Embattled Banco Espirito Santo revealed in a regulatory filing that Goldman Sachs bought a 2.27% stake in the bank on July 15. That’s a good signal because the Goldmanites were likely to do some due diligence.
On the other hand, Banco Espirito Santo also revealed it has hired Deutsche Bank to assess the “potential optimization” of the balance sheet. That sounds suspicious.
Shares of Banco Espirito Santo have stabilized since Goldman bought shares on July 15
Argentina is facing a technical default at month-end because it’s been virtually barred from using the US financial system to pay current bondholders until holdouts from the 2001 default are paid.
A bond payment is due on July 30 and now Argentine officials are looking for more time. A lawyer for Argentina says a deal by month-end is impossible, even with round-the-clock talks.
That’s exactly the kind of thing a lawyer that bills by the hour would say but this is a high-stakes operation. Argentina has been a perpetual basketcase but troubles there helped to disrupt broader markets in February and a technical default would threaten the same.
On problem paying the holdouts is that it would trigger a clawback clause in current bonds. That clause expires at year end and Argentina will try to buy time until at least then.
EUR/JPY has bounced slightly on better risk appetite but is down about 40 pips to 136.73 on the day. The range is 137.34 to 136.59, which is a 5-month low.
The pair is creeping ever-closer to the Feb low of 136.23 and that’s the key level to watch in the days ahead. The pair posted an outside reversal bearish reversal today and the inability to rally on better risk appetite is a bearish signal.
Bids are at 136.50, which includes a rumored barrier option. Look for stops below. More bids at the Feb low then another barrier at 136.00.
Offers at 137.30/35. More at 137.55 then at 1.3775/80. Stronger sellers at 1.3800.
Palestinian leadership proposes to Egypt plan for Gaza ceasefire followed by 5-day talks, according to a Fatah official in Cairo cited by Reuters.
Nearly 6 hours they sat in a meeting today to talk about sanctions yet the spineless basket weavers running Europe have one eye on the speedos and suncream after failing miserably to hand out even the mildest of new sanctions.
As Adam says, it’s to be expected really. After this week they’ll all be packing their bags and heading off to campsites and beaches across the continent.
Gone fishing, back in two months
At least us Brits will continue to press for a stronger hand on Russia as foreign secretary Philip Hammond says that EU ministers agreed to look at an embargo on new arms sales to Russia and restrictions on access to capital markets, financial services and high technology goods for use in energy sector. He says Britain wants cronies around president Putin to bear the pressure of sanctions.
It’s still all going to wait until they’ve had their jollies though.
Summer in Europe. It’s not best on the eyes.
Coming soon to a European beach near you
Big day right across the board in European stock markets. It might be good in the short term that European leaders are letting Putin get away with whatever he wants but there will be a price to pay down the road:
- UK FTSE +1.0%
- German DAX +1.2%
- French CAC +1.5%
- Spain IBEX +1.6%
- Italy MIB +2.2%
UK stocks are about 1.5% from the highs while German shares are off by about 3% and Italian stocks are 7.6% below the June highs.
The mess of European bureaucracy rarely gets the benefit of the doubt but after a plane leaving from Amsterdam full of innocent civilians was shot down in a Russian-sponsored war the market through the EU might get its act together and slap some swift sanctions on Russia.
Instead, EU leaders have walked out of meetings with pronouncements like this:
- Russian faces more sanctions on unless it cooperates (Steinmeier)
- We decided that the European Commission to look at a number of potential measures (Timmermans)
The most they could come up with was a few more names of individuals, which will be submitted on Thursday. The toothless response is helping risk trades.
AUD/USD jumped 40 pips on the soft US inflation data and hit a session high of 0.9422 but virtually all the gains have now been erased and it’s trading back at 0.9388.
There is some demand ahead of the pre-CPI low of 0.9380 then more bids at session low/55-dma at 0.9356. More at 0.9350 and 0.9340 so it will be tough going on the downside.
Stevens was out with a speech earlier but didn’t really touch on the Australian dollar. The key will be the inflation report in the day ahead. The market sees a slim chance of a rate cut over the next year but soft inflation combined with continue weak employment data could eventually mean cuts.
The S&P 500 is up 12 points and has broken the July 7 all-time high of 1985.59. Low inflation and decent economic data is the perfect combination for stock markets.
Get the glasses ready!
1.7042 is as far as we’ve come so far and 7 pips short of the spike low on Friday.
We’re also having another look below the Oct 2013 support line
GBP/USD Daily chart 22 07 2014
A fall through support here would see the 1.70 level come into focus which also marks the 38.2 fib of the May swing up. Under that the 50 fib also coincides with the 55 dma and the 100 mma at 1.6935
We’re slowly creeping further and further away from the recent highs and although there is some dollar moves behind it I wouldn’t get complacent that were done at the highs. Retail sales and GDP later in the week may not cause us to stray too far.