election might be decisive for whether Greece might have to exit the Euro. The Greek elections are therefore followed with great interest by global market and other Euro-countries.
Moody’s investor Service on Tuesday cut the credit ratings on two Cypriot banks, Bank of Cyprus (BOC) saw its rating cut by one notch to B2. Hellenic Bank got its credit deposits and credit assessments ratings lowered to B2.

The Cypriot banks are heavy exposed to Greek treasury bills and Greek private lenders.
Cyprus Popular Bank, the country’s second biggest lender has till 30th June to find 1,8 billion Euro in fresh capital to meet European regulators conditions. In a statement, the Cypriot Minister of Finance did not rule out an EU bailout to prop up its Greece exposed banks. Cyprus is going to take over the half-yearly chairmanship of the EU from July 1st.

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#6
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Moodys downgrades Spain and Cyprus

Arne Treholt Vice-President of Business Development and Investments

Moody’s has downgraded Spain and Cyprus after the international rating agency yesterday also downgraded Bank of Cyprus and Hellenic Bank.
Spain has been given rating, Baa3 down from A3, the closest to junk status highlighting the seriousness of the Euro-zone debt crisis.
Moody’s stressed simultaneously that the approved Euro-zone plan to help Spain’s banks will increase the country’s debt burden.

A concrete result of the downgrading is that like Greece, Spain and Cyprus shall have very limited access to international debt markets, and likely further weakness of their national economies.
In following the situation, Moody’s stated that the rating agency shall look carefully into the development in the wider Euro-zone including the result of the upcoming Greek elections, before taking eventual further downgrading steps.

In accompanying news interest rate for German Bonds, which recently have been seen as one of few “safe havens” for investors, unexpectedly rose with 0,1 % following the same upward trend as interest rate on Spanish and Italian bonds.
The turnaround in German’s bond rates is seen as Investors fears that Germany under pressure from France, Italy and other Euro members might give in on their resistance to introduce German supported Euro-bond to ease the debt crisis.

US and European markets ended in red yesterday while the Asian composite MSCI index is slightly down.
Brent crude is trading at 97,66 before the end session of OPEC the Oil producing countries, in Vienna.
While Saudi Arabia wants to increase oil production. Iran wants cut production to keep oil stabile on at least 100 USD/barrel. The opposing views shall most likely end up in a compromise where the conflicting parties agree to disagree, with no increases or cuts in production.

The firmer Euro trend towards USD is continuing. After dipping below 1.25, Euro – USD is trading at 1.2582 in the morning. USD/JPY is at 79,4458.

During congressional hearings JP Morgan Chase Chief Executive apologized for the bank’s multibillion–dollar trading loss. Dimon revealed few new details about the trading losses: struck a contrite tone when needed and punched back when provoked.

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#7
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Global markets cling to stimulus

Arne Treholt Vice-President of Business Development and Investments

American and Asian stock markets traded up yesterday and this morning on central bankers statements that the time might be ripe in for injecting stimulus to a global economy fighting on the defensive.
Dow Jones added 1,24 %. The Asian Pacific climbs 0,7 % after its best week since December.

Commodities are stabilizing with Brent crude up 1 dollar to 97,03 after the Oil producing countries, OPEC, left the production quota ceilings unchanged. The dollar weakens against most currencies. EURO-USD is trading at 1.2645 before Sunday’s crucial Greek elections.
The yen is stronger; USD/JPY at 78.8875 . Australian and New Zealand dollar post record gains against USD for the week. Dollar is falling on the assumption that Fed shall make a new round of quantitative easing.

Central Bankers representing major economies have in different statements over the last days, declared their willingness to stabilize financial markets by providing liquidity and prevent a credit squeeze in case Sunday’s Greek elections cause panic trading. A US official, however, cautioned that the Greek elections will not provide the definitive signal on what would happen next in the Euro-zone crisis.

Markets are also following crucial elections in France and Egypt over the weekend. The situation in Egypt is complicated, and central bankers stand ready to ensure that enough cash is throwing through the financial system in case of any disruptive turmoil.

Interest rates on European bonds continued to raise. Spanish 10 year bonds ended yesterday on 6,95 %, just below the critical 7 % threshold which the beginning of the real problems for Greece, a couple of years ago.

Central bankers indication that Central Banks are preparing for coordinated action to provide liquidity, lifted the US and Asian markets. Global markets seem to gamble on the hope that central bankers are ready to inject funds into weak under capitalized banks and take steps to stimulate the economy. This was the message also coming out from yesterday’s meeting with England’s Minister of Finance and Bank Head, Mervin King.

Futures for Europe and US are pointing up. Dollar is under pressure and Gold is trading at 1625, close to 10 dollars higher than at the opening in Europe yesterday.

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#8
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WEEKLY MARKET REVIEWS

by Arne Treholt Vice-President of Business Development and Investments

Greeks are proud to state that their country is the cradle of democracy. Greeks are going to vote on Sunday for the second time in one month. International eyes are on Greece. Never before in their history there has been such an interest for the outcome of a Greek election.

For the first time since Andreas Papandreou dominated the Greek political scene and challenged the power centers in Europe and US with his charismatic, oratory flame, a 37 year former street protester and engineer, Alexis Tsipras, and his Syriza party, makes claim to his position. Tsipras has flatly rejected the austerity measures of IMF (International Monetary Fund), ECB (European Central Bank) and EU (European Union), which the established political parties hesitatingly accepted. This rejection sent shockwaves through international capitals.

SYRIZA’s dilemma is, however, to reconcile a rejection of the troika Memorandum with Greece’s continued EURO membership. Tsipras is well aware of the fact that 75 % of Greeks don’t want to return to the drachma. Greeks see themselves as” Europeans”, and the EURO is the very symbol of being a European. Whether that is in their real national interests, is at present not at the agenda.

During the last week, Tsipras has been all over the place. Yesterday he issued a strong warning to speculators: Don’t gamble on the assumption that a Syriza victory is equal with a Greek exit from the Euro! This message was taken from the violent atmosphere of Athens protesting streets to new forums as Bloomberg News and Financial Times. Syriza claims to renegotiate the austerity measures. That does mean that Syriza shall claim a Greek exit from the Euro.

His message has been received with shrug of shoulders and open mouths in European power centers. They have given their signals to the Greek voters; stay with the austerities and the parties which swallowed them; or else …

The upper hand is, nevertheless, neither with the Greek voters or Tsipras. It rests in Germany.
Germany is at the final stage of deciding the fate of Greece’s fate inside or outside the Euro. That depends primarily not on Alexis Tsipras. But give Tsipras the credit. He has managed the piece of art of having the power corridors of Europe to listen: even if it is with open mouths.

Greece confronts Germany with its own history. Greeks have terrible war time memories of Hitler Germany. The rationale for the establishment of the European Union was to avoid the horrors of the past. In Germany’s case the hyperinflation of 1923 and the death of democracy in 1933 which lead to a destructive war.

It seems, however, that Angela Merkel as the key decisive figure is more occupied with the memories from 1923 than the ones from 1932. Today it is not inflation, but depression and mass unemployment that threatens the stability of Europe, and Germany’s recent prosperity is closely connected with the EURO establishment.

Germany is the big winner of the Euro introduction. The Euro gave German exporters a competitive exchange rate to the old Deutschmark. 42 % of German exports go to the Euro-zone. It is hardly in Germany’s interest to plunge the southern periphery of Europe counts for 25 % of their export into Depression. Angela Merkel obviously realizes this, when she the last weeks has stressed the necessity for a closer European fiscal and political union. Germany and the political and financial elites of Europe might be ready and wish a closer integration.

The big question is whether the streets in Athens and Madrid, which are further and further alienated from the European power centers, think likewise.

That also count for Europe and Greece, which take pride of being the birthplace of democracy.

Copyright: United World Capital

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#9
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EURO jumps after pro bail-out victory

Arne Treholt Vice-President of Business Development and Investments

The EURO jumped to a one month high trading at 1.2702 vs. USD, after the political parties supporting Greece international bail-out won the elections on Sunday.
The center-right New Democracy party came first with 29,8 %, and will together with center-left PASOK which also supports the terms and conditions laid down in the Memorandum negotiated with the troika of IMF(the international monetary fund), ECB (European Central Bank) and EU, probably succeed to form a majority government. A small pro-bail out party on the left might also join the coalition.

PASOK and New Democracy have together 161 of the 300 places in Parliament. The anti bail-out leftwing coalition, SYRIZA, which came in second with 26,8 % has rejected to participate in a national salvation government headed by ND’s Antonis Samaras. Before the elections Western European heavy weights as Angela Merkel and Italia’s Mario Monti along with the EU-Commission had warned strongly against the consequences of a victory for the leftwing Syriza.

The outcome of the much anticipated elections had markets to soar. The pro bail-out parties victory is increasing the chances for the debt-laden Greece to stay in the Euro, and came as a relief to global markets ahead of G-20 meeting in Mexico.
The Euro recovered strongly. Asian markets led by the big exporters jumped up to 2 %, and oil prices are at its highest levels in one week. Brent trading at 98.90.
Gold and precious metals are trading flat. Gold at 1622. Japanese Yen is gaining versus USD at 79,1245.

Although the elections are seen as a victory for the pro bail-out camp, SYRIZA and other rejectionist parties also came in strongly. Greece is in deep recession and experiencing its 5th year with negative growth. Unemployment running at 25 %.
The elections have given some clarity, but the fundamental challenges facing both the EURO and Western European economies shall soon be back on the agenda.

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#10
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Greek relief rally proved short lived

Arne Treholt Vice-President of Business Development and Investments

The relief rally after the Greek elections on Sunday proved short lived. Already few hours into Monday’s trading the positive sentiment, which saw Asia and oil prices raise, turned soar.
Markets were back to normal reacting to the worldwide consequences of the European sovereign and banking crisis. As a worrying sign, interest rate on Spain’s 10 years bond surpassed the critical 7 % threshold, giving a dark reminder of what happened when Greek bonds jumped to 7 % a couple of years ago.

Oil prices dropped back to year’s low. Brent trading at 96. The Euro/USD which reached 1,27 during morning’s trading yesterday fall back to 1,2613 confirming the long term downward trend of the Euro.
The pressure on a Greek exit is temporarily gone. Greece shall probably be able to form a coalition government between the center parties, New Democracy and Pasok, today. But if the new government shall be able to keep, at least, a minimum of credibility towards their electorates, the new Premier, Antonis Samaras, would have to ask and also be given some token concessions from the “troika” of ECB., IMF and EU. Without such concessions and easing of austerities, Greece is going to face a new long and very hot summer in the streets.

After the German Foreign Minister and Brussels had indicating some willingness for concessions, Angela Merkel was on the eve of the G-20 meeting in Mexico steadfastly against giving any concessions. She is, however under strong pressure. The leaders of the 20 strongest countries have urged Europe to take steps to resolve its debt crisis. As a token of their willingness to contribute to a solution, two of the leading BRIX-countries, China and Russia, stated that new billions of dollars would be put at the disposal of IMF, the International Monetary Fund. Christina Laggard, the head of IMF, stated that USD 450 billion would be kept as a contingency for Europe.

The dollar is trading weaker after the last events on expectations that the US Federal Reserve would introduce new stimuli to its stagnating economy.
JPY is stronger, creeping below the 79 mark against the USD.
Gold prices are as silver slowly edging upwards; confirming a trend seen over the last weeks where precious metals again are sought as a safe havens during market upheavals and big volatility in the currency markets. Gold is up 7 % over the last month.

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#11
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USD dips on monetary stimulus rumors

Arne Treholt Vice-President of Business Development and Investments

Rumors that the Federal Reserve (FED) may feel compelled to launch a new monetary stimulus, dipped the dollar to 1.2672 against Euro in morning trade.
As economic storm clouds gather and the American recovery has stagnated, US authorities seem once again prepared to use the printing press to stimulate in order to get its own and the global economy back on track.

The rumors about immediate action is strengthened by the fact that FED is wrapping up a meeting today. A likely outcome is that FED will further prolong their historically low interest rate policies. This would probably have a negative impact on the dollar. USD has during the last months turmoil been seen as a safe haven for investors.

The G-20 meeting in Mexico ended with behind the scene bilateral meetings on the debt crisis in Europe, Syria and Iran. President Obama stated that he saw growing willingness among European leaders to deal actively with the crisis.
The Euro has been extremely volatile. After reaching a month high after the Greek elections on Monday, Spanish borrowing costs fueled fears of an escalating Euro- zone debt crisis. Spanish bond yield rose above the critical 7 %, the highest since the Euro was launched in 1999, threatening Madrid’s ability to finance itself.

Greece, Ireland, and Portugal were all forced to seek international bailouts soon after their 10-year bond yields rose above 7 %.
Cyprus with its close binding to Greek economy risks to be the fifth country to be bailed out after its authorities asked the European Financial Stability Mechanism for support for their struggling banks.
Although Sunday’s election eased the immediate fear that Greece might be forced out of the Euro-zone, the narrow basis for the new government has raised doubts whether it can implement further spending cuts and increase taxes which is a logical consequence of the bail out.

Oil prices continue its downward trend: Brent at 95,81. Copper and gold are also lower. JPY increases vs. USD at 78,905. The Asian composite index, MSCI, rose to its highest level in one month. The US exchanges were solidly up on stimuli expectations.

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#12
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FED lowers growth outlook

Arne Treholt Vice-President of Business Development and Investments

FED slashed the forecast for economic growth and saw no immediate improvement in the labor market, when FED chairman, Ben Bernanke, summed up US central banker views yesterday.
Markets reacted by sending stocks and commodities down. Brent crude fell to 92,08, the lowest level for the year. EURO/USD is trading flat at 1.2675, while JPY lost vs dollar trading at 79,57. The weaker yen boosted the Japanese export industry. Nikkei was the only positive stock exchange during Asian trading.

While dampening the forecasts for the economy, US Federal Reserve expanded its “Operation Twist” by $ 267 billion till the end of the year. This means selling of short term securities to buy longer-term ones to keep the long-term borrowing costs down.
Bernanke kept the door open for a round of further quantitative easing depending upon the development in the labor market. US unemployment figures were 8,2% in May. Growth forecasts for 2012 are lowered 0,5 % to 1,9 – 2,4 %.

Bernanke stressed that the debt crisis in Europe is weighing heavily on the US markets. The EU-commission is expected to consider proposals for introduction of EURO-bonds and closer banking integration at a meeting later this week. In Greece, Samaras presented his new coalition government yesterday.
Chinese manufacturing figures continue to be weak.

Markets were unimpressed by these new developments. US- and Asian markets ended in the red. The lower growth forecast had an immediate negative effect on commodities, and affected commodity driven currencies.
The currency markets have seen relative stability over the last couple of days, but are extremely sensitive towards any news announcement. Both stocks and currency markets are in for big volatility for the last two trading days of the week.

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#13
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Stocks and commodities plunge on growth outlook

Arne Treholt Vice-President of Business Development and Investments

The global stock markets plunged on the US growth forecast yesterday. Simultaneously, Moody’s, the international credit rating agency, downgraded 15 of the world’s biggest banks including heavy weights as Credit Suisse which saw its rating reduced with 3 notches.
Oil prices dropped to its lowest level in 8 months with Brent crude spot falling through technical support level on 90 dollar pr. Barrel. In addition US jobless claims and housing numbers came in worse than expected and sent DOW Jones (minus 1,96 %) and Nasdaq down ( 2,44 %).

In Europe the head of the International Monetary Fund, Christine Laggard, warned that the Euro crisis has reached a critical level. She urged for monetary coordination and the establishment of a tight monetary union. The crisis in Spain is going from bad to worse. Estimates presented on Thursday show that Spain’s banks are in need of a capital infusion on up to 78 Billion Euros. This while Spain’s borrowing costs are creeping upwards on higher risk and interest rate on their bonds.

The picture in Asia is equally bleak. The rapid economic growth in China seems to have slowed down. Manufacturing data is lower than expected. This morning India is adding its voice to the choir, reporting on stagnating and sluggish growth.

For the moment there seems to be no light in the global tunnel. Much, however, hang on European leaders. But it is not expected that the EU-summit during the weekend shall lead to a breakthrough.
A tighter monetary coordination in the form of a monetary union shall imply that sovereign states would have to give up authority on their fiscal and taxation policies. It is unlikely that the richer member states like Germany, the Netherlands and Finland are ready to give up their sovereignty bailing out a struggling southern European periphery with taxpayer’s money.

The currency situation continues to be extremely volatile. After sniffing on the 1,27 level again yesterday, EURO/USD has fallen to 1.2555.
USD is strengthened towards JPY trading at 80,4225.
Gold and silver are following the commodities down. Gold is at 1567, 40 dollar down from yesterday’s high, but above bottom levels.
A new onslaught is expected when European equity markets open later today.

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#14
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Global markets suffer worst losses in weeks (22/06/2012)

Arne Treholt Vice-President of Business Development and Investments

The week started with the result of the Greek elections given markets a glimmer of hope. This was, however, short lived. After some hours relief rally, markets were back to hard core realities in the form of a growing sovereign and bank crisis in Europe, a stagnating US economy and sluggish growth in ASIA. Markets suffering their heaviest losses in weeks.

A volatile week ended with the International credit agency, Moody’s, downgrading 15 of the biggest banks in the world on Thursday, involving heavy weights as Credit Suisse, which saw its rating cut with three notches.

The international rating agencies, most of them of US origin and known for their cozy relations with the very countries and banks they are rating, were heavily criticized after the financial crisis in 2008. Then they failed to sound alarm about the serious credit status of major American banks. They also overlooked the serious debt situation of the US government; running heavy budget and trade deficits. Europeans saw political motives behind the rough credit attitude their own banks and governments were subject to.

This time it might be different.

The Moody’s is first out with the alarm. Other rating agencies are set to follow suit. It is not longer possible to hide the seriousness of the European sovereign and banking crisis illustrated by the smallest country inside the Euro-zone, Cyprus, this week applying for emergency support from EU institutions for their three banks, a clear token of the fact that there are not only governments have lived beyond their means. Bankers in Europe and across the Atlantic have been gambling with their bank’s client’s money often out of uncontrolled greed hunting for what they wrongly saw as easy money.

Now it is payback time and slowly both the so called global political and finance elites start to realize what is at stake. When the head of the giant bank J P Morgan Chase defended a USD 3 trillion hedging loss in congressional hearing during the week, he stressed that banks must be permitted to take risks.

Yes, for sure, but on the cost of whom? Taxpayers and bank depositors?

Hubris is a Greek word for individual playing above their own intellectual capacities and means. Bankers and politicians have long been behaving as they belonged to an isolated island isolated from the world of ordinary people. It would soon show whether the medicine ordained this week by one of the elite’s main actor, IMFs Christine Laggard: the establishment of real integrated EU monetary Union, is what the one, which shall save the EURO and the global economy.

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#15
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SOROS WARNS EURO AT CRITICAL CROSSROAD

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments


One of the world senior investors, George Soros, known to have built his fortune on torpedoing the British pound decades ago, issued a stark warning to European leaders in front of this week’s EU-summit. The Euro is on the brink of collapsing and may take the rest of the global economy with it. Soros complimented Angela Merkel for being a strong leader, but added: one who consequently has taken the wrong decisions to a growing crisis.

The crucial question is about burden sharing. Soros found it unlikely that Germany will accept to compromise its economy to the benefit of Greece, Italy and Spain. A recent published poll shows that the highest number of EURO skeptics in Europe are in Germany, indicating the domestic political challenge. The Euro and the bailouts of the southern periphery countries is deeply unpopular in Germany. In front of the EU-summit the Euro is falling to 1.2528.

Most observers see no prospect for a “quick fix” during this meeting. The leaders will probably agree on a “growth pact” establishing a new fund for stimulating growth in the magnitude of approximately Euro 150 billion. This is in line with the new French President’s proposal. This represents a new “fire wall” initiative. It might temporarily ease, but not solve the Euro crisis. With clear address to the new Greek government, German Strong man, Minister of Finance, Wolfgang Schauble, stated on Sunday that throwing more money at the euro zone debt crisis, will not solve the cause of the problem.

Schaubel’s statement came as a reaction to Greece’s proposals to prolong the implementation of the austerity measures with two years and reduce VAT from 23 to 13 %. In a related development the Cypriot Minister of Trade went on a special mission to China to seek Chinese support for a package on Euro 12,7 Billion to save its banks. Cypriot banks are heavily exposed to Greek treasury bills and private debt.

The Indian rupee fall Friday to its lowest level in one year, 27 % down vs. USD. The rupee has recovered somewhat in morning trade. Shanghai starts the week in blue on expectation on Chinese stimulus. The Chinese currency is at its lowest in seven months. Gold trading at 1572.

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Cyprus seeks banks bailout

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Cyprus becomes the fifth Euro country after Greece, Portugal and Spain to seek a lifeline for its debt ridden, when its government on Monday turned to Brussels for bailout and emergency funding.
Cyprus had earlier sent ministers to China and Moscow for credit talks. Cyprus received last 2,5 billion Euros loan from Russia last year, and has been scrambling for funding from both Moscow and Beijing to avoid the stringent EU terms for bailouts.

The international rating agency, Fitch, yesterday downgraded Cyprus debt to junk status. This comes a day after Moody’s downgrading. Cyprus’ second biggest bank, Popular Bank, has till Friday to find 1,8 billion Euros to recapitalize. Both Popular Bank and the number one bank, Bank of Cyprus, are heavily exposed to Greece both through buying Greek treasury bills and private loans to Greek citizens. 47 % of Popular Bank’s loan portfolio is exposed to Greece.

The Western European leaders are meeting on June 28th. Prior to the summit there is no token that Germany will soften its stand on the negotiated and agreed austerity terms and conditions. Due to an urgent eye operation the newly elected Premier, Antonis Samaras, is not going to attend the summit. Neither will the Minister of Finance who resigned few days after being appointed after emergently being brought to hospital.

Germany seems completely unwilling to bear the burden of a debt sharing with the striving Southern European periphery, and might choose to make Greece a test case; either you stick to your obligations or there is now place for you in the Euro. In an interview yesterday, Angela Merkel repeated her rejection of Euro bonds.

Sensing that the summit is going to be a new none starter, global markets are reacting nervously. Asia is down for the fourth day in row after jumpy sessions in Europe and US. The Euro/USD is falling and at 1.2496.
Yen is stronger; USD/JPY at 79,505. NYMEX at 179,15 and Brent 91.14 are stabilizing somewhat after steep falls the last weeks.
Gold recovered during yesterday session.

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#17
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Merkel buries Euro bonds

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments


Positions are hardening in front of the crucial European Union summit at the end of the week. “Not in my life time”, was German Chancellor Angela Merkel clear message to Euro leaders who want a joint debt burden sharing by introduction of EURO bonds. In a meeting with Parliament, the Bundestag, Merkel repeated that Germany is not prepared to share Western Europe’s total debt liability.

Cynicism rules the ground affront of the summit. There are no expectations. Observers know that the European Union thrives on crisis, but very seldom, something concrete comes out of the summits. We need to go back to early 1990’ies and the establishment of the Maastricht Treaty for a closer coordination and cooperation in Western Europe, for a major breakthrough.
The sigh of the President of the EU-Commission: “We cannot stand still”, illustrates the situation. His outburst is, however, unlikely to make any impression on Berlin.

Without Germany’s active backing and support, all concerned parties know that the EU is a lame duck, unable to nourish and keep its favorite child - the EURO, alive. They also know that few of the member countries are ready for the ordained medicine: a tighter monetary union developing into a political union as a following up step.
The European bureaucrats are pressing for such a solution. Individual member states and its electorates are not that enthusiastic. The key players know that Germany, and not elections in France or Greece, is going to decide whether the Euro will survive.

Everybody’s eyes are nevertheless on Europe. Anxious global markets yesterday watched that the interests on European bonds continue to raise. That overshadowed positive US economic domestic figures. US markets ended slightly up.
Asia is up after falling for four days. EURO/USD is stabile at 1.2499. USD/JPY 74945. Oil prices are reacting up after the last week’s steep fall. Brent is 92,75. Gold is at 1571.

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#18
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Asia raises on US data

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments


Strong US housing durable goods sales got the positive sentiment back in the markets yesterday. The American stock indices rose for the second day in row. Both Dow and Nasdaq were up 0,74 %. Asia followed up this morning with oil prices also stronger on US-growth prospects.
Brent is trading above USD 93 after dipping below 90 at the end of last week. Euro/USD is hovering below the 1.25 mark at 1.2499 before a crucial EU summit is going to give investors a better idea of where the Euro is moving.

German chancellor Angela Merkel met her French counterpart, Francoise Holland in Paris yesterday as a warming up for the summit session. The European leaders are trying to overcome their differences in a situation where strong German rhetoric has dominated. Germany has demonstrated no will for compromises, and flatly rejected to take a joint responsibility for sovereign and banking debts, which have heaped up in the Southern European periphery.

A feeling of disillusionment has been spreading, and nobody seems to have any expectations as to what could come out of the summit. The EU-president, Herman van Rompuy, presented earlier in the week a ten years plan for coordinated banking surveillance and an emergency banking insurance system, as steps towards the issue of Euro bonds, which Merkel has promptly rejected. Euro bonds are strongly supported by France, Italy and Spain.

Cyprus, which is going to overtake the half-yearly presidency of the EU on June 1st, has asked for emergency assistance on approximately Euro 10 billion for its struggling banks. There seems to be a positive development towards a solution supported by EU, the European Central Bank and the International Monetary Fund.

The reason for the US optimism is that pending home sales in May was up 5,99 %, much higher than expected. The good home sales news led to a lift of the Australian dollar and New Zealand, Kiwi in morning trade USD/JPY.

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USA: news from EU summit a little damped an ardor of bears

DAILY MARKET REVIEWS
Arne Treholt Vice-President of Business Development and Investments


On Thursday, June 28, the stock market of the United States finished the trading session in the negative territory in view of quite weak macroeconomic statistics, as well as on appeared information that losses of JP Morgan Chase can reach $9 billion.

Accordingly to the data published yesterday, the number of primary requests for unemployment benefits made 386 thousands whereas analysts expected 385 thousands. Besides, the previous value was reconsidered towards increase from 387 thousands to 392 thousands. Meanwhile, the index of business activity in the industry of FRB of Kansas was reduced in June from 17 points month earlier to 12 points, and GDP, according to final data, increased in the first quarter by 1,9 %, as expected, having coincided with the previous reading.

Towards the end of trading session the American indexes could restore a part of losses due to the news which have arrived from the EU summit, which begun yesterday in Brussels. So, it became known that for urgent measures for stimulation of economic growth and employment the European Union will mobilize about 120 billion euro ($149 billion) what the president of the European Union X. van Rompey officially declared during the press conference. According to him, credit possibilities of the European investment bank will be increased by 60 billion euro and other 60 billion euro will be collected at the expense of not used EU structural funds to which means will be added funds from the pilot program of the European bonds calculated on specific projects fewer than 5 billion.

Following the results of the trading session the indicator of "blue counters" the index of Dow Jones decreased by 0,196 % to value 12602,26 points, the index of the wide market S&P 500 left in a minus for 0,211 % to level 1329,04 points, and the index of the hi-tech companies Nasdaq reached level of 2849,49 points.

Oil prices are still pointing up. Brent is is traded on a level of 92.951$.

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#20
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BOND SUPPORT FOR SPAIN AND ITALY LIKELY OUTCOME OF EU-SUMMIT (29/06/2012)

WEEKLY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments


It has been mixed week in global markets dominated once again by the sovereign debt crisis in Western Europe and banks striving for survival. Brussels and the EU-summit at the end of the week has been the focus for attention with low expectations for a final breakthrough.
The fate of Euro is hanging in the air. Strong contradictions between the leading German economy and countries in the European periphery have led to new question marks. Germany has demonstrated no willingness to share the debt burden with countries like Greece, Spain, Portugal, Italy and now last Cyprus. Why should Germany contribute to mistakes and failures of states, which have not kept their house in order?

The outcome of the Euro crisis seems again to be some kind of a compromise most probably intended to stop the spiraling costs on Spain and Italy's bonds. Global markets see a glimmer of hope in these developments. Might be, that there is a light at the end of the tunnel after all?
The new European "iron lady", Angela Merkel, has all through the increased and bitter rhetoric being steadfast in her demands: There is no quick fix on the sovereign debt crisis. Short term measures to help lower Spanish and Italian borrowing costs, are likely the outcome of the summit. However, as Merkel has been stressing such quick remedies are eyewash and fake solutions. They do not solve the fundamental questions.

However, markets and investors with big money bags are waiting on the sideline happy; to jump on whatever seems better than no decision at all. When Merkel postponed an announced press conference on Thursday night, markets saw this as a positive token and as an expression that Germany as the key player, was still considering some temporary solutions. This led to a mini rally at the end of the session in New York. In addition, this morning, Asia is clinging to the postponement as a sign that something, in spite of all down plaid expectations are happening behind the closed doors. It has even created some excitement among currency traders. Might it be some hope for the Euro after all?

Over the week, markets have been clinging to the smallest tokens of positive movements. US-housing sales had analysts once again to jump on the expected American growth wagon. The enthusiasm lasted 36 hours until the jobless claims number Thursday night poured cold water in the head of optimists.

A reduction on 6000 in the jobless claims, do not create a spring. Add to the global misery that Cyprus, one of the smallest economies inside the Euro, had to ask for Emergency assistance for its banks. In the midst of the crisis, their banks gambled on the high interests’ rates on Greek treasury bills, and private Greek customer’s appetite for loans, which no others were willing to give them. Now they want that Europe shall share with them and pay the price.

For bankers, it has in general been a miserable week. Barclays bank was fined record $ 450 million fby English regulators for manipulating with the Libor interest rate set by the Central banks as basis rate or private banks lending to borrowers. Barclay has possibly colluded in their fraudulent action with other leading international banks. Such facts does not increase the credibility of bankers, which over the crisis years have been known more for their greed than clever investments and managing of clients funds.

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