US & World News

Banks in the world are preparing in peace to work with a new Greek currency.

Some financial institutions have never cleared the drachma of their computer systems after the adoption of the euro by Greece in 2001. They would be ready in a flash if the problem of debt forced the country to return to the good old banknotes and coins denominated in drachmas.

In any case, banks are accustomed to change: they have managed the transition of financial markets to the euro in 1999 and the emergence of currency as the Estonian kroon (up ; its replacement by the euro in 2011) and the Kazakh tenge with the breakup of the Soviet Union.

Moreover, it stirs behind the scenes since 2009, when the onset of the debt crisis in Greece, says Hartmut Grossman, American society ICS Risk Advisors works with banks Wall Street.

"Many companies, particularly in Europe and also here, studying it for a long time," said Hartmut Grossman. "All financial institutions are prepared for this eventuality. The departure of Greece in the euro area is not a new idea."

The European Union says it wants to keep the euro in Greece. Polls show that the Greeks want to keep the single currency. But they also voted last Sunday for parties opposed to the bailout of the EU and the International Monetary Fund, which has again raised doubts about the maintenance of the country within the Ten- Sept.

EXCHANGE CONTROL

If Greece leaving the euro, it certainly would impose exchange controls, say bankers, which would not prevent dealings in the new currency.

"The rooms specializing in foreign exchange markets can be ready fast enough. It depends on exactly how to pass out of the euro area, "said Lewis O'Donald, chief risk officer of London-based investment bank Nomura Japan

.. The currency ……. not freely tradable, as the Chinese yuan, followed in markets other than through the use of derivatives such as contracts term for example

. If Greece chooses a fixed exchange rate, everything will depend on the exchange ratio used. If the government chooses a euro for a new drachma, such parity would not be sustainable for very long and would involve major losses for banks Banks

. é ; tudié opportunities to protect themselves but few have taken concrete steps

. "Banks are very, trè s reluctant to start shouting fire. They know what's going on (would) and what would a panic, "said a London lawyer to advise financial institutions

. Most people just check the law applicable to their contracts, are covered against defects and examine all the legal problems that an outflow of Greece to the euro could raise … Simulations

…… have been made. But we do not really know how to operate an output

…. ….. "For transactions denominated in euro, what will their status in case of change in the nature of this currency?" asks Miles Kennedy, a partner at PricewaterhouseCoopers

.

Rolls-Royce said Friday it was on track to post strong growth this year, continuing to capitalize on the need for airlines to have had less intensive ké ; Rosene.

The British group, second largest manufacturer of aircraft engines behind General Electric, said the year had started well for him and confirmed its objective of significant growth of beneficial fice in the civil aviation and space.

"For the full year, the group still expects good growth in turnover and profit, excluding exceptional circumstances and with a cash flow to roughly ; s at equilibrium, as we continue to invest in future growth, "says Rolls-Royce said in a statement. 

Airlines around the world to equip aircraft models lighter to cope with soaring fuel costs, which, combined with European debt crisis weighs heavily on the sector.

They will acquire for about 2.7 billion euros of airplanes over the next 20 years to meet demand for flights to and from emerging countries, particularly in Asia, say aerospace giants Boeing and Airbus.

These forecasts highlight the growing demand for single-aisle aircraft like the Boeing 737 and Airbus A320. Some analysts 20,000 narrowbody aircraft of this type will be produced over the next two decades.

Rolls-Royce, which recorded an increase of 21% of its profits in 2011, has more than 5,000 engines on order, worth a total of 52 billion pounds (64 billion euros).

A new joint venture between Rolls-Royce and U.S. rival Pratt & Whitney to be officially established this year. It must develop the next generation of engines for medium-range single-aisle.

At 10:45 GMT, action Rolls-Royce lost 0.29% to 856.50 pence, but it earns about 16% since the beginning of the year.

The British group is expected to announce a pretax profit of 638 million pounds (786 million) in the first half of 2012, and 1.44 billion pounds (1.72 billion euros) on entire year, according to analysts polled by Thomson Reuters.

The OECD recommends that developed countries cut their debt to GDP ratio to 50% in the coming decades to cope with possible shocks, in a study published Thursday.

Most of these countries have much higher ratios, significantly aggravated by the recent crisis, the OECD average in excess of 100% and 200% Japan.

For comparison, the French public debt amounted to 1.717 billion euros at end 2011, nearly 86% of GDP.

"Cleaning up public finances to cope with the consequences of the crisis, the underlying weaknesses as well as future pressures on public spending is a major challenge for many countries", e described the Organization for Economic Cooperation and Development. 

"It appears there could be an important and lasting fiscal tightening in almost all countries to reduce debt to prudent levels," she says, adding: "Given the weak economy World, commissioning Å? work of a broad program of fiscal restraint could be particularly costly. "

The Tokyo Stock Exchange ended down on Tuesday, causing the yen to profit taking on the values ​​that were well mounted exporting since January.

The Nikkei ended down 0.59% or 59.48 points, to 10,050.39 points while the Topix retreated in the same proportions (-5.03 points) to 851.02 Points .

The dollar is trading around 81.89 yen after three weeks of low points touched 81.55 yen on trading platform EBS in early trading.

Toyota, which has won over 37% since the beginning of the year, has limited its decline to 0.28%, while Sony has lost 0.58%. Its gain since the beginning of the year exceeds 20%.

Declining in most European countries, the activity has only slightly slowed in France in the fourth quarter 2011 before stagnating earlier this year, according to INSEE, which had considered the possibility of a recession. Better resistance does not prevent unemployment to continue rising. French executives come to the business district of La Defense

France is going through a little better air hole that affects the entire euro area. After avoiding a decline in activity in the fourth quarter – unlike Germany, it should just happen to stabilize its GDP over the first three months of the year before starting to rebound slowly, according to forecasts revised upwards published Thursday by the National Institute of Statistics.  

"For France, we expect a stable activity in the first quarter, zero percent growth, and then a sluggish 0.2% in the second quarter," he told reporters Sandrine Duchene, head of the Department of conditions of INSEE. In December, INSEE had planned a short recession with contraction of economic activity in the last quarter 2011 and first quarter 2012, before there is a growth of 0.2% on October to December last year. "We had a shock on the euro area in the summer of 2011 we are coming out" and "recovery is slow," noted Ms. Duchene presenting the note of economic INSEE March. But gross domestic product (GDP) "regain its pre-crisis level in the forecast horizon," that is to say, late June, said during a press conference an analyst of the INSEE, Dorian Roucher.  

The institute has also revised sharply upwards its forecast of growth acquisition for 2012 that would be achieved by mid-year: 0% predicted in December, it would increase to 0.5%. This represents growth of GDP this year if the last two quarters remained the same as the second quarter. Ms. Duchene explains this revision by the better than expected growth in the last quarter of 2011 and the upward revision of its forecasts for the first half.

Consequently, the Minister of Economy and Finance Baroin announced an increase in the government's forecast for growth of the French economy in 2012, now expected at 0.7% against 0.5% previously.

The engines of growth remain low

Optimism, however, must be very measured. The chief economist at INSEE emphasizes that household consumption, the traditional engine of growth in France, "remains low". She would grow by 0.2% in the first quarter before stagnating in the second. And because "a 0.3% decline in purchasing power in the first half."

Several factors contribute to this weakness. Purchasing power would suffer first the relatively high level of inflation (2.2% yoy). In addition, earned income will slow due to the deteriorating labor market. This will not only result in further loss of 49,000 jobs in the first half but it will also affect wage negotiations. Finally, household incomes will be further tapped by taxes, supported by measures enacted in Finance Act which come into force in 2012.

France can not be counted as late last year on exports. Thanks to sales of Airbus, they have indeed been the main driver of growth in the fourth quarter that helped prevent the recession. But their contribution to the activity will become neutral due to weak demand in the euro area.

The context would finally have some good investment: the business outlook remains bleak, the conditions for granting loans were tightened before the massive intervention of the ECB and the margin of the companies is at an historic . Besides factors such as more timely consequences of the cold wave on construction.L business investment would decline so slightly in the first quarter 2012 (-0.4%), before rebounding in the second quarter (+0.8% ).

But the big downside of these forecasts is unemployment. INSEE entails loss of 49,000 in the market sector in the first half after a fall of 54,000 over the last six months of last year. Total employment would nevertheless be supported by intensified supported employment. Finally, the unemployment rate should continue to increase to 9.7% in France in June (10.1% including Dom).

The Indian airline Kingfisher Airlines could be stripped of his license for non compliance with safety standards and financial viability, said Tuesday the Indian Minister of Aviation, Ajit Singh.

The company in financial difficulty, does not meet its turnaround plan, said the minister who was speaking to reporters.

Kingfisher Airlines is now operating more than 18 aircraft, barely more than a quarter of its fleet.

The company, whose debt stands at $ 1.3 billion (995 million), could file for bankruptcy if banks continue to refuse to lend money for its operations rations from day to day. 

A massive decrease in thefts has reduced the turnover of the group and the carrier has almost no money to defray the salaries and meet its tax liabilities and its airport charges.

The chairman of Kingfisher, Vijay Mallya, will meet the civil aviation authorities Tuesday or Wednesday to discuss the Group's recovery, the minister added.

According to data from Airbus, current orders Kingfisher deal 32 single-aisle A320 Family, 20 A330s, five long-haul A350 and five A380 super-jumbo.

Over the past three months, the U.S. stock market has regained its levels of late 2007. And in Europe, France has rebounded even stronger. The improvement could well last until May. But then train for the return of volatility. Explanations. The stock market rally seen through the evolution of the Dow Jones: an increase of nearly 18% in almost four months.

Equity markets have recovered tone. Wall Street has lost ground with the financial crisis, is now finding its levels in late 2007 after a 11% jump in three months. For the first time in its history, its flagship index, the Dow and the Nasdaq, dominated by technology, rose this week above the psychological threshold of 13,000 points and 3,000 points, during the same session. European stock markets are pronounced the same trend, the Cac 40 in Paris even showing since mid-February a gain of 21% which allowed him to retake the course of 3600 points.

The rally in shares is not new. It has already lasted three months and we owe largely to central banks, said Benjamin Melman, Director absolute performance at Edmond de Rothschild IM. The rebound in stock prices coincided with the opening last December, to tap liquidity from the ECB or the provision of banks over 1000 billion euros of resources at low cost. This proactive reassured investors who constantly claim that the central bank acts as a lender of last resort to stem the contagion of debt. But his determined action has contributed to lower interest rates in the bond market and away along the spectrum of the credit crisis that threatened the European economy. The Fed has also facilitated the rise of the stock market by deciding to extend until 2014 its ultra accommodative monetary policy. Of course, the rescue of Greece has also helped to ease investors. Although all issues are not resolved, a page of the European crisis has turned, says Francois Chevallier, strategist at Bank economist and Leonardo.

And the good news for investors is that the rally is not over yet. Price increases in January and in February was made with very little volume, Melman says Benjamin. Many investors have been waiting patiently for several issues are resolved. They return on the market today. We assist in some way, a second wave of purchases, which explains the recent acceleration in price rises.

How long can it last? Difficult to say. Looking at the ratios of current profits, we say that most of the journey was made, says François Chevallier. However, the stock market has another engine, that of profit expectations. But they will remain well oriented in the short term due to the favorable business surveys. The ZEW index in Germany and that of the Philadelphia Fed – two leading indicators of the industry – improved further in March, says the expert. This means that the plateau expected in the industry has not yet occurred. The next ISM index, which takes the pulse of American industry, may still show an increase in early April, at the same time giving a new impetus to the market.

As of May, however, the stock market could consolidate, ie enter a phase of slower growth. Indeed, the production rates in the industry expected to slow. Moreover, the return of valuations at pre-crisis level will lead to profit taking, says Francois Chevalllier. Tensions on the bond markets – the U.S. 10-year rates rose in a few weeks from 1.8% to 2.3% – would create air holes on the stock market, adds Benjamin Melman. Volatility will brief comeback. The opportunity for investors to remember an old adage stock: sell in may and go away.

The European Central Bank has inflected his speech Thursday with a warning of unexpected inflation and a call to governments and banks in the euro area so that they take over in order to consolidate the stabilization of the economy of the block.

She has once again lowered its growth forecast for this year and next year after leaving its key rates unchanged, noting that the prospects for the economies of the area have e ; ty much worse without the massive liquidity injections carried out as part of its refinancing operations with two long-term (LTRO) in December and February.

The ECB began to see signs of stabilization at the beginning of the year, but the expected recovery could take longer than expected. "Available economic indicators confirm signs of stabilization in the euro area, but the economic outlook remains subject to downside risks," said ECB President Mario Draghi, when the press conference that followed the announcement of maintaining the refi rate to 1.0%.

Thus, for 2012, the ECB table does on a GDP growth between -0.5% and 0.3%. For 2013, it anticipates a range between 0% and 2.2%. Three months ago, the central bank of euro countries anticipated a change between -0.4% and 1.0% for 2012 and a range of 0.3% to 2.3% for 2013.

The recent 20% increase in oil prices has, however, prompted the ECB to raise its inflation forecast and anticipate a price increase of between 2.1% and 2.7 % this year, against a range of 1.5% to 2.5% previously. For 2013, the price increase should be between 0.9% and 2.3%, against a previous forecast of 0.8% to 2.2%.

"Because of rising energy prices and indirect taxes, inflation rates are now expected to remain above 2.0% in 2012, the prevailing upside risks", Mario Draghi warned.

The latest Reuters poll conducted among 74 economists, the ECB should keep rates unchanged this year and much of 2013.

Bund futures rose while European equities and the euro have reduced their earnings after the downward revision of growth forecasts of the ECB. 

"From our perspective, the projections (the ECB) are still relatively optimistic, while economic data showed no" stabilization ", especially in the periphery (euro area). The risks are clearly on the downside, "said Annalisa Piazza of Newedge Strategy

. NOT divisive ….. Draghi

… was confident that the operations of long-term refinancing of the ECB which resulted in the injection of more than 1,000 billion in cash in the banking system of the block it averted a crisis far more serious

. Borrowing costs for countries difficulty such as Italy and Spain have fallen sharply and Mario Draghi said that markets, including the interbank market, working again and that investors were income on assets denominated s euro

. "All things considered, we see that great progress has been made", he said. "Simply compare the situation as it was in November and what it is today."

The President of the ECB, however, called on governments and banks to take over to reinforce the recovery of European economies, calling for further progress in fiscal consolidation and further structural reforms.

The euro area economy has stabilized in recent months, partly because of lower rates in November and December the ECB and its massive refinancing operations long-term.

Its room for maneuver to fight against the crisis in the euro area seem small now, partly because of reserves that raises its action, particularly in Germany. 

The Bundesbank President Jens Weidmann has sent a letter to Mario Draghi last month to express his concerns and the former head of economic studies of the ECB, and always trè s influence, Juergen Stark ruled Thursday in a German newspaper that the quality of the balance sheet of the ECB was "appalling".

Jürgen Stark had resigned within the ECB last year to protest against decisions which he felt they were not consistent with the mandate of the institution.

"My personal relationship with Jens is excellent … No one is isolated within the Governing Council and the Bundesbank, in particular, is not isolated," said Mario Draghi. "I'm really attached to the culture and tradition of maintaining price stability, the Bundesbank," he said.

In the letter to Mario Draghi and obtained by the German business daily Frankfurter Allgemeine Zeitung, Jens Weidmann was concerned about the imbalances in the interbank clearing system of the euro area TARGET 2 and risk that would result to the Bundesbank, which will be exposed in the unlikely event of a breakup of the euro.

Mario Draghi has sought to minimize these concerns and has declined to comment on the progress of the exchange transaction of Greek debt to be finalized e Thursday at 20:00 GMT at Athens risk of exposing themselves to a default.

The main European stock markets opened in fall Tuesday in the wake of Wall Street and Asian markets, fears of an economic slowdown in China and Europe prompting investors to reduce their exposure to risk.

In Paris, at 9:30 am, the CAC 40 lost 0.83% (29 points) to 3458 points. London yields 0.56% and Frankfurt was down 1.01%. The pan-European Euro Stoxx 50 index was down 0.96% after gaining over 9% since the beginning of the year, supported especially by abundant liquidity injected by the Bank Central Bank (ECB).

The values ​​of the automobile are among the largest declines. The European sector index losing 2.2%, weighed down primarily by PSA Peugeot Citroen.

PSA lost more than 5% in the Paris Stock Exchange after the announcement of the terms of the capital increase of a billion launched after its alliance with General Motors. The French group also announced it would not pay a dividend this year.

The German Merck was down 1.3% after reporting fourth quarter results below expectations, within the scope of a claim to half mast for the crystal used in the tee ; léviseurs flat screen.

The earnings season in Europe has been relatively poor. According to Thomson Reuters data Starmine, only 49% of STOXX 600 companies have published the results meet or exceed expectations, against 68% of companies S & P 500 on Wall Street.

"The macroeconomic data from the euro area, while the main liquidity operations of the ECB are completed, have aroused fears of a recession and de ; ceived markets. To make matters worse, China has lowered its forecast for growth ", says Koen De Leus for KBC Securities in Brussels.

Markets have also coldly received the message sent Monday by Athens, which it was prepared to force private creditors to take losses on Greek debt. Private investors have until Thursday to say whether they intend to or not participate in the exchange of debt that should allow Greece to erase more than 100 billion euros of its debt, as part of its second bailout of 130 billion euros.

European shares reinforce their gains late Wednesday morning after the injection of almost 530 billion euros of liquidity into the European banking system as part of the second ; me refinancing long-term European Central Bank.

Traders polled by Reuters had expected that banks in the euro zone borrow some 500 billion euros, after borrowing 489 billion during the first operation to three years and at reduced rates which took place in late December.

Equity markets have increased their earnings briefly a few minutes after the announcement of the ECB before returning to previous levels. The euro also briefly mounted against the dollar before erasing its gains.

"The relaxation of collateral has worked well. We see that the central bank achieved its goal. This shows that the central bank is proactive and follows closely the situation of banks' refinancing , "said Raymond Renaud, president of Eleanor Capital.

"This is a very positive message about the state of mind in which the central bank. We see that the behavior of the central bank is increasingly close to that of the Fed."

"The market implications are positive. There are two issues of concern to markets: growth and financial stress. The subject of financial stress is very well addressed with the Greek record in the process of being resolved and the refinancing of banks, "he says

.. A ……. 11:45, the CAC 40 index advanced 0.3% after rising briefly to almost 1% and then he earned more than 0.5% shortly before the announcement of the ECB

. Other major European markets, London was almost unchanged, Frankfurt Milan took 0.5% and 0.8%

. From the European indices, the Euro Stoxx 50 gained 0.5 also Eurofirst 300% and 0.4%

. Bank stocks, which anticipated the operation from the opening, are the first measure ; res to enjoy. Farm Credit clinching nearly 4% and 1.7% Societe Generale.

The performance of the German government bond (Bund) at 10 years was 1.827%, 1.825% cons shortly before the announcement.

The euro was trading around 1.3440 dollar, while it was around 1.3465 before the announcement.