Joseph Lazzaro
New York - http://
Joseph Lazzaro is a veteran financial editor with more than 10 years in financial news and financial publishing. Lazzaro served as Managing Editor of New York-based financial news web site WallStreetItalia.com / WallStreetEurope.com for four years. Lazzaro, who holds an ABD/Ph.D. in American Government and International Economics from the University of Connecticut, also served as a News Editor for the Pulitzer Prize-winning Hartford [Connecticut] Courant, prior to graduate school. He is based in New York.
Posted Oct 10th 2008 4:50PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Recession, Financial Crisis
Twenty five trillion dollars in global market capitalization wiped out. At least $500 billion -- and most likely in excess of $1 trillion added to the United States' national debt.
The Fed has loaned money to corporations, added massive liquidity to banks, cut interest, and the
U.S. Treasury may invest directly in private banks, if it doesn't nationalize them.
And the currency of the nation primarily responsible for the global financial crisis -- the dollar -- how has it fared?
The
dollar has been firm, for the most part, even rising against the
euro and
British pound. However, the dollar has fallen against
Japan's yen. As of Friday at 2:35 p.m. EDT, the dollar had risen 2 cents versus the euro to $1.3382 and 1.5 cents versus the pound to $1.6947, but had fallen one-half yen to 99.33.
Continue reading Despite stock rout and more U.S. debt, dollar is firm (so far), except vs yen
Posted Oct 10th 2008 2:18PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Politics, Recession, Financial Crisis
Nouriel Roubini, the once obscure New York University economics professor who two years ago predicted the current global financial crisis, now says leaders of the world's major industrialized economies and developing countries must implement an 'all fronts' approach to avert a financial calamity and a global depression.
"It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging-market economies to avoid this economic and financial disaster," Roubini said on his web site,
RGE Monitor.Roubini urged that national policy makers take immediate action to end the crisis, which has dramatically tightened credit conditions worldwide, constraining the ability of corporations to undertake daily operations, which will hurt GDP growth rates in every region.
And, ironically or by coincidence, leaders will have an opportunity to dialogue and implement a common strategy: officials from the International Monetary Fund, World Bank, and Group of Seven (G-7) nations meet in Washington, D.C. this weekend for their previously-scheduled annual meeting.
Continue reading NYU's Roubini: 'All fronts' approach necessary to end global financial crisis
Posted Oct 10th 2008 1:17PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Oil, Recession, Financial Crisis
As national policy makers strive to unfreeze credit markets and end a global financial crisis that threatens to severely damage economies worldwide, Saudi Arabia will not defend an $80 oil price, and instead will let the price of oil fall, to reduce a critical cost stress on the global economy, economists and energy traders say.
Further, despite today's more-diverse oil market characterized by dozens of suppliers, any Saudi decision to not cut production will lower oil prices, Energy Trader Jim Dietz told BloggingStocks Friday.
Saudi Arabia possesses
the largest, proven oil reserves in the world. The kingdom also has the biggest, quickly-marketable spare production capacity in the world, estimated to be 1.5-5.0 million barrels of oil per day, depending on the analysis.
'Saudis will let oil price fall, a lot'"The Saudis are fully aware of the grave situation facing global financial markets and economies. The Saudis are going to let the price of oil fall, a lot. Other OPEC members like Iran or Venezuela may call for a production cut and try to protect their interest, but it's a non-starter, an after thought," Dietz said. "The Saudis know that every stimulative tactic must be used to keep commerce moving and eliminate stress and a lower oil price is part of that solution." (Dietz added that he had no open energy trading positions, his normal stance for a Friday.)
Oil fell $6.94 to $79.65 per barrel Friday at mid-day, as a near-panic atmosphere permeated markets as stocks plunged worldwide and U.S. stock markets declined for an eighth consecutive day. At 12:05 p.m. EDT,
the Dow was down 313 points to 8,265 and the
S&P 500 was down 38 points to 871.
"An $80 oil price is too high for this economy. It probably was too high for any economy, but that is a debate for another time. Right now, the oil market senses that the Saudis know the price of oil must go lower to reduce financial system stress," Dietz said. "And as the Saudis go, so goes the price of oil."
Continue reading Saudis, sensing ominous global situation, seen letting oil price fall to assist recovery
Posted Oct 10th 2008 10:35AM by Joseph Lazzaro
Filed under: International markets, Federal Reserve, Financial Crisis
Thus far, credit conditions remain almost as cold as the ice in the Arctic.
Interest rates for three-month loans in dollars continued to rise early Thursday, as a coordinated interest rate cut by the world's major central banks failed to jump-start bank-to-bank lending.
The London three-month rate increased 7 basis points to 4.82%,
Bloomberg News reported Friday. However, the London interbank offered rate, or LIBOR -- the rate banks charge each other for overnight dollar loans -- plunged 262 basis points to 2.47% early Friday morning, a hint that some liquidity may be creeping back into super-stressed credit markets.
Also, Hong Kong's three-month interbank offered rate, or HIBOR, climbed 1 basis point to 4.41% Friday. Singapore's three-month dollar loan rate increased for a fourth straight day, climbing 23 basis points to 4.74%, the highest this year.
Overnight rates are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, a very high overnight will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.
Continue reading Credit markets remain super-stressed; hint of liquidity seen in LIBOR rate
Posted Oct 9th 2008 5:30PM by Joseph Lazzaro
Filed under: Indices, S and P 500, DJIA, Recession, Financial Crisis
With the nationalization of banks seemingly exceeding IPOs these days, to say that both developed and developing nations economic performance expectations are more-modest today than they were a year ago would be an understatement.
Still, investors would be wise to take a page from that playbook, as it relates to
the Dow, and more broadly, to the U.S. stock market, so says economist Richard Felson.
Concentrating on the problem, not the inconvenienceFelson, who took pains to point out that he is not a market analyst or stock guru, nevertheless highlighted the importance of reining-in stock expectations: people who are 'looking for the market to rally,' or who look for a relatively quick turnaround in stocks in a quarter are missing the point.
"The purpose of the monetary and fiscal actions being taken is to maintain the financial system, so that there
are stock markets, not to get the Dow to rise, or to create the next bull market," Felson said. "Investors need to keep sight of that fact." Today
the Dow closed down 678 points to 8,579 and the
S&P 500 was down 75 points to 909.
Continue reading Modest (and appropriate) expectations: Think holding Dow 8,000
Posted Oct 9th 2008 1:57PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Financial Crisis
The resources of the central bank of
the world's second strongest economy have now been marshaled to address the global financial crisis.
The European Central Bank, led by President Jean-Claude Trichet has shifted policy - - a remarkable, historic change - - and is now working in coordination with its companion major central banks - - the U.S. Federal Reserve, Bank of England, Bank of Japan, and the Bank of China - - and others, to end a credit crisis that threatens to cripple international business and seriously damage economies, worldwide.
A legendary inflation hawk,Trichet, whose ECB lowered its key, short-term interest rate by 50 basis points in conjunction with the other major central banks on Wednesday, declined to rule out further steps to solve the crisis, including additional interest rate cuts,
Bloomberg News reported Thursday.
ECB: banks offered unlimited cash at 3.75%Further, and equally significant, Trichet offered banks unlimited cash at 3.75% to help them cope with tight credit markets,
Reuters reported Thursday. Previously, the ECB had offered funds to the highest bidders, a tactic that pushed average rates as high as 4.99% - - almost 75 basis points above the official rate.
In addition, the ECB cut in half the premium it charges for overnight emergency loans and increased the interest rate it pays on deposits,
Reuters reported Thursday.
Continue reading Trichet's ECB 'cash cavalry' is on the move - and not a moment too soon
Posted Oct 9th 2008 12:10PM by Joseph Lazzaro
Filed under: International markets, Forecasts, Recession, Financial Crisis
The financial crisis that's constrained credit around the world will slow the global economy considerably and quickly, the International Monetary Fund announced in its
October 2008 report.
The IMF now expects global GDP growth to slow to 3.0% in 2009, down from 3.9% forecast in its July 2008 report.
Moreover, economists note it's important to highlight the differences in what constitutes a recession in the developing and developed worlds. Because emerging markets/ developing countries are capable of and require higher growth rates, a low GDP growth rate is roughly equivalent to a negative GDP growth rate in developed countries -- i.e. equivalent to a recession. The average of the two means the global economy can be considered to be in recession when global GDP falls below 3.0%, certainly if it falls below 2.5%.
Worst global GDP growth since 2001-2003Economist David H. Wang told BloggingStocks the IMF's latest forecast points to a global recession, or the closest condition to it.
"It is a somber report, no question. Many developed nations will now record close-to-negative or negative GDP growth for 2009. Add slowing emerging market growth and a credit market that will be in recovery mode for much of 2009 on to high commodity prices, and it's a formula for the worst global economic conditions since the 2001-2003 period," Wang said.
The IMF now expects the U.S. economy to record 1.6% GDP growth in 2008 and just 0.1% in 2009. IMF 2008/2009 GDP forecasts for other key economies are as follows: United Kingdom, 1.0% / -0.1%; Germany: 1.8% / NA; France, 0.8% / 0.2%; Japan, 0.7% / 0.5%; China, 9.7% / 9.3%; India, 7.9% / 6.9%; Brazil, 5.2% / 3.5%; and Mexico, 2.1% / 1.8%.
Continue reading IMF: Global economic slowdown a certainty, due to financial crisis
Posted Oct 9th 2008 10:30AM by Joseph Lazzaro
Filed under: International markets, Federal Reserve, Financial Crisis
The slowdown in global credit markets continues. Interest rates for three-month loans in dollars continued to rise early Thursday, as a coordinated interest rate cut by the world's major central banks failed to jump-start bank-to-bank lending.
Credit markets: Freeze frameThe London three-month rate for dollar loans increased 23 basis points to 4.75%,
Bloomberg News reported Thursday. Meanwhile, the London interbank offered rate, or LIBOR -- the rate banks charge each other for overnight dollar loans -- decreased 29 basis points to 5.09% early Thursday morning; nevertheless, the level still is a very high rate for short-term cash.
Overnight rates are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, a very high overnight will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.
Economist Peter Dawson told BloggingStocks Thursday the failure of short-term, bank-to-bank rates to drop indicates that monetary and fiscal officials will have to do more to maintain financial system liquidity. "Banks remain in a state of fear. Basically, the way things are now banks are assuming that their competitor banks are insolvent unless proven otherwise," Dawson said. "It's a breakdown in trust and its constricting commerce. If it continues it's going slam GDP on both sides of the Atlantic."
Continue reading Short-term interest rates rise again, as tight credit conditions continue
Posted Oct 8th 2008 3:10PM by Joseph Lazzaro
Filed under: Forecasts, Indices, Technical Analysis, S and P 500, DJIA, Recession
The
S&P 500 has dropped 36% in the past year and
the Dow is down about 35% since hitting a high around 14,280 about a year ago.
Each decline is large enough to qualify as a bear market. And yet there's much more downside ahead? Say it ain't so.
Top-ranked analyst is bearishTop-ranked market analyst Jeffrey de Graaf says it is so, or it will be so, according to his analysis,
telling Bloomberg News Wednesday U.S. stocks are only 'halfway through' their current decline. In Wednesday afternoon trading, the Dow was down about 18 points to 9,428 and the S&P 500 was up 1 point to 997.
"The big concern is that we're going into recession,'' de Graaf, a senior managing director at ISI Group Inc. in New York,
told Bloomberg News. "The first part is the unwind of the previous boom, the second is the recession that follows. We're in the camp that we're only halfway through this." De Graaf has been the top-ranked technical analyst in
Institutional Investor magazine's poll the last four years.
Continue reading Leading technical analyst says U.S. stocks 'halfway through' decline
Posted Oct 8th 2008 1:50PM by Joseph Lazzaro
Filed under: International markets, Politics, Federal Reserve, Financial Crisis
If overnight interest rates do not fall as a result of the Fed's guarantee for commercial paper and related efforts to create incentives for banks to lend, the leaders of world's central banks and treasury departments may have to try a more creative approach to end the financial crisis: a global distressed asset summit.
As economist David H. Wang told BloggingStocks Wednesday, the major economies may have to hold a global 'out & price' summit to get distressed and bad assets -- the source of so many of the defaults and resultant fear among banks -- out of the financial system.
The problem, Wang said, is not just that the subprime and Alt-A mortgage backed securities represent distressed and bad debt, it's that "banks and other financial institutions can't determine the value or price of many of these securities."
Unknowns about toxic assets driving fear
Wang believes that "lack of certainty about price is the biggest factor in banks' unwillingness to lend."
"Banks can't determine the price of these assets, it represents a big uncertainty, therefore because they're uncertain regarding what their competitor banks hold, they aren't lending, and they're charging higher rates for short-term loans," Wang said. "Both are restricting commerce and will continue to slow economies all over the world if the problem is not addressed."
Continue reading We need a global summit to get toxic assets out of the system
Posted Oct 8th 2008 10:30AM by Joseph Lazzaro
Filed under: International markets, Industry, Federal Reserve, Financial Crisis
Overnight interest rate continued to rise Wednesday, despite a decision by the
major central banks to cut interest rates, as banks continued to hoard cash and charge very high interest for short-term loans on fears the global financial crisis will worsen.
The London interbank offered rate, or LIBOR -- the rate banks charge each other for overnight dollar loans --
increased 144 basis points to 5.38% early Wednesday morning -- a very high rate for short-term cash. It was the second straight day the LIBOR had risen more than 100 basis points.
Overnight rates are key sources of cash for corporations and other larger institutions that use the cash to pay suppliers, make payroll, roll over debt, etc. Hence, a very high overnight rate will discourage corporations from conducting business, restricting commerce, and thus slow the economy, so says economist Richard Felson.
"We have to force overnight rates lower and encourage banks to lend. High overnight interest rates will discourage companies from conducting typical business and will slow the economy. We've got to stop this bad momentum, eliminate fear, and get the ball rolling in the other direction or GDP will contract more," Felson said.
Continue reading Overnight interest rates continue to rise, likely to constrain business
Posted Oct 8th 2008 8:28AM by Joseph Lazzaro
Filed under: International markets, Forecasts, Federal Reserve, Recession, Financial Crisis
In an unprecedented, emergency, coordinated move,
the Fed and other major central banks cut interest rates Wednesday, in an attempt to prevent the global financial crisis from spreading further and damaging economies.
The Fed, European Central Bank, Bank of England, Bank of Canada, Sveriges Riksbank, and the Swiss National Bank each lowered their benchmark rates by 50 basis points. The Bank of Japan was not involved in this round of rate cuts, but said it fully supported the action.
Separately, China's central bank
also lowered its one-year lending rate by 0.27 percentage points.
"`The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,''
the banks said in joint statement. "Some easing of global monetary conditions is therefore warranted."
The action brought the Fed's benchmark rate to 1.5%; the ECB's main rate is now 3.75%; Canada's declined to 2.5%; the U.K.'s rate fell to 4.5%; Sweden's rate declined to 4.25%. China's rate fell to 6.93%.
Continue reading Fed, ECB, BOE, China cut interest rates to fight global financial crisis
Posted Oct 7th 2008 6:30PM by Joseph Lazzaro
Filed under: International markets, Politics, Financial Crisis
Think it's hard for the U.S. Congress to agree on a policy?
Try getting a policy passed by the
European Union.
Strictly speaking, of course, the
European Parliament (both chambers), not the EU, is akin to the Congress, but the 27-nation EU is proving to be almost as unwieldy as the EP.
The EU's decision to increase the guarantee on bank deposits to 50,000 euros or about $68,000 Tuesday represented the first common, or unified approach to the financial crisis,
The New York Times reported Tuesday, despite incontrovertible data indicating that the credit crunch is restricting lending, both short- and long-term, and is slowing commerce.
EU stance: 'Every nation for himself'Economist Richard Felson told BloggingStocks Tuesday the EU's lack of unified action highlights the limitations of Europe's supranational political system. "For those European nations using the euro, these nations are unified by a common central bank. But fiscal policy, in terms of a treasury department, remains at the nation-state level. That makes it much harder to coordinate a bank rescue, for example," Felson said.
That's the main reason the EU hasn't passed a rescue package similar in scope to the U.S. Congress', Felson said. "Europe's economy is just as large as the U.S.'s and it's likely to experience distressed/bad debt aftereffects almost as large as those in America. It requires a unified response, but thus far it's been 'every nation for himself.' It's very disappointing, from a governance standpoint."
Continue reading EU, sensing credit whirlwind, seen trying again for unified response
Posted Oct 7th 2008 2:45PM by Joseph Lazzaro
Filed under: Federal Reserve, Recession, Financial Crisis
To see the impact of credit market strain in the United States one need not travel farther west than The Bay State.
On Tuesday, Massachusetts, which would rank in the top 100 countries in the world in terms of GDP if ranked as a nation,
postponed the sale of $750 million in short-term notes for the second time in two weeks, due to a lack of demand.
However, it should be pointed out that Massachusetts's decision occurred before
the U.S. Federal Reserve's decision, announced Tuesday at 9 a.m. EDT, to buy all corporate commercial paper to ease tight credit markets.
Further, although the municipal market differs from the corporate commercial paper market, the Fed's action aimed at easing conditions in the credit market overall, via both guaranteeing debt payment and by moral suasion. Many economists see this as the Fed's attempt to change market psychology via the central bank's enormous financial resources, monetary policy stance, and regulatory powers.
Still, economists caution that the Fed's commercial paper guarantee does not end counterparty risk; it simply eliminates a segment of that counterparty risk. According to economist David H. Wang, more actions by the Fed and U.S. Treasury undoubtedly will be needed to get credit flowing more freely and also reduce perhaps the biggest systemic problem: fear. Commercial paper is about a $1.5 trillion market, while states and local governments borrow about $2.8 trillion, Wang said.
Continue reading Massachusetts postpones $750 million short-term debt sale due to credit crunch
Posted Oct 7th 2008 2:05PM by Joseph Lazzaro
Filed under: Oil, Recession, Financial Crisis
Think the price of oil can remain sky-high amid a U.S. recession, a global economic slowdown, and the worst credit market conditions in decades?
Think again.
Oil prices are headed back to $50, according to analyst at an investment firm based in Russia.
Chris Weafer, analyst at Uralsib Capital in Moscow, said the Russian market is projecting that
oil prices will plunge to about $50 per barrel,
The Wall Street Journal reported Tuesday. Amid a U.S. recession and a global economic slowdown,
oil has fallen about 38% to $91.07 per barrel after hitting a record high of $147.27 per barrel in July.
Oil price projections are especially important in Russia because oil revenue has provided much of the capital for Russia's development, economic expansion and funds for the Russian Government's programs.
Further, Weafer now expects Russia's GDP growth to slow to 3% in 2009, as global growth and the financial crisis slows both foreign demand for oil and commercial activity in Russia,
The Journal reported. In turn, that will force Russia's government to reduce spending for certain programs, while eliminating funding for others, Weafer added.
Continue reading Analyst sees oil dropping to $50 on global economic slowdown
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