Translated material
Through tests to risks
The market chooses the positive
Global markets generally reacted positively to the results of stress tests of European banks. Now investors are focusing on corporate reports of the largest companies that are showing good results. As a result, stock markets and the European currency showed moderate growth yesterday.Asian markets have been growing since the morning. The Shanghai Stock Exchange Composite Index rose 0.6%, and Hong Kong's Hang Seng Index rose 0.12%. The growth of shares was facilitated by expectations of a strengthening of the residential real estate market in China. The Seoul Stock Exchange KOSPI index closed up 0.63%, while the Tokyo Stock Exchange Nikkei index closed up 0.8%. The market was supported by expectations of positive reports from a number of large companies, such as Sony Corp, Toyota Motor, as well as major banks. European markets also opened in positive territory, but the positive mood did not last long, and the indices returned to their previous closing values. The US market opened weakly as carrier FedEx Corp raised its earnings forecast. In the first hours of trading, the main indices rose within 0.8%. US stock markets ended the previous session in positive territory thanks to General Electric's decision to increase quarterly dividends by 20%. Shares of the industrial giant rose 3.3%.
The Russian RTS index yesterday rose by 1.28% to 1467.68 points, the MICEX index by 1.16% to 1396.92 points. Shares of Gazprom added 0.76%, LUKOIL - 0.9%, Sberbank - 1.06%. "The news from FedEx is important because it demonstrates that the economy is stronger than many economists think," Bruce Bytles, chief investment strategist at Robert W. Baird&Co, told Reuters. “Any good news about the economy is very helpful to the market right now.”
US Treasury Secretary Timothy Geithner also reassured investors by saying that a return to recession in the American economy is unlikely, and the White House should not extend tax breaks for wealthy Americans in the face of a gigantic budget deficit. “I believe the economy will gradually strengthen over the next one to two years, with job growth and investment resuming. But there is still a long way to go,” Mr. Geithner said. “Even if there is some slowdown, there is no sign that the economy is slipping back into recession,” said Jim Meyer, head of investment at Tower Bridge Advisors.
The market perceived the results of European stress tests neutrally, but experts assess them skeptically. Late last week, the European Central Bank announced results showing that only seven of the 91 banks tested failed the test, and the need for additional capital amounted to just 3.5 billion euros. Well-known economist, New York University professor Nouriel Roubini is confident that “the stress tests were not stressful enough.” Analysts at JP Morgan believe that these stress tests “were a joke” and cannot lead to anything good. “We are confident that the results of the stress tests will not be able to restore confidence in the financial markets,” they noted.
The European currency exchange rate rose yesterday from 1.29 to 1.294 dollars. However, according to experts, the growth was associated with positive economic information in general. “We're seeing a significant increase in risk appetite,” MF Global Holdings Ltd.'s chief market strategist told Bloomberg. Denis Cajigas. “Company profits give players confidence.”
As experts note, regardless of the results of stress tests, many factors indicate an improvement in the situation in Europe. Greece, Spain and Portugal have managed to sell a total of 50 billion euros, or $64 billion, of government bonds since May 10, when the need to save the single currency led finance ministers to create a $1 trillion crisis fund and the European Central Bank began buying bonds. The strengthening of the euro is also supported by the growing number of signs of a slowdown in the US economy. In the first half of the year, the euro weakened by 15% amid the debt crisis. However, the dollar is now falling - it has fallen 8% from a four-year high reached in June. This month, American economic statistics turned out to be worse than analysts' forecasts, while reports from the eurozone have exceeded expectations since April of this year. “Market participants have become too focused on the problems of the eurozone and have forgotten that the US has its own problems,” David Bloom, chief currency strategist at HSBC in London, told Bloomberg. According to his forecasts, the euro will reach $1.35 by the end of the year.
German banks have not published all the data as part of the stress tests. European regulators accuse Germany and the country's banks of violating agreements on the disclosure of information on sovereign securities owned by credit institutions. “We have agreed with all supervisors and all banks involved in the stress tests that sovereign risks will be disclosed on a bank-by-bank basis,” Arnaud Vossen, secretary general of the European Committee on Banking Supervision, told the Financial Times. In addition to the Tier 1 capital adequacy indicator, banks were required to provide information on sovereign debt instruments held on their balance sheets. However, such large German banks as Deutsche Bank, Postbank, Hypo Real Estate, banking groups DZ and WGZ, as well as Landesbank Berlin did not publish these data. Analysts had previously warned that German banks' failure to disclose sovereign debt would raise suspicions about their financial health. Representatives of German regulators Bafin and Bundesbank said that national legislation does not give them the right to require banks to disclose this information. However, one banker told the Financial Times that "there was a debate in Germany about the possibility of publishing sovereign debt data and banks were told that this was a requirement for stress tests, but in the end Bafin did not push for it." Mr Vossen noted that he would contact the country's regulators. “We agreed that this information will be disclosed,” he said. “This is one of the topics that we will monitor.” RIA Novosti