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News : International Last Updated: Oct 8, 2012 - 3:54 PM


Markets: Eurozone finance ministers to launch ESM rescue fund -- discuss Spain and Greece
By Finfacts Team
Oct 8, 2012 - 9:28 AM

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The European Stoxx 600 Index tracks Europe's top 600 companies

Eurozone finance ministers will today launch the European Stability Mechanism (ESM) -- the permanent EU rescue fund - -at a meeting in Luxembourg that will include discussions on Spain and Greece. The ESM will have funds of up to €700bn from 2013.

Meanwhile, Angela Merkel, German cchancellor, will make her first trip to Greece when she visits Athens on Tuesday

Eurozone finance ministers meeting to focus on Spain and Greece: David McNamara comments - - "The meeting of Eurozone finance ministers later today (17.00) will focus on efforts to secure the next tranche of funding for Greece and attempts to tackle the Spanish crisis. With the Greek government looking to secure €6.5bn in funding ahead of the November deadline, the finance ministers will likely make positive signals towards the Greek austerity efforts ahead of the visit of Chancellor Merkel to Athens in which she is expected to signal her commitment to Greece remaining in the currency union.

While an application for a bailout will not be forthcoming at this time, the Spanish issue is also high on the agenda of today's meeting in the wider context of the proposed pan-European banking union as Spanish officials continue to resist efforts to enter an official programme. The details of this proposed banking union will likely be fleshed out further at the wider ECOFIN meeting tomorrow which all 27 member states will attend. This leaves the ministers time today to accentuate the positives in officially launching the EU's €500bn permanent bailout fund, the European Stability Mechanism (ESM).

In a quiet day for macroeconomic data, markets will look to the strength of industrial production in Germany (11.00) for signs of a weakening output in Q3. The unexpected bounce in industrial output in July (+1.3% month-on-month) is expected to have been offset by a decline in August of 0.6% month-on-month, leaving industrial production down 1.6% on the year."

Economic View: Politicians take over the baton; Dermot O'Leary of Goodbody comments - - "Last week ECB President Draghi effectively passed the baton to politicians in the race to return stability to the euro area. A series of meetings over the next two weeks will tell a lot about the ability of these politicians in this latest leg of the euro area crisis.

The first of these meetings occurs today when the finance ministers of the 17 euro area member states meet in Luxembourg. It would have been hoped by many of these Ministers that an aid request by Spain would be dealt with at the meeting but despite rumours of such a request occurring at the weekend, the Spanish continue to hold out. Officially, it is expected that an extension to the timeframe for Portugal to hit its deficit targets will be ratified. The latest on the proposed financial transaction tax is also expected to be discussed. Ireland and the issue of its bank debt is not on the agenda for today’s meeting.

Despite reports of continued disagreement on the scale and detail of fiscal consolidation efforts in Greece, Olli Rehn stated over the weekend that he expects that the ministers will issue a positive statement on the country. This may come a day before Chancellor Merkel makes a controversial visit to Athens. Clearly diplomatic efforts are underway to ensure that Greece remains a member of the euro area. However, we would expect the concern surrounding Greece to continue into November given that it appears that the Troika report will not be ready until then and there is also the tricky issue of Official Sector Involvement (OSI) to be resolved at a European level.

ECB actions over recent months have clearly had a calming effect on markets. While this is a necessary condition for resolving the crisis, it is not sufficient. Politicians must also be involved. Despite the seriousness of the situation, we would not anticipate a speedy resolution."

Asia Markets

The MSCI Asia Pacific Index ex-Japan fell 0.9% on Monday.

Japan's markets were closed Monday; China's Shanghai Composite Index fell 0.56%; South Korea's Kospi dropped 0.67%; Australia's S&P/ASX 200 declined 0.28% and in Mumbai, the Bombay Stock Exchange's Sensex 30 Index dipped 0.76%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 1.07% in early morning trading Monday.

The ISEQ is down 0.95% in Dublin.

CRH has dipped 1.40%

European Benchmarks

Irish Share Prices

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Currencies

The euro is trading at $1.2972 and at £0.8067.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Friday last week the BDI closed up 30 points or 3.55% to 875 - -  the BDI plunged a full 70% from its recent mid-October peak of 2,173 to an all-time low of 647 on February 3.

Freighter Oversupply Weighs on Shipowners and Banks - - Jan 26, 2012: The New York Times says vessels bought during the global commodity boom are only now being delivered, putting pressure on the European banks that financed the purchases.

The skyscrapers and immaculate beaches of Singapore's seaport look out on one of the world’s largest parking lots: mile after mile of empty cargo ships, as far as the eye can see.

Similar fleets bob at anchor, with empty cargo holds, off the coasts of southeast Malaysia and Hong Kong. And dozens of newly built ships float empty near the giant shipyards of South Korea and China, their owners from all over the world reluctant to accept delivery during one of the worst markets ever for the global shipping industry.

As recently as six weeks ago large freighters that can carry bulk commodities like iron ore or grain were fetching charter rates of $15,000 a day. Now, brokers and owners say, the going rate is $6,000 a day. If any customers can even be found.

Crude oil for November 2012 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $88.40 down $1.48 from Friday's close. In London, Brent for November delivery is trading on the International Commodities Exchange at $110.90. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is at $21 - - The Globe and Mail says that for the past 10 months, Canadian producers - - whose prices are tied to WTI - - have been taking steep discounts for their oil compared with international crude prices that are benchmarked against North Sea Brent, which can be shipped more readily. In the past, WTI tended to trade at a small premium to Brent, because it is easier to refine.

That spread hit a peak of $28.08 (US) on Oct. 14, but has fallen dramatically since then. After plans for more pipeline capacity at Cushing, Oklahoma, the differential narrowed.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,770.30, down $11.00 from Friday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 06, 2011.

Check out our new subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.


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