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MARKETS EXPECTED TO REBOUND TODAY
| From : Prasanna Manvi at 06:47 AM - May 10, 2010 ( ) |
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Futures dart higher on hopes for EU aid deal
(Reuters) - U.S. stock index futures surged on Sunday, pointing to a strong rebound off nearly three-month lows when the cash market opens, on news European officials are working on a 600-billion-euro ($805 billion) plan to halt the spread of Greece's fiscal woes across Europe.
European Union finance ministers sought agreement on Sunday on emergency measures that could include loan guarantees by euro zone countries worth 440 billion euros, a stabilization fund worth 60 billion euros and a 100 billion euro top-up of International Monetary Fund loans, source told Reuters. S&P 500 stock index futures soared more than 20 points at the start of trade, suggesting a nearly two percent rise at the open. The resurgence comes after U.S. stocks on average turned negative for the year on Friday on fears of another credit crisis stemming from Greece's souring finances and lingering questions about what triggered the previous session's dramatic plunge. The major stock indexes finished Friday's volatile session from 1.0 percent to 2.0 percent lower. Fears of a Greek debt default that started when that country revealed its finances were in far worse than previously announced, has turned into worries about other eurozone budgets and debt, especially in weaker states like Spain and Portugal. Concern that a euro zone debt crisis could collapse banks and hurt the global economy like the September 2008 collapse of U.S. bank Lehman Brothers swept through markets last week, pushing global stocks to around a three-month low. S&P 500 futures were up 18.5 points and well above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 165 points, while Nasdaq 100 futures jumped 30.75 points.
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EU ministers agree 500bn euro aid package
Officials hope loan guarantees would prevent the Greek crisis spreading
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EU finance ministers have agreed on emergency measures worth 500bn euros (£430bn) to prevent the Greek debt crisis from affecting other countries.
Members of the single currency bloc will have access to 440bn euros of loan guarantees and 60bn euros of emergency funding from the European Commission.
The International Monetary Fund (IMF) will also contribute up to 220bn euros.
Spanish Economy Minister Elena Salgado said they were "placing considerable sums in the interest of stability".
There had been fears that without the measures, the euro might have come under heavy pressure on financial markets this week.
The currency has strengthened in early trading in the Far East.
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By James G. Neuger and Meera Louis May 10 (Bloomberg) -- European policy makers unveiled an unprecedented loan package worth nearly $1 trillion and a program of bond purchases as they spearheaded a global drive to stop a sovereign-debt crisis that threatened to shatter confidence in the euro. Jolted into action by last week’s slide in the currency and soaring bond yields in Portugal and Spain, the 16 euro nations agreed to offer financial assistance worth as much as 750 billion euros ($962 billion) to countries under attack from speculators. The European Central Bank will counter “severe tensions” in “certain” markets by purchasing buy government and private debt. “It’s a clear signal to the markets,” Austrian Finance Minister Josef Proell told reporters in Brussels early today after the 14-hour meeting. “Never before have we made such a step,” he said. Under pressure from the U.S. and Asia to stabilize markets, the European governments gambled that the show of financial force would prevent a sovereign-debt crisis and muffle speculation that the 11-year-old euro might break apart. The two-pronged offensive pushed up the euro 1.4 percent to $1.2931 as of 11:12 a.m. in Tokyo. The Nikkei 225 Stock Average climbed 1.3 percent to 10,499.25. 3-D Shock and Awe “This is Shock and Awe, Part II and in 3-D,” Marco Annunziata, chief economist at UniCredit Group in London, said in an e-mailed note. “This truly is overwhelming force, and should be more than sufficient to stabilize markets in the near term, prevent panic and contain the risk of contagion.” The steps came after failure to contain Greece’s fiscal crisis triggered a 4.1 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.’s collapse. European stocks sank the most in 18 months, with the Stoxx Europe 600 Index tumbling 8.8 percent to 237.18. The ripple effect in the U.S., including a brief 1,000- point drop in the Dow Jones Industrial Average on May 6, prompted President Barack Obama to call German Chancellor Angela Merkel and French President Nicolas Sarkozy to urge “resolute steps” to prevent the crisis from cascading around the world. Under the loan package, euro-area governments pledged 440 billion euros in loans or guarantees, with 60 billion euros more in loans from the EU’s budget and as much as 250 billion euros from the International Monetary Fund. European Stability “We are placing considerable sums in the interests of stability in Europe,” Spanish Economy Minister Elena Salgado told reporters after chairing the meeting. Markets worldwide are reeling from Europe’s debt saga. Gold rose to a near-record of $1,214.90 an ounce in New York last week, and the MSCI World Index of equities dropped to a three- month low. Investors fleeing European markets parked money in U.S. Treasuries, pushing the 10-year note yield down 23 basis points to 3.43 percent. In a step that skirts EU rules barring direct central bank lending to governments, the Frankfurt-based ECB said it will conduct “interventions” to ensure “depth and liquidity” in markets. The purchases will be sterilized, meaning they won’t increase the overall money supply in the financial system. European Union Economic and Monetary Commissioner Olli Rehn characterized the ECB’s moves as “very significant operations.” The central bank also reactivated unlimited fixed- rate offerings of three month loans, a key tool in the ECB’s efforts to fight the credit crisis. It will also reactivate dollar swaps with the Federal Reserve. Race Against Time In Brussels, finance ministers from the 16-nation euro region -- joined by ministers from the 11 EU countries outside the euro -- raced against time to weld the contingency lending arrangements before markets opened in Asia. Inability to craft a convincing package in time would have left deficit-plagued countries at the mercy of the “wolfpack behavior” of speculators, Finance Minister Anders Borg of Sweden, a non-euro member, said as the meeting began. The new war chest would be used for countries like Portugal or Spain in case their finances buckle. Deficits are set to reach 8.5 percent of gross domestic product in Portugal and 9.8 percent in Spain this year, above the euro region’s 3 percent limit. Both countries pledged “significant” additional budget cuts in 2010 and 2011, which will be outlined in May, an EU statement said. The extra yield that investors demand to hold Greek, Portuguese and Spanish debt instead of benchmark German bonds rose to euro-era highs last week. The premium on 10-year government bonds jumped as high as 973 basis points for Greece, 354 basis points for Portugal and 173 basis points for Spain. Greece, the epicenter of the debt crisis, has already won a 110 billion-euro aid package after agreeing to unprecedented austerity measures. The cuts sparked riots in Athens last week, leading to three deaths and stoking concerns that the government won’t be able to implement all the steps. European governments endorsed their 80 billion-euro share last week, and the IMF cleared the way to pay its 30 billion- euro share yesterday. Europe’s financial leaders sought to master the euro’s stiffest test since its debut in 1999 without wheelchair-bound Finance Minister Wolfgang Schaeuble of Germany, Europe’s largest economy, who was rushed to a hospital soon after the meeting started due to an adverse reaction to new medication. Interior Minister Thomas de Maiziere got on a last-minute flight to Brussels to take his place. As Merkel’s cabinet held a late-night meeting in Berlin on the euro rescue, her party unexpectedly lost control of Germany’s most populous state in a regional election, potentially costing her a majority in the upper house of the federal parliament. Goaded Goaded by Germany, the ministers made a fresh commitment to closer monitoring of government finances and more rigorous enforcement of the deficit-limitation rules. The vow to push budget shortfalls below the euro’s 3 percent limit echoes promises that have been regularly broken ever since governments in 1999 set a three-year deadline for achieving balanced budgets. The euro region’s overall deficit is forecast at 6.6 percent of gross domestic product in 2010 and 6.1 percent in 2011. Britain, the EU’s third-largest economy, won’t contribute to a euro rescue fund, though it backs efforts to restore stability, Chancellor of the Exchequer Alistair Darling said. “When it comes to supporting the euro, that is for the eurogroup countries,” Darling told Sky News.EU Crafts $962 Billion Show of Force to Halt Crisis (Update3)
S&P futures up 2.4 percent as central banks launch swap lines
HONG KONG (Reuters) - S&P futures extended their gains on Monday, up 2.4 percent as central banks launched U.S. dollar swap lines, while the European central bank will buy back bonds.
ENTIRE ASIA HAS OPENED IN THE GREEN: NIKKEI +1.15%,, SEOUL +1.3%, SGX NIFTY @ 5042
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