Tuesday 15 November 2011

Key Comment - 15/11/11

" Further weakness expected as European cross-holdings ensure hotbed of contagion. France to join team SMP?"                    
 
Cross Market News 
  • China: The IMF sees a "steady build up of financial vulnerabilities" including off-balance sheet lending, a surge in property prices and contingent liabilities from its government- dominated credit allocation model. 
  • OAT spread continue to widen as France has roughly double the exposure to Italy than any other sovereign. Currently the weakest link in the Euro chain as no SMP cover.
  • Europe's permanent bailout fund, the European Stability Mechanism (ESM), may not be brought forward as planned from its targeted launch in 2013, according to Mr Schaeuble . 
  • The European Commission is aiming to curb the freedom of expression of credit rating agencies through suspension of sovereign ratings in "exceptional circumstances". They draft proposals argue that rating agencies could magnify contagious effects through subjective biases and arbitrary downgrades that aren't fully explained and prompt investor over-reactions  (RE: False France Downgrade...) 
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