Daily Market Reviews by MAYZUS

[UWC Neeraj]

15 MARCH 2013: STOCK MARKET GROWTH SMILE ON US DOLLAR

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments


The Dow Jones Industrial rose for a 10th straight day in a stock rally not seen since 1996, and ended up 0,6% at 14 539. This followed a strong session in Europe. In Asia stocks rose again this morning after two loss making sessions. The rally was spurred by new US- labor market data showing a fall in the weekly numbers applying for. The data reflects that the American economy is steadily improving. A raft of recent data from retail sales and manufacturing to employment and housing have shown that the US economy is gathering steam.

In contradiction to former historical stock rallies where the green buck was used as some kind of a life jacket, the USD has this time benefited greatly on the stock market’s surge to new highs and improved economic data. Against a basket of currency, DXY, the dollar has reached a seven month high. Since January USD/JPY has jumped from 86,67 to over 96. Pound Sterling, GBP, has fallen from 1.62 to a bottom of 1.4832 earlier this week. The moves suggest that the dollar has entered a multi-year bull cycle where the dollar has outperformed nine of the major G-10 currencies.

Political uncertainty in Italy has re-ignited fear about the euro zone’s debt crisis and put new pressure on the Euro. Weak economic growth and prospects of aggressive monetary easing in Japan and Britain have driven the yen and GBP to multi-year lows. Spending cuts in Washington could for sure damper US economic growth and the FED has further pledged to keep interest rates low for the foreseeable future. But capital flows continue to rotate in the favor of US-assets and strengthen both the US economy and the dollar.

The dollar strength against JPY and Euro took a little breather on Friday. USD/JPY trades at 96,03 down from the peak of 96,71 on Tuesday. If the Bank of Japan (BOJ) follows up on its declared strong monetary easing policies, USD/JPY is likely to trade in a future range between 95 – 105. If BOJ disappoints the trading range is expected to be 86 – 96. Euro/USD was in the short term strengthened by a positive Spanish bond auction on Thursday. It trades at 1.3010. Pound sterling and Australian dollar were yesterday’s winners. The Aussie added another 0,8% after another one percentage jump on good employment numbers on Wednesday.

British pound surged yesterday as investors scrambled to cover short positions made on expectations of more quantitative easing by the Bank of England. The Bank’s Governor stated that GDP according to his opinion is properly valued and not seeking further depreciation. GDP was helped by rumors that Qatar is planning to invest billions of GBP into British infrastructure projects. The GDP yesterday’s 1% gain is the biggest seen in seven months.

These short term gains are nevertheless not expected to have any major medium or long term impact. The long medium and long term outlook point towards a stronger USD both in relation to Euro, JPY, GDP and most other currencies. These forecasts for Euro/USD point to a new test on former bottom levels 1.19 – 1.20. It is also predicted that USD/GBP can drop as low as 1.35. The corridor range 95 – 105 is the most likely medium term scenario for USD/JPY.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

18 MARCH 2013: VOTE ON CONTROVERSIAL DEPOSIT HAIRCUT TODAY

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The Cypriot Parliament is later today going to vote on EU finance minister’s unprecedented decision to impose an all-out haircut on Cypriot deposits. The newly elected President Nikos Anastasiades was in Brussels with his finance minister Friday night and returned back to an uproar among Cypriot and foreigners who had entrusted their savings to the island’s banks and now found them in risk of being confiscated.

The bail-out was cut from Euro 17 to 10 Billion and implies that savers have been forced to bear the cut. Banks are by Tuesday 19th automatically going to withdraw 9,9% on deposits above Euro 100 000 and 6,75% on all smaller amounts. It is unclear whether this implies both private and corporate accounts. But most likely both. It also seems that the decision applies to accounts in all Cyprus based banks regardless of their origin country. All accounts seem to be hit in an action that best can be described as pure confiscation or theft of private savings and funds.

The unilateral action of the European Union and the Cypriot government have instituted a new practice never earlier seen in financial markets. The confiscation or “levy” which they call it, is estimated to contribute Euro 5,5 billion towards the recapitalization of the Cypriot banks. This counts for more than 50% of the bail out from the richest countries in Europe. In a televised speech on Sunday President Anastasiades defended his decision and stated that Cyprus was faced with the gravest situation since the Turkish invasion in 1974. The Cypriot government has “sugared” its measures by stressing that the confiscated funds are compensated by shares in the island’s bankrupt banks, the Bank of Cyprus and Popular Bank.

Supporters of the new president have lately stressed his good and friendly relations with Angela Merkel and other European center right leaders. “Lazy” Greeks and “irresponsible” Cypriots have for long time leading up to the German elections in September, been negative headlines in the German press. Nikos Anastasiades got his chance to prove he is Germany’s devoted friend. He might have helped Merkel’s election campaign, but does this decision serve ambitions of making Cyprus a financial center?

This is also a question of negotiating tactics. In its dealings with EURO zone finance ministers and the “troika” of representatives from the International Monetary Fund, IMF, the European Central Bank, ECB, and EU, Cyprus demonstrated that they were overeager to strike a deal. This never pays off in a Brussels nourished by confrontations and last minute’s deals. The late hours exercise in Brussels have given both Cyprus and the Euro zone members a hard lesson. It is time for blue Monday blues.

The new Cyprus government has experienced – if they believed it in before - that there are no solidarity or true friends in Europe. It does not matter whether you are a goodwill pro-European or a former communist. European relations are built on interest politics. Cyprus has less than a million people and institutes 0,2% of the Gross Domestic product inside the Euro zone. But exactly the size is why European leaders could have afforded to be a little generous. Instead EU once again demonstrated an attitude which lately has brought the Southern periphery of Europe to despair.

Today the Euro is falling 100 points close to 1,29. The message is clear. Neither markets nor Cypriots any longer trust the Eurozone reliability. Why should other Western European depositors do when their banks are bankrupt? Today Cypriot bank customers are treated dis respectfully. Their deposits are stolen and they are offered valueless shares. Next time the same medicine might be ordained to Italy, Spain, Greece, and Portugal or for that sake Netherlands.

It has been sent a clear message to whole Europe. When governments are reluctant to pay for their banks speculations and excesses private property rights do not apply. Then it is up to the man in the street to pay the bill by having their accounts confiscated.

Luckily enough MAYZUS Investment Company has been wisely enough to keep our client funds in banks outside Cyprus.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

19 MARCH 2013: DEADLOCK OVER CYPRUS BAILOUT

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The Cypriot parliament is scheduled to vote over the Brussels agreed bailout later today. The meeting for yesterday was postponed when party deliberations showed that there was no majority in favor of the package. The President of Cyprus informed Angela Merkel last night that he had not been able to mobilize a majority for the bailout package which has created anger and fury in Cyprus and shaken international markets. The initial reactions to the so called “levy” have been disastrous. It is likely that today’s scheduled Parliament meeting again would be postponed. A reject of the bailout shall most probably create new tumults in the markets.

The Cyprus government has decided to close the banks today and most probably for the rest of the week to avoid a rush on withdrawal of deposits. The ATM machines which were emptied during the holidays have been filled up again and are functioning.

The decision to enter private banking accounts and confiscate them at will, have had far reaching effects. Major principles are at stake. The decision to put a levy on deposit accounts have scared global markets. Nervousness and risk aversion are back in play with focus on the Euro zone. Stock markets in America, Asia and Europe fell dramatically yesterday with Asia recovering this morning after digestion.

The big question is that when this could happen to euro member with a tiny economy as Cyprus; constituting 0,2% of the total euro zone GDP, who might next in line? Spain, Portugal or Italy? If the Cyprus bailout continues to be handled in an unprofessional manner this can lead to contagion and a run on the banks all over the euro zone.

The plain content of the Brussels decision is that it overstepped and violated sacred principles of private property rights. Governments should not mess with citizen’s private banking accounts regardless of which strong arguments you think you have. The “troika” representing some of the strongest capital forces in the world, has stressed that Cyprus has an overblown banking sector. Germany and other Euro countries accuse Cyprus for money laundering and that rich Russian oligarchs presumably have deposited money in Cypriot banks.

But are these news have not come to light over night? They have lived with Cyprus since the breakdown of the Soviet Union when Russian businesses without a functioning banking system at home turned its attention to the visa free Cyprus. Anti-money laundering measures are functioning more efficiently in Cyprus today then did when Cyprus entered the European Union 10 years ago and the Euro in 2006. Cyprus has been following the same rules and regulations practiced inside the European union and the Euro zone relating to money laundering.

At the same time Cyprus has been living high on Russian capital injections. Banks, law offices and auditors have prospered and so has the real estate sector. Why this sudden change of heart? What justifies that euro ministers and President Anastasiades permit to give banks a green light to intrude on and steal from clients banking accounts regardless of whether you call it a “levy” and not theft or for that sake a bank robbery.

The Cypriot government has used the last 24 hours to try sugar a decision which from the very beginning was ill thought. Brussels have seemingly blessed that Cypriots are free to decide to exempt smaller savings account from the “levy” as long as the total confiscation stands at 5.8 Billion Euro.

That does not change the sacrosanct principles involved in spite of Euro ministers and the Cyprus government now pretending to be modern Robin Hoods stealing more from the rich than the poor. Russian and British companies and private accounts are most severely hit. President Vladimir Putin and Prime Minister Medvedev are understandably furious. Russia gave Cyprus a generous loan on Euro 2,5 billion in 2011. Nevertheless neither Euro finance ministers nor the Cypriot government bothered to consult Moscow before this crucial decision was taken.

The Cypriot Minister of Finance has planned to go to Moscow on Wednesday presumably to ask for better terms. We wish him a good trip. The Minister might find that the timing for asking for more favorable terms and conditions on existing loans is ill planned when it comes on the top of a confiscation of might be 4 – 5 billion Euros. Putin has rightly called Friday’s decision “unprofessional, unfair and creating a dangerous precedent”.

For clients of MAYZUS Investment Company it is once more important to stress. Whatever outcome the planned “levy” shall have no impact on their deposits with MAYZUS Investment Company. Only a tiny portion of our funds are placed in Cypriot banks. Client funds are with prime banks outside Cyprus.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

20 MARCH 2013: CYPRUS MIGHT TRAVEL EAST

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

After serious miscalculations both on the part of the Cypriot government and the euro zones finance ministers, the newly elected President Nikos Anastasiades might be heading east. After building close and friendly relations with Angela Merkel and his German sister party, CDU, during the first month of his Presidency, the real content of these relations were put on a severe test during the Euro zone meeting last Friday.

Anastasiades was met with a done deal. His strong objections and clear statement that the proposed bailout would have no chance to pass Parliament, fell on death ears. When appealing to Merkel for flexibility when calling her on Monday, he was met with a cold shoulder and instruction to talk with the troika. Merkel also strongly advised against any contact with Russia.

This response and the Cypriot parliament’s flat rejection, might have given the Cypriot President exactly the encouragement he needed to demonstrate that he is nobody’s puddle. He is neither the property of the German Chancellor or the European Union. In a critical moment of need what the ruling technocratic elites in Europe were able to come up with, was a proposal to temper with private banking accounts and confiscate from 6.75 to 9,9% of their value. This infuriated everybody concerned from poor Cypriot pensioners to rich Russian oligarchs, Arab sheikhs and ordinary employees with small accounts. Nobody likes to have their savings stolen. Over the last days the Euro zone proposal has created an uproar. We can see the beginning of global financial crisis where the Euro falling as a stone and everybody asks which are the next banks to fall.

If this was a calculated risk on behalf of European technocrats they are paying a high price completely overlooking the explosive political dimension in Southern Europe. The President of European Central Bank, Mario Draghi, was as late as in September willing to take whatever it takes to save the Euro. By his strong statement he stabilized euro zone markets and the common currency. By treating a small, but very proud nation as a given entity, the euro zone and the financial markets are plunged back to where they were a year ago. The result of the German inspired austerities are there for everybody to see; negative growth, mass employment and new lost youth generations don’t especially in the periphery of Europe. This does not inspire belief in the high values of democracy and freedom preached by European technocrats.

During the session in the Cypriot parliament yesterday there was not a single vote in favor of the European bail out. Outside Parliament there were furious demonstrations and flag waving remarkably enough in favor of a Russian solution. No wonder that Anastasiades, humiliated and rejected from his Western European friends, feels for going east. His Minister of Finance is already in Moscow. If the President decides to take the next plane the whole nation shall stand behind him and wish him well in the negotiations. From being the “traitor” selling out Cypriot interests, he might during some days have turned into a national hero.

There is, however, be no easy sell for Anastasiades. President Vladimir Putin was furious and offended for not being consulted either by EU or Cyprus before last Friday’s decision. He found the proposed solution “unfair, unprofessional and with unforeseeable consequences”. Russians are world masters in chess, and each move must be carefully considered not at least from the Cypriot side.

But much is at stake also for Russia. The German Minister of Finance, Wolfgang Schaeuble, said this morning that Cypriots only have themselves to blame when they don’t understand that they have an overblown banking sector. From a logical point of view he might have a point. Psychologically he is building under the image of the arrogant German in a situation where the streets in Southern Europe are boiling and where especially bankers and the Brussels technocratic shall think twice before finger pointing. It might be easier for Anastasiades to find common language with their eastern orthodox brothers in Moscow than with a German Lutheran protestant.

Russia has recently given Cyprus a loan on Euro 2,5 billion. To prolong it with 5 years on better conditions might be the easiest part. But by playing hard ball with EU going east, Cyprus might be seeking a bail out partner for their banks in Moscow. For a Russia which already has deposited Euro 30 – 35 Billion in Cyprus, the 10 billion offered in bail out from EU, IMF and ECB, might seem such an excessive amount of money. And in addition: Qatari and Chinese money bags are flirting at the doors. Newly discovered gas on continental shelf is also a part of the game.

Might be that Western Europe in the end needs Cyprus more than Cyprus ever needed the euro. The Cyprus drama seems just about to begin.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

21 MARCH 2013: EU THREATENS CYPRUS WITH CUTOFF OF FUNDS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Cyprus is considering to nationalize pension funds which hold between 2 and 3 million euros and issuing an emergency bond linked to future natural gas revenues as talks continue in Nicosia, Brussels and Moscow. The Government has decided to keep banks closed till Tuesday 26th next week in an effort to try to avoid a customer’s run on the bank when they open. The banks have been closed since Friday last week. The Cypriot Parliament on Tuesday rejected EU’s term and conditions for a Euro 10 Billion bailout and turned to Russia for aid. This comes amid threats for a complete cutoff in funds to Cyprus.

Finance Minister Michael Sarris has extended his stay in Moscow. Russian officials said that Sarris has asked for a further 5 billion euros on top of a five year extension and lower interest on an existing 2,5-billion euro loan given in 2011. Russian clients hold approximate 30 Billion Euros in Cypriot banks, and would be especially hard hit by the proposed bailout which threaten to confiscate 9,9% or more on all bank accounts with a balance above 100 000 Euros. That equals a confiscation of 3 – 5 B euros from Russian citizens’ dependent of which percentage is finally chosen. EU has indicated an even higher levy than 9,9% on deposits above 100.000.

Russian Prime Minister Dmitry Medvedev will today meet with a delegation from the EU Commission in Moscow. Both President Vladimir Putin and Medvedev have expressed outrage with the way both EU and the Cyprus government have handled the bailout question. Russia was in spite of promises not consulted in advance. Putin called the bailout package “unfair, unprofessional and with unprecedented consequences”.

In a statement yesterday Medvedev said that Euro zone ministers had behaved “like a bull in a China shop” and likened the proposals to Soviet-era confiscations. This made little impression on EU-leaders who continued to stress that the bailout was fair and urgent action needed to save the overblown banking system in Cyprus from collapsing. The European Central Bank (ECB) warned simultaneously that Cyprus was running out of time. ECB would pull the plug on Cyprus unless the tiny country of 1 million people, quickly accepts a bailout.

That made little impression on Cypriots who continue to balk at EUs demands for a confiscation of 5,8 billion Euros from private accounts. This has so far been a taboo in Europe’s handling of the debt crisis. Private accounts have been regarded sacrosanct and not touched. The reason why EU in relation to Cyprus has chosen to break with this sacred principle, is probably due to the fact that a big number of Russian accounts are involved. Facing an election in September the German Chancellor, Angela Merkel, is afraid of being accused for bailing out rich Russian with for what might be claimed as German taxpayer’s money.

The first turbulence in global markets after the Cyprus crisis is slowly fading for now. Asian markets rose on FED chief, Ben Bernanke’s statement yesterday painting a more optimistic picture of the employment situation without indicating an end to monetary easing. The Euro has stabilized from steep falls earlier in the week. The handling of the Cyprus crisis has once again put the question of the survival of the common currency on the agenda and raised focus on negative growth, political instability and the mass unemployment inside the Euro zone.

On that basis global observers are asking whether the EU-leaders complete have miscalculated markets reaction in their handling of the Cyprus crisis. It is announced that the Cypriot President, Nikos Anastasiades, today is going to present his Plan B for how possibly get out of the crisis.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

22 MARCH 2013: ECB GIVES CYPRUS BAILOUT ULTIMATUM

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The Cyprus drama escalated with furious banking employees protesting in front of Parliament as worries about the effect of the Cyprus-crisis on the euro zone intensified. Shares in Europe fall yesterday as did USD/EURO. The Euro is under continued downward pressure. The European Central Bank (ECB) simultaneously issued a bailout ultimatum that liquidity transfers to the Central Bank of Cyprus would be stopped on Monday unless Cyprus agreed on terms and conditions for a bailout.

In a bid to raise investments in a Solidarity Fund to raise the required Euro 5,8 billion that is necessary to unlock the EU/IMF’s Euro 10 billion financial assistance package for Cyprus, the Government yesterday succeeded in mobilizing support from all the political parties. The powerful and economically strong Greek Orthodox Church has also stated its willingness to contribute with cash injections and land assets. The Fund would be built up on possible future income from the oil and gas reserves on the continental shelf.

Any effort to speed up offshore natural gas exploration as a way of attracting desperately needed investment to save its teetering economy, might, however, be challenged by Turkey which questions Cyprus sovereign rights to explore and exploit what Turkey regards as disputed areas. According to the International Law of the Sea Convention agreement between the concerned parties is a prerequisite for starting drilling activities in disputed areas. A possible Turkish challenge gives an added dimension to the crisis as a stark reminder of the Turkish invasion of Cyprus in 1974.

Potential gas riches also seem to have been part of the negotiations the Minister of finance, Michael Sarris, is conducting in Moscow. The gas resources have been identified as one area where Russia might be interested in investing. A lot of rumors are surrounding these negotiations which so far has reached no breakthrough. Yesterday it was claimed that the second biggest bank, Popular Bank of Cyprus, was bankrupt, and that Gazprombank the financial arm of Gazprom, the world’s biggest gas company was ready to take over in a trade off with access to blocks on the shelf. That was denied by Gazprombank. It is, however, a fact that both Popular and the Bank of Cyprus are closed to bankruptcy.

Rumors were also spread that Cyprus has given Russia rights to establish a naval base in Meri. Russia might in connection with informal talks on the side line of the official negotiations, sounded out the opportunity to establish repair facilities for its merchant fleet in Cyprus. Similar sounding outs have been given to Greek islands. Nothing has yet been finally settled. Russia might be willing to extend the Euro 2,5 billion credit given to Cyprus for 5 years at 4,5% interest rate for 5 more years.

It is nevertheless worth reminding that England has had two military bases on the island since Cyprus gained its independence in 1960. There are also bases on the Turkish occupied northern part of Cyprus. On that basis a Russian naval base seems rather unlikely.

A delegation from the EU-commission headed by the President, Manuel Barroso, met yesterday with Prime Minister Dmitry Medvedev. Before the meeting Medvedev lambasted the EU’s handling of the Cyprus debt crisis comparing the “levy” with Soviet style confiscations. The fact that EU and the newly elected Cyprus president, Nikos Anastasiades, left Moscow, one of the most concerned parties, out in the dark regarding the bailout created outrage.

Officials in Moscow were privately skeptical to a Russian bailout or in Russia’s interest to provide further bridging loans. Commercial criteria would be the basis for any possible investments. This was clearly expressed by one Russian banker: “Buying worthless equity in a bank for a million or two. That is not going to bear very far here in Moscow”.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

25 MARCH 2013: EURO GAINS ON CYPRUS BAIL-OUT

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The Euro and Asian shares rose on Monday after Cyprus reached a last minute deal with international lenders for a 10 billion euro bailout. The agreement was reached hours before a deadline to avert a financial collapse. The European Central Bank (ECB) had declared on Friday that it would stop emergency liquidity to two big exposed, Cypriot banks, Bank of Cyprus and the Popular Bank, on the 25th if a solution was not found. The deal which is not dependent of support by the Cypriot parliament which last Tuesday rejected a bail-out proposal obtained in Brussels earlier. Euro/USD trades 1.3029; 50 points up from Friday.

During the negotiations all the concerned parties plaid hard ball. The newly elected Cypriot president, Nicos Anastasiades, who is known as Euro-friendly, threatened the Euro-ministers to resign if he was pressed, too, far. Anastasiades also firstly rejected to participate when final EU-meetings were resumed late Sunday night stressing the unacceptability of Cyprus negotiating with a pistol to its head. The German Finance Minister countered claiming a total lack of realism on Cyprus’ behalf. A crisis sentiment ruled during the talks, and in line with Brussels traditions a last minute deal was clinched after 12 hours negotiations.

The deal involves a winding down of the second largest bank, the Popular Bank of Cyprus, Laiki, and shifting deposits below 100 000 euros to the biggest Bank of Cyprus to create a bank with healthy assets. Deposits above 100 000 euros in both banks, which are not guaranteed under EU-law, will be frozen and used to recapitalize the Bank of Cyprus through a deposit/equity conversion. This raid on uninsured Laiki depositors is expected to raise 4,2 billion euros. Up to 40% of the balance on these accounts risk to be confiscated much higher than the 20% originally envisaged. This will especially hurt foreigners and mainly Russian depositors who stand to lose billions of dollars. It is estimated that Russians have deposited up to 35 billion euros in Cyprus.

It is likely that the proposed agreement will create strong negative reactions from Russia, Ukraine and other concerned countries. Prime Minister Medvedev likened last week the EU-proposal with Soviet-type confiscation. Most of the 6 200 employees in Laiki would probably lose their jobs. Employees reacted last week with fury on the proposals and out the President and Parliament under strong pressure. A poll during the weekend showed that 2/3 of the Greek Cypriots preferred to leave the Euro. A week earlier 67% was in favor of the Euro.

The Minister of Finance, Michael Sarris, said in an interview with BBS that the agreement avoided financial disaster for Cyprus. Anastasiades left Brussels without making any comments. A Cypriot exit from the euro might have been avoided in this first round, but the fact that international lenders for the first time during the debt crisis in the Euro zone use sacrosanct private account funds in a bail-in arrangement might have serious contagion consequences all over the euro zone.

Bank employees and the public have additionally taken notice that leading managers in Bank of Cyprus and Laiki lately have received generous parachutes when the two banks for all practical purposes were bankrupt. Many Cypriots are asking the fairness of such parachutes in a situation where the same bankers have gambled with clients money and speculated in treasury bills and unsecured Greek loans. The two biggest banks have 25 billion euros in bad Greek loans after firstly losing billions on the Greek Treasury bill haircut imposed by EU and IMF.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

26 MARCH 2013: MARKETS NEGATIVE TO CYPRUS BAIL-OUT

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Digesting the details of the Cyprus bailout markets reacted negative to the scheme agreed in Brussels Monday morning. After initially rallying stock markets fell back yesterday evening and Asian shares eased as investors worried about the potential risk from the Cyprus bailout scheme. Euro/USD which rallied on the news and reached 1.3050, fell steeply back and trades at 1.2869 putting the single currency under new downward pressure. “Safe haven” currencies as USD and Japanese yen have strengthened. Gold is falling back after initially rallying to 1614.

Markets were positive to the news that a crisis was averted. But as the details of the bailout scheme became clear, markets were starkly reminded of the risk involved in the Euro zone. When little Cyprus with a million people and a GDP constituting 0,2% of the GDP in Western Europe, creates such waves in the financial markets what when a crisis occur in Spain or Italy? The EU handling of the crisis leaves serious questions and strengthens the impression that the Euro zone is living on borrowed time and a breakup of the common currency edges closer.

The Euro based on a lack of common taxation and financial policies has over the last years experienced 5 crisis situations ending up with bailouts in Ireland, Portugal, Greece, Spain and now Cyprus. While tax payers were doomed to pay the bill for the first four crisis, Cyprus is instituting a new unheard principle. Bank depositors are this time asked to pay for the mess created primarily by Bank of Cyprus and Popular Bank of Cyprus’s speculations with depositors’ money over the last years in crisis ridden Greece.

The new package exempts depositors with accounts below Euro 100 000. Depositors with a balance above EURO 100 000 will have their accounts frozen and the door kept open for future confiscations in the magnitude of 40%. EU officials stated yesterday that this step, confiscating private depositors’ funds, might constitute the rule for the future. Strict currency controls are introduced and the banks are going to open firstly on Thursday being closed for two weeks. Bank clients are permitted to subtract Euro 100 from their accounts using ATM machines.

EU and especially Germany have in their propaganda for justifying what they with a misled concept have called “levy”, made Russian depositors in Cyprus the scapegoat. Most observers with some knowledge are aware that the big chunk of the Russian cash in Cypriot banks has its root in the chaotic privatization following the fall of communism and the Soviet Union in 1991. The bank system broke down, and Russians used Cyprus as one of many new domiciles for cash stashed in their luggage. Nobody asked, too, many questions. The west supported the wild-west privatization as the true token of freedom and democracy. Cypriot auditors, law offices, real estate agents and bankers did not ask naughty questions and greatly thrived on the Russian business.

OECD in the late 1990-ies put Russia on the black list for suspected money laundering countries. After thorough investigations Cyprus was removed from this list in 2002. Removal from the black list was one of the preconditions for EU membership in 2004 and the entry into the Euro in 2006. The 10% corporate tax which now is going to be increased to 12,5%, was introduced as a result of negotiations and EU-agreement to facilitate a country that had to accept the common agriculture policies and prohibition of production of traditional products. The so called “troika” has for a long time demanded free access to banks and other institutions. Suddenly over the night Russian money and some “oligarchs” have been turned into a money laundering mafia.

President Nicos Anastasiades who has his fair share of rich Russians on his law office clients list, defended the bailout terms in a televised speech to the nation yesterday last night as the majority of Cypriots ask for independence and threaten to leave the Euro. Whether his arguments will dampen the anger of fury in a small country realizing being dictated from Berlin and Brussels, are open questions. The last two weeks have opened independent Cypriots’ eyes for what it means to be member of a rich man’s club in Northern Europe. Cypriots are as Greeks, Russians and Serbians orthodox. Religion plays an important role as strategic and security considerations did when Turkey invaded the island in 1974.

In this situation it may be dangerous to concentrate only on small figures and behave as elephants in a Chinese porcelain shop.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

27 MARCH 2013: ASIAN SHARES GAINS ON POSITIVE US DATA

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Asian shares rose on Wednesday as positive US data confirm a moderate recovery. US Home sales and manufacturing fed optimism with the Dow Jones industrial climbing more than 100 points to a new record high. 14 559 beats he former record from March 5th 2007. Data showed that single family home prices in January rose at the fastest pace in six years. Durable manufactured goods also shot up in February. The numbers are boosting investor confidence and loading up on equities.

The rosy US picture is in stark contrast to Europe where the Cyprus crisis and its possible contagion impact on other vulnerable members of the euro zone take central stage. The Cyprus bank bailout inflicts huge losses; up to 40% on deposits above Euro 100 000. Banks are still closed. When they hopefully open tomorrow it would be strict restrictions on currency transactions to avoid a run on the banks.

The second biggest bank, the Popular Bank of Cyprus, has been closed down. Its healthy assets, deposits below Euro 100 000, will be transferred to the Bank of Cyprus in an effort to boost and save the island’s biggest bank. Minister of Finance Michael Sarris stroke a positive tone yesterday when he stressed that the banking transaction restrictions would last only for some weeks. Others are more realistic. Cyprus fears capital flight and a run on their banks. It is likely that big Russian, British and Middle Eastern clients will take their money out as soon as there is a chance.

The handling of the Cyprus crisis also threaten to set a bad precedence. For the first time EU, the European Central Bank, ECB, and the International Monetary Fund, IMF, has confiscated funds on private accounts to finance a bailout. That has violate sacred principles. European politicians have later indicated that this practice would be followed in connection with possible other bailouts inside the Eurozone. This has sent shock waves through the European financial system and threaten banking clients especially in countries like Italy and Spain which might be next in line.

The practical consequence of the Cyprus bailout is that it might have undermined public trust in a banking system ridden by high profile scandals and banker’s speculation and misuse of client funds. The way the EU, ECB and INMF has handled the Cyprus crisis has further increased the divide between north and south in Europe. Southerners are reacting with dismay on what they see as German and EU technocrat arrogance. Confidence in the common currency is thereby also hit. While bankers are saved with generous parachutes the EU and IMF imposed austerity measures have meant unemployment and misery for the people in the southern periphery.

The Euro/USD is under steady downward pressure and trades at 1.2849. Currency analysts are expecting 1.25 in a short two months perspective. Oil prices are up with NYMEX trading above 96 the highest level seen for weeks. Brent crude is above USD 109 a barrel on the better US data. The BRIX countries meeting in Durban in South Africa has decided to establish a new investment bank in support of weaker economies with acute payment problems. It is stressed that this banking establishment is not a substitute, but a complementary to IMF.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

28 MARCH 2013: ASIAN INDEXES ARE DECREASING ON NEWS THAT CHINA IS GOING TO LIMIT FOREIGN INVESTMENTS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

China will encourage foreign investments into services and high technologies sectors, but at the same time will rigidly limit capital investments in construction, real estate, and also the projects, differing to high power consumption and polluting environment. This news brought negative impact on Asian stock markets where weaker than the others is Chinese continental SSE index. Most of all it was reflected in the banking sector, where Bank of Communications and China Merchant Bank are losing more than 4%.

On Wednesday, American market could not any longer ignore bad news coming from the Europe and did not continue its growth started the day before. Index of incomplete transactions on sale of houses in February decreased more strongly than expected 104,8 points. Following the results of the trading session the indicator of "blue chips" the Dow Jones Industrial Average index was closed with -0,23% on a level 14526,16 points, the S&P 500 lost 0,06%, and the index of the hi-tech companies Nasdaq grew up for 0,12% to a level of 3256,52 points.

In Europe, besides Cyprus – Italy is again coming to the headers of news feeds. On last placement of the Italian debt papers, Rome managed to attract only 6,91 billion euro from the planned 7 billion euro. In Nicosia, in turn, the authorities presented a package of measures for capital control. Among other things it should be noted that single withdrawal of funds won't exceed 300 euros, and it will not be possible to take more than 1000 euros out of the country. The Cypriot banks will open today after almost two-week break.

Prices for oil are stable this morning and both Brent and NYMEX are adding 0.22% and 0.33% accordingly. Brent is traded on a level 109.94$ per barrel and NYMEX on a level of 96.90$. Ascending movement proceeds against noticeable strengthening of the American dollar in relation to the majority of world currencies. Gold is losing 0.12% and is traded on a level of 1604.28$ per troy ounce.

EUR/USD pair is slightly correcting and is strengthening for 0.20% traded on a level 1.2804.

Copyright: MAYZUS Investment Company Ltd

 

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29 MARCH 2013: USA MARKETS – S&P INDEX BEAT ITS HISTORICAL MAXIMUM

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Yesterday stock market of United States finished trading session with a moderate growth, at the same time the index of the wide market S&P 500, during the last minutes of the trading session, managed to subdue the level of its historical maximum 1565,15 points and was closed 4 points above it. Data on GDP of the USA presented yesterday, where the indicator increased by 0,4% in comparison with the previous assessment in 0,1% gave support to the market and positively influenced purchasing moods. The rest of the statistical data was not so positive, the number of primary requests for unemployment benefits last week increased by 16 thousand to 357 thousand and significantly exceeded expectations, and the Chicago index of business activity in March made only 52,4 points and more than 4 points didn't hold on to average forecasts.


Asian stock markets in the last working day not only of this week, but also month, and also the whole quarter show quiet multidirectional dynamics. Trading volumes are insignificant. The Japanese exchange bargains almost neutrally. Nevertheless, index Nikkei is ending quarter with growth of nearly 19%, which is the best result since middle of 2009. At the end of March the Nikkei index keeps about levels 12300-12400, which is just a bit lower its maximum levels. From the middle of November growth of the main exchange indicator of the country grew almost by 45%.


Leading stock indexes of Europe also closed yesterday’s trading session with a moderate growth - the British FTSE-100 grew up for +0,38%, the German DAX grew by 0,08%, the French CAC increased for +0,52%. Also it should be noted that in relation to the Catholic holiday “Passionate Friday”, markets of the USA, Australia, Hong Kong, India, Singapore and as well as many European platforms Britain are going to be closed today.


Prices of oil following the results of last trading session continued a shy rebound upward and again showed positive dynamics. In the short term ascending dynamics can be continued up to the closest zone of resistance around $112-113 for barrel. This morning, we can see BRENT traded on a level of 109.77$ per barrel, NYMEX adds 0.67% in price and is on a level of 97.23$ per barrel.

Copyright: MAYZUS Investment Company Ltd

 

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01 APRIL 2013: GLOOMY PERSPECTIVE FOR CYPRIOT INVESTORS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

EURO/USD fell to its lowest level in four month Monday on concerns about the spill over from Cyprus bailout terms. The Euro hit 1.2791, just above the four month low of 1.2750 reached on Wednesday. The Euro was trading at a high of 1.3711 back in February. Trading activities have been low over the last days due to Easter holidays in Europe.

The short and medium term effects of the Cyprus crisis inside the Euro zone are so far not fully digested. Russian investors are hard hit, but Western European companies and individuals using Cyprus for the same tax planning reasons have also suffered heavy losses as a result of the collapse of Laiki, The Cyprus Popular bank, and near bankruptcy of the biggest bank. Bank of Cyprus (COB). This comes among rumors that the Cypriot banks lately have given politicians and close friends favorable loans and credits.

Small companies struggling to repay loans in Italy and Spain signal bigger problems on the horizon for the euro zone. Defaults by small and medium sized enterprises which are the biggest employers in Spain and Italy, are rising explosively spelling troubles for banks and countries in the heart of Europe’s debt crisis. While Cyprus count for 0,2% of the total Gross Domestic Product (GDP) in the euro zone, Spain and Italy count for 28%. Whether these countries will be able to pull themselves out of the crisis and avoid full-blown bailouts depends on their banks which are fighting with bad loans and decreased profitability.

Recent news from the Cypriot Minister of Finance and the Central Bank tell that account holders would be hit much harder than firstly announced. Cypriot authorities are still putting strong restrictions on “safe” accounts with less than Euro 100 000 meaning that Cyprus for all practical purposes not any longer is a functioning member of a currency union. On deposits above Euro 100 000 37,5% shall be converted into shares in Bank Of Cyprus (BOC), 22.5% are going to be frozen and the remaining 40% might be used for recapitalization of BOC.

This means that Russian depositors stand to lose billions of Euro in what Prime Minister Medvedev has described as a Soviet style confiscation of Russian accounts. The Russian government will, however, not aid businesses that have lost money in Cyprus. Deputy Prime Minister, Igor Shuvalov, stated yesterday that Moscow is going to continue to clamp down on flight capital to offshore financial centers. “It is a terrible shame that Russians lose money, but the government will not take action in such a situation”.

Much of the Russian money in Cyprus, probably up to Euro 19 B in bank deposits, are flight capital where Russian companies and rich individuals have tried to avoid taxation in Russia. The authorities have formerly offered a tax amnesty for flight capital being brought back to Russia.

Copyright: MAYZUS Investment Company Ltd

 

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02 APRIL 2013: “TAX HAVENS” FIGHT FOR CYPRIOT CLIENTS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The dollar was losing momentum yesterday and early Tuesday as the Institute for Supply Management, ISM, announced that its index for national factory activity fell 6% in February. New orders, a key indicator for future growth, accounted for much of the fall. US stocks fell after being closed since Thursday due to the Easter holidays. The weak ISM manufacturing data together worries in the euro zone after the Cyprus bailout and some growth concerns in China, point towards a softening of economic activity and a weaker sentiment prior to the 2013 first-quarter earnings session.

EURO/USD fell 20 points to 1.2863 and also lost ground towards the Japanese yen, JPY, trading at 92,96 yen to the dollar. Copper prices fell to the lowest level in months on Chinese growth concern.
Oil prices are strong. Brent crude trades at USD 110,80 a barrel. Gold is up to 1602.

The ink was barely dry on the bailout of the Cypriot banking system last week when the legal challenges began rushing in. The first challenge was launched by the powerful Church of Cyprus which has big business interests on the island, which questioned the legality of shareholders in Bank of Cyprus having their equity stakes taken as part of the bailout mechanism. The complaint was filed on the basis that expropriation of property is contrary to the Constitution of Cyprus. The Church successfully petitioned the government. More legal challenges are to come.

A blame game hunt to find the “guilty men” responsible for the banking disaster has also intensified. Both the Minister of Finance and the Governor of the Central Bank have been caught in the fire line. The crisis is most likely to have potentially more worrying consequences for Cyprus’ relation to the EU. Politicians and officials being instrumental in securing that Cyprus became a member in the EU and EURO, have voiced grave concern and stressed that if they would not have recommended membership if they had seen what has now been coming.

Cypriots start to be critical for the speculative way their banks were run, but the anger and fury are mainly directed against Germany and EU which “wanted to punish Cyprus”. There is also growing irritation over EU singling out Cyprus as the only “offshore financial center” culprit. Germany stressed that the financial sector in Cyprus was seven times its GDP without asking questions to other EURO and EU members as Malta and Luxembourg where the baking sector is 8 and 22 times bigger than the GDP.

There is also growing irritation as to the aggressive way other offshore destinations inside and outside Europe now is trying to steal especially Russian clients away. Instead of demonstrating solidarity with a striving Cyprus and their banking sector these same countries are now trying to lure potential clients to their “tax havens”.

Copyright: MAYZUS Investment Company Ltd

 

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03 APRIL 2013: EURO WEAKENS AS UNEMPLOYMENT CLIMBS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Euro/USD fell to 1.2803 as unemployment inside the euro zone fell to a record high 12,5%. The euro fell against 12 of its 16 most traded peers as unemployment continued to soar in Greece and Spain adding to concern of an even deeper recession. Unemployment in Greece reached 26,7% with 60% of the youth without jobs. A mix of lower than expected industrial manufacturing data and unemployment paint a grim picture for hopes of a quick recovery inside the euro zone.

Asian stocks fell before later publication of new US job numbers. The dollar index (DXY) which has fallen for the last days rose 82,920 as gold prices plunged 35 dollars to USD 1567 an ounce. Copper and silver continue to fall while oil prices are steady. New York crude (YMEX) has been trading above 96 for the whole week and Brent crude above USD 110 a barrel. The European Central Bank (ECB) which along with the EU and International Monetary Fund, IMF, has been strongly criticized for its handling of the Cyprus crisis, meets on April 4th.

As indicated in our Daily Report yesterday Cyprus has started a blame hunt for a crisis running out of hand. Finance Minister Michael Sarris who conducted the bailout negotiations in Brussels and afterwards came empty handed back from Moscow, resigned on Tuesday and was replaced by Labor Minister Haris Georgiades. Sarris has for the last year served as President of the Board in the bankrupt Popular Bank of Cyprus, Laiki. Over the last months Laiki received billions of Euros from ECB in emergency funding.

The use of these funds will be part of a special investigation conducted by three special judges appointed by President Nicos Anastasiades. The judges shall within three months present a report on whom bear responsibility for the crisis. Bank of Cyprus (BOC) and Laiki Bank were till recently regarded as solid profitable national flagships. The two banks have over the last 2 – 3 years lost billions of euro on speculation in Greek treasury bills and unsecured loans to Greek individuals and companies.

President Anastasiades himself came under fire yesterday when it was known that a company headed by his son of law and other relatives presumably transferred 21 million euro out of Cyprus just before the controversial EU decision to raid bank deposits took place. Anastasiades flatly rejected tip-off to close family members or any other wrong doing; “I never knew, and it was never possible for me to wage war until Saturday morning March 16th to avoid what they imposed on us and at the same time supposedly tip-off people”.

Other politicians have received similar accusations which would be subject for the investigations. Even if lose accusations, the tip-off suspicions illustrate what the Cypriot public regards as, too, “cozy” relations between bankers and politicians.

Copyright: MAYZUS Investment Company Ltd

 

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04 APRIL 2013: ECB UNDER FIRE FOR CYPRUS HANDLING

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Asian stocks fell as worse-than-estimated US economic data spurred concern about the pace of the US recovery as investors speculated whether the Bank of Japan (BOJ) would be able to meet forecast for monetary expansion and an inflation target of 2%. The MSCI Asia Pacific index slid 1% with carmakers as Toyota Motor declining on a stronger Yen. USD/JPY trades at 93.00. Copper prices, a strong indicator for economic growth, sank to its lowest level since August. Gold and silver prices plunged with Gold at USD 1546 an ounce. Oil prices fell two dollar a barrel.

The European Central bank (ECB) is meeting today in the aftermath of a botched attempt to rescue Cyprus. Bank shares have been tumbling across the Euro area and rattled confidence in policy maker’s ability to tame the sovereign debt crisis. With unemployment reaching a record high of 12,5%, doubts are growing about Mario Draghi’s forecast for a second-half economic recovery. The austerity measures prescribed from European bankers and politicians have so far dragged Europe into an even deeper recession.

The disconnect between official low lending rates and those businesses are actually charged, is also a growing concern for the ECB. More than four times as many small businesses in Spain were rejected loans in the second half of 2012 than in Germany or walked away from, too, expansive offers. The excess liquidity in the banking sector has halved over the last half year and lenders in the south European periphery might be in need of more central bank funding.

In front of today’s meeting critical questions are asked on the role ECB plaid in the Cyprus bailout. ECB initially welcomed and supported the Cypriot government’s plan to confiscate funds on all banking accounts including those below Euro 100 000. This was rejected by the Cypriot Parliament. A revised agreement was negotiated a week later under the threat of ECB cutting emergency funding to Cypriot banks. Additionally; capital controls were for the first time in the EU history introduced to avoid capital flight. Free movement of capital is one of the four basic freedoms EU cooperation is built upon.

The confiscation of private accounts and introduction of capital control have damaged investor confidence and banks reputation across the Euro zone. Between March 15 and 27 the Stoxx Europe 600 Bank index dropped 6,8%. The cost of insuring against default on European bank bonds have surged 41% in the same period. Partially responsible for a flawed bailout plan being presented to Parliament, ECB exacerbated markets reactions to the bailout and simultaneously harmed the trust in Europe’s crisis fighting abilities.

Analysts stress that even if the error originated in Cyprus, Euro Finance ministers and ECB’s big miscalculation were to support a flawed plan. This resulted in increased financial stress and uncertainties in global markets. The trust in the Euro was undermined. Whether Mario Draghi and the ECB today would be able to present the right damage limiting response, is an open question.

Three Supreme Court judges appointed by President Nicos Anastasiades will today start investigations into a decade of financial profligacy which brought Cyprus to its knees. They have also a mandate to look into the President’s own affairs after accusations of tipoffs that presumably saved close family for big amounts when of 21 million euros were transferred abroad days before the bailout plan was announced.

Copyright: MAYZUS Investment Company Ltd

 

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05 APRIL 2013: DRAGHI: CYPRUS NOT A TEMPLATE

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Cyprus is not a template for other possible banking crisis inside the Euro zone, the president of the European Central Bank, ECB, Mario Draghi stated after the ECB board meeting yesterday. Draghi thereby criticized his own decision where Cyprus banks with the blessing of the ECB, was given the right to confiscate funds on private banking accounts below the guaranteed Euro 100 000. Draghi admitted that the proposal was not very “smart”, and stressed that potential future crises would be handled differently without risk for private account holders and companies. This initial wrong decision was quickly corrected, Draghi added.

It took, however, more than a week before the ECB sponsored proposal was rejected by the Cypriot parliament and a new bailout plan was presented. In the meantime it created confusion and havoc in the global financial markets. The new proposal exempted accounts with a balance below Euro 100 000 and from confiscation and left to foreign account holders, mainly Russians and Ukrainians, to bear the bulk of the bailout burden.

The Euro fall as low as 1.2745 on Draghi’s remarks. Euro/USD later recovered strongly to 1.2933. The way ECB and the EU have handled the Cyprus crisis, has, however, put grave question marks as to Draghi and EU-politicians ability to handle the euro zone problems. The crisis ridden Southern European periphery is dragging further into recession, and the only solution the troika of EU, ECB and the International Monetary Fund, IMF, has been able to come up with is a further vicious circle of reduced economic growth, increased taxes and growing unemployment.

Draghi had suggested yesterday that ECB could slash the interest rate, already at a record low level, even further. In a situation where the currency rates are highly volatile and often jump more than one percent a day, a reduction of the interest rate with 0,25% is not the most convincing argument to get the euro zone back on track. Along with low interest rates quantitative easing has been central banks preferred tool. ECB has heavily been buying national bonds in Italy and Spain to avoid spiraling bond rates.

Bank of Japan which also met yesterday, announced aggressive measures to ease monetary policy. USD/JPY plummeted from 93 to 95,67. BOJ will in the next two years double its holding of bonds and shares in line with the monetary easing policies of the US Federal Reserve (FED). BOJ has also set an inflation target of 2% to stimulate economic growth. OJ’s plan implies to buy bonds for an equivalent of USD 73 Billion monthly. Fed is in comparison buying for USD 85 billion a month. Wall Street got a lift from BOJ’s surprisingly dramatic stimulus plan. This came along with supportive comments from ECB and FED, suggesting that central bank policies will keep underpinning measures to the benefit of stocks.

Copyright: MAYZUS Investment Company Ltd

 

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08 APRIL 2013: YEN SLUMPS AS US - JOB FIGURES HIT DOLLAR

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

US job figures set alarm bells ringing as the rise in job recruitment was half the expected. US employers added only 88 000 jobs in March at its slowest pace in 10 months. The job figures published on Friday triggered fresh concerns about a slowdown in the world’s largest economy. Equity markets fell and might indicate that the last months strong US stock rally has come to an end. Expectations of a fast recovery might have run faster than what is economic fundamental realities.

The dollar plunged in relation to EURO and other major currencies. The Euro/USD rose to a two week high at 1.3039 stabilizing around 1.30 in early Asian trade today. The British pound, GDP, hit the strongest level in six weeks at 1.5362 on concerns of the health of the US labor market. Oil prices fell. Brent crude trades at USD 104,50 a barrel.

The Japanese yen, JPY also fell dramatically. USD/JPY trades at 98,52 after he Japanese Central Bank (BOJ) announced strong quantitative monetary easing measures to combat deflation. After falling 20% in some few months, analysts ask how far down the JPY would be permitted to go. Recent developments might encourage investors to shift back to yen as a funding currency instead of the dollar. The data may encourage more long European currency/yen trading with yen as the favored funder. It might reinforce the yen’s place as the favored carry trading currency.

The Euro received a boost earlier last week as the European Central Bank held rates at 0,75% and the ECB President, Mario Draghi, sought to reassure markets that the Cyprus bailout should not be seen as a template for possible future bailouts in the Eurozone. In a memorandum of understanding between the parties involved in the bailout; Cyprus, ECB, IMF and the EU-commission, severe budget cuts and privatization of state owned assets are among the measures needed for Cyprus to receive its periodic allotments of bailout money.

The anger and public fury run high on the island. Adding to the public tension a financing consulting firm, Alvarez & Marshal hired by the Central Bank to make investigations on the banks behavior leading up to the crisis, revealed that two of the most senior executives at the Bank of Cyprus may have deleted crucial emails pertaining the bank’s disastrous buying of Greek government bonds just before Greece’s international bailout in 2010.

While most attention over the last weeks has been directed towards Cyprus, the leak of 2.5 million files containing details of offshore accounts of some of the world’s wealthiest individuals has added fuel to Europe’s debate over the economic crisis. In a situation where many struggling Europeans are asked to tighten belts and pay more taxes, the political and financial elites of Europe have stuffed their wealth in offshore tax havens as British Virgin Islands, the Cook Island and Singapore, making German, EU and INF accusations against Cyprus pale in comparison. The latest money laundering and tax exemptions accusations involve reputable Western European banks as Deutsche Bank, and individual top German and French bankers and politicians.

Copyright: MAYZUS Investment Company Ltd

 

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09 APRIL 2013: AGGRESSIVE BOND BUYING SINKS JPY

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

USD/ JPY dropped for the third straight day as the Bank of Japan (BOJ) yesterday started its aggressive monetary easing program. Following the strategy of the US Federal Reserve (FED), BOJ is buying Japanese bonds for trillion in an effort to stimulate economic growth. The Japanese government intends to get out of the vicious inflation circle and has set a target for 2% inflation. The bond buying has boosted the Japanese stock market. US stocks also gained yesterday ahead of second quarter earnings session which is expected to show moderate growth.

USD rallied to its highest level towards JPY seen since 2009, trading at 99,50 yen as BOJ concluded its first bond purchases since announcing the new monetary easing last week. Wall Street dipped in early trading as caution head of the quarterly season dominated the sentiment. Stocks turned around and ended in positive territory. US stocks have rallied strongly over the last months with major indexes hitting record highs. Earnings forecast are predicting a 1,6% rise in earnings over the last year.

The Nikkei index in Tokyo jumped 3.1% and saw its highest level since 2008 as BOJ shall pump an equivalent to USD 1,4 trillion into bonds over the next two years. These measures have created a bonanza in the stock and real estate markets. Traders are waiting for a breakthrough of the psychological 100 yen level a dollar. US 10 years treasury bills fell sharply last week in response to the aggressive Japanese measures.

Oil prices hitting an 8 month low on Friday, have recovered. Brent crude is trading at USD 105,55 a barrel, up one dollar from the beginning of the week. Euro/USD has made a strong come back from its low level on 1.2760 last week in the aftermath of the turbulence in Cyprus and the press conference of the European Central Bank (ECB). Euro/USD is trading at 1.3050. British pound, GBP, and other major currencies have also gained ground against dollar. Precious metals led by gold, USD 1575 an ounce, is also trading higher.

Copyright: MAYZUS Investment Company Ltd

 

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10 APRIL 2013: DOW CLOSING AT RECORD HIGH

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

US-Stocks advanced on Tuesday with Dow Jones closing at a record high following a rally in cyclical shares and as the earnings season started to heat up. Asian stocks edged higher in Wednesday morning trade. Chinese trade data signaled a recovery in the world’s second largest economy as imports grew 14,1% year on year, much higher than expectations. The yen remained under pressure. USD/JPY stayed on 99; not able to break through the psychological 100 yen a dollar barrier.

The return to record levels indicates that investors again are using market declines as buying opportunities. The two winning groups, technology and energy, are closely tied to the pace of the economic growth. Microsoft jumped 3,6% as the top gainer on Dow Jones which advanced 0,41% to a record high on 14 673. Stocks were given a boost from the earnings session. ¾ of the 5% of the companies hitherto reporting results, have delivered higher than expectations.

In advance of the reports of earnings for the second quarter expectations have deliberately been plaid down. Alcoa, the aluminium producer, which traditionally is first out with its quarterly report, filed its adjusted results late on Monday, setting the tone for the earnings season. Alcoa’s results were slightly better than expectations. The Alcoa stock ended flat. First Solar Inc was the shining star with a surge of 45,5%. Solar’s results lifted the whole solar sector.

The dollar which has jumped 7% against yen since the Bank of Japan (BOJ) last Thursday stated that it will pump USD 1,4 trillion into the Japanese economy, was not able to break through the 100 level. This might easily happen during the week. Australian dollar continues to demonstrate strength after the surge in Chinese import. Euro/USD is steady in the interval between 1.3050 and 1.31.

Oil prices have recovered after the steep fall last week. NYMEX, New York crude, trades at 93,91 and Brent crude is at USD 106,40; up two dollars from the lows yesterday. Precious metals are up with gold trading at USD 1585 an ounce.

Copyright: MAYZUS Investment Company Ltd

 

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11 APRIL 2013: WALL STREET LIFTS ASIAN SHARES

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Wall Street’s record closing and optimism on the Chinese economy lifted Asian shares in early Thursday morning trading. The Japanese yen continues to be under strong pressure. USD/JPY trades at 99,60, a hair’s breadth within the 100 level. Yen continues to test fresh lows against major currencies as the effect of the Bank of Japan’s (BOJ) bold monetary easing takes hold. The South East Asian Pacific index, MSCI, gained 0,8%, while the Japanese Nikkei jumped 1,3%.

The new Governor of BOJ has proven that is serious regarding a 2% inflation level bringing fresh impetus to a stagnating, deflationary economy. There are questions whether this is enough. Monetary measures ought to be followed up by a strong restructuring of the Japanese economy especially steps to encourage the private bond market. Japanese bonds have fallen on BOJ measures, and Japanese investors are said to be moving funds into foreign bonds.

The last published minutes from the Federal Reserve (FED) Board’s meeting gives new to the US dollar. According to the minutes FED officials have debated to slow down the pace of asset purchases or end them later this year. The Dow Jones industrial average and the Standard & Poor’s 500 gave also impetus to a stronger dollar. Both indexes ended at historic highs on Wednesday, led by cyclical shares on China’s rosier demand outlook. Chinese imports have increased significantly during the last quarters. Higher-yield commodity currencies also gained ground on the Chinese data with the Australian dollar jumping to 1,0553 Against the USD.

A report published by the European commission yesterday gave a bleak picture of the economic development inside the euro zone. One of the EU-newcomers, Slovenia, has been a stark warning to put his house in order. The banking sector’s debt ridden and suffers. Slovenia might therefore be the next in line to follow Cyprus. The EU Commission also points to serious weaknesses in the banking sector in Italy, France and Spain in and reminds that the European banking and financial crisis might only be in its beginning.

Copyright: MAYZUS Investment Company Ltd