Economic Calendar

Sunday, May 27, 2012

Euro Declines Most in 2012 on Deepening Turmoil in Spain

By Allison Bennett - May 26, 2012 11:00 AM GMT+0700

The euro had its biggest weekly loss since December against the dollar as Greece’s anti-bailout party gained in the polls and amid a deepening crisis in Spain.

The shared currency fell for a fifth week versus the yen, the longest stretch since October, as German manufacturing shrank and the Bank of Japan (8301) refrained from adding stimulus to the economy. Brazil’s real was the only winner against the dollar as the central bank sold currency-swap contracts. The dollars of Australia and New Zealand declined as reports showed the Chinese economy is stalling. A report June 1 is forecast to show U.S. employers added more jobs in May than the prior month.

May 25 (Bloomberg) -- Charles Dallara, managing director of the Institute of International Finance, talks about the potential cost of a Greek exit from the euro, its impact on the European Central Bank and the outlook for the region's economies. He speaks with Bloomberg's Andrew Davis in Rome. (Source: Bloomberg)

“Uncertainty is high, growth is poor and a Greek exit is a wild card,” said Aroop Chatterjee, a currency strategist at Barclays Plc’s Barclays Capital unit in New York. “It’s unlikely that the euro finds a bottom for a while even in a good state of the world.”

The euro declined 2.1 percent on the week to $1.2517, touching $1.2496, the weakest since July 2010. The 17-nation currency declined 1.2 percent to 99.75, falling below 100 for the first time since February. The Japanese currency fell 0.8 percent to 79.68 per dollar.

Hedge funds and other large speculators increased wagers the euro will decline versus the dollar to a record high for a second consecutive week. So-called net shorts increased for a third week, totaling 195,361 in the period ended May 22 compares to 173,869 for the week before, according to the Commodity Futures Trading Commission.

Euro Crisis

“Risk appetite itself has traced its undulation to the movements in the euro,” Ravi Bharadwaj, a market analyst in Washington at Western Union Co. (WU)’s Western Union Business Solutions unit, said May 23.

European leaders announced no new measures to stem the bloc’s crisis at a summit in Brussels this week. The gathering took place as Greece prepares to hold new elections on June 17 after an anti-bailout party surged to second place in balloting on May 6. A poll on May 24 had the Syriza party with 27.2 percent support, boosting speculation that the country may exit the currency bloc.

The euro weakened 1.2 percent against nine developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, the worst performance along with the Swiss franc. The dollar gained 1.1 percent and the yen rose 0.2 percent.

The shared currency fell below $1.25 for the first time in 22 months after the president of Catalonia, one of 17 semi- autonomous regions in Spain, repeated his call for Spanish central government to help regions access funding, Standard & Poor’s cut the credit ratings of five Spanish banks and the Bankia group said it needed 19 billion euros ($23.8 billion) of government money.

‘Unwelcome Development’

A German index based on a survey of purchasing managers in the manufacturing industry declined to 45 this month from 46.2 in April, Markit Economics said May 24.

“It’s unwelcome development with German manufacturing, because typically that’s where you go looking for a silver lining in the euro,” Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York, said May 24. “The second quarter had delivered a shock to growth expectations globally.”

China may have a loan shortfall which would be the first in seven years, according an exclusive Bloomberg News report. Loan demand is drying up as Europe’s debt crisis curbs exports and demand for new homes wanes.

Aussie, Kiwi

Australia’s dollar fell 0.9 percent to 97.58 U.S. cents. The Aussie fell to 96.90 U.S. cents on May 23, a six-month low.

New Zealand’s dollar declined 0.3 percent to 75.40 U.S. cents and touched 74.57 U.S. cents, the weakest since November. The so-called kiwi’s losses were limited as Moody’s cited the government’s deficit and debt trajectories in affirming its AAA rating.

China is Australia’s largest trading partner and is the second-biggest destination for New Zealand exports.

American employers added 150,000 jobs in May, according to the median estimate of economists surveyed by Bloomberg News, after a 115,000 gain in April that missed forecasts. The jobless rate held steady at 8.1 percent, according to another survey.

The Dollar Index (DXY) rose 1.3 percent to 82.393, after touching 82.461, the strongest since September 2010. The gauge’s fourth consecutive weekly gain comes as cumulative net inflows in to U.S. Treasuries yesterday were more than double the daily average over the past year.

Franc Tumbles

The Swiss franc was the biggest loser against the dollar this week, falling 2.1 percent to 95.95 centimes per dollar. It was the biggest weekly loss since Nov. 4. Switzerland’s currency touched the weakest level in two months versus the euro on May 24 amid speculation the central bank may take action to discourage investment in the nation through taxing deposits.

SNB spokeswoman Silvia Oppliger declined to comment on the Swiss franc exchange rate. Finance Ministry spokesman Roland Meier wouldn’t comment on the tax speculation.

Brazil’s real rose 1.8 percent against the dollar to 1.9874 after the central bank sold currency swaps through auction for four consecutive days to stem the largest year-to-date decline against the greenback. The real is the worst performing major currency this year and has declined 6.1 percent against the dollar. It touched a three-year low on May 18.

The nation also completely removed a tax on currency derivatives for exporters on May 23, said Alexandre Andrade, an official at the tax agency.

The yen had its biggest weekly decline against the dollar since March 16 as Fitch Ratings cut the nation’s credit ranking, saying it isn’t acting quickly enough to tackle its public-debt burden.

Losses were limited as the BOJ kept its asset-purchase fund at 40 trillion yen ($502 billion) at a meeting May 23, after expanding it by 10 trillion yen last month. The central bank also left a credit-lending program at 30 trillion yen, it said in a statement in Tokyo. The policy board kept the key overnight lending rate between zero and 0.1 percent.

To contact the reporter on this story: Allison Bennett in New York at

To contact the editor responsible for this story: Dave Liedtka at


Facebook IPO Seen Deepening Investor Distrust of Stocks

By Elizabeth Ody and Margaret Collins - May 26, 2012 11:01 AM GMT+0700

Facebook Inc. (FB)’s initial public offering, plagued by trading errors and a 16 percent drop in the share price, will push more individual investors out of a stock market they already distrust after the financial crisis.

“This is clearly the latest in a long string of events that is eviscerating the confidence investors have in the market,” said Andrew Stoltmann, a Chicago attorney who represents retail investors. “The perception is Wall Street jiggered this IPO so the underwriters made money, Facebook executives made money and the small investor got left holding the bag.”

Buyers of the stock have sued Facebook, the sale’s underwriters and Nasdaq OMX Group Inc. (NDAQ), the exchange handling the listing. Photographer: Manjunath Kiran/AFP/Getty Images

May 25 (Bloomberg) -- Paul Kedrosky, author of the Infectious Greed blog and a Bloomberg contributing editor, talks about Facebook Inc.'s initial public offering and co-founder Eduardo Saverin's investment in Jumio Inc. He speaks with Cory Johnson on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

May 25 (Bloomberg) -- Sheila Dharmarajan reports on facebook's IPO and how it is the biggest flop in a decade based on the first 5 days of trading. She speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

May 25 (Bloomberg) -- Federal securities regulators and the U.S. Senate’s banking committee have said they will or may review the Facebook offering. Bloomberg's Peter Cook reports on Bloomberg Television's "Money Moves." (Source: Bloomberg)

Federal securities regulators and the U.S. Senate’s banking committee have said they will or may review the Facebook offering. Photograph: Frank May/DPA/Landov

The Facebook Inc. logo is displayed on a computer screen in this arranged photograph in San Francisco on May 17, 2012. Photographer: David Paul Morris/Bloomberg

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Individual buyers’ willingness to venture into stocks was undercut by difficulties in executing trades on the first day of trading on May 18, Facebook’s subsequent decline and questions over whether the firm and underwriters selectively disclosed material, nonpublic information.

“If you have a lot of angry people out there, they’re going to express their anger in different ways,” said Steve Sosnick, equity risk manager for Timber Hill LLC, the market- making unit of Greenwich, Connecticut-based Interactive Brokers Group Inc. (IBKR) “One of them may be with their feet.”

The IPO produced the worst five-day return among the largest U.S. deals of the past decade. The 13 percent decline through May 24 exceeded the 10 percent drop by MF Global Holdings Inc. in its first five sessions. Visa Inc. did best among the biggest deals, rising 45 percent.

Lost Decade

Some retail investors still haven’t moved off the sidelines after pulling out of the market during the 2008-09 financial crisis. The Standard & Poor’s 500 Index (SPX) has made no progress in more than a decade, currently trading at levels first seen in 1999 following two bear markets that wiped out about 50 percent from the index. The May 6, 2010, rout known as the flash crash erased $862 billion in less than 20 minutes, undermining confidence in the structure of equity markets.

Investors have withdrawn money from mutual funds that invest in U.S. stocks for five straight years as of December, according to the Investment Company Institute, a Washington- based trade group. U.S. households held about $8.1 trillion in corporate equities at the end of 2011, about 16 percent less than the $9.6 trillion they held in 2007, according to Federal Reserve data released in March.

Increased volatility, high correlation among stocks and the flash crash are among a “whole basket-load of things” that have caused retail investors to be skeptical for several years, said Ron Sloan, who oversees about $11 billion as chief investment officer of the U.S. core equity team for Atlanta- based fund manager Invesco Ltd. (IVZ) “This is just the icing on the cake.”

Lowered Estimates

Patricia Arroyo, 53, a psychologist and executive coach in Boston who manages her own investments, said, “What shakes my investor confidence more than the glitches is to see all the institutional investors, insiders and favored clients get all the advantages in these situations.”

After Facebook said on May 9 that growth in advertising had failed to keep up with user gains, analysts at some banks underwriting the deal cut their earnings estimates, said people familiar with the process. The new estimates were relayed to institutional investors.

Arroyo had avoided Facebook and instead purchased about 50 shares of social-gaming company Zynga Inc. (ZNGA), speculating that a pop in Facebook’s price would benefit the stock of the San Francisco-based company. Trading of Zynga was halted twice because of volatility on the day Facebook started trading. Zynga’s stock has fallen 20 percent in the past week.

Federal Review

Federal securities regulators and the U.S. Senate’s banking committee have said they will or may review the Facebook offering. Buyers of the stock have sued Facebook, the sale’s underwriters and Nasdaq OMX Group Inc. (NDAQ), the exchange handling the listing. New York-based Nasdaq was overwhelmed by order cancellations and trade confirmations were delayed on the first day of trading.

Brokerages whose customers had trouble executing Facebook trades, including Boston-based Fidelity Investments and Charles Schwab Corp. (SCHW), said they are trying to resolve complaints.

“Fidelity senior management has been working with regulators, market makers and Nasdaq to represent all of our customers’ trading issues from May 18 and we will continue to do so in order to persuade Nasdaq to mitigate the impact on our customers,” Stephen Austin, a spokesman at Fidelity, said in a phone interview. Schwab also is continuing to address any concerns that remain for its customers, Michael Cianfrocca, a spokesman for the San Francisco-based brokerage, said in an e- mail.

Missed Opportunity

The Facebook fallout has eroded hopes that the debut would revive the appetite for stocks among individuals. Trading in Facebook accounted for about 20 percent to 30 percent of revenue-generating trades at online brokers on May 18, Richard Repetto, an analyst at Sandler O’Neill & Partners LP in New York, said in an e-mailed report on May 23. Retail buying and selling on the day a company debuts is usually 2 percent to 5 percent, he wrote.

The social network accounted for 22 percent of equities volume on May 18 at online brokerage TD Ameritrade Holding Corp. (AMTD), according to Steve Quirk, a senior vice president at the Omaha, Nebraska-based company. The firm had almost 60,000 orders to trade Facebook shares before the stock opened, he said.

“For now, it appears like a missed opportunity to build sustainable retail momentum,” Repetto wrote. The technical glitches and price decline in the stock have “driven retail trading back to earth.”

Knight Capital

Retail investors weren’t the only ones who lost money as Facebook shares declined this week. Knight Capital Group Inc. (KCG) estimated that it lost about $30 million to $35 million trading Facebook because of technical problems at Nasdaq, the firm said in a filing with the U.S. Securities and Exchange Commission on May 23. The brokerage and market maker is based in Jersey City, New Jersey.

Citadel Securities, the Chicago-based broker run by hedge- fund manager Ken Griffin, lost as much as $35 million, according to a person with knowledge of the firm.

Despite trading problems and losses, many investors who have already purchased the stock are continuing to hold on, said John Dominic, vice president of trading for TradeKing, an online broker based in Fort Lauderdale, Florida.

“Most are probably taking a wait-and-see approach,” Dominic said.

‘Slow Motion’ Wreck

IPOs are often risky and expensive for investors, said Zack Shepard, managing director for Mason, Ohio-based Matson Money Inc., which manages about $3.1 billion on behalf of individual investors. He said his firm generally waits about one year before it considers investing in newly public companies.

The Facebook mess and concerns about whether the rules of the game are fair will get resolved, said Invesco’s Sloan. A lasting effect may be that individuals focus more on company fundamentals and invest in equities for the long-term, he said.

“Watching this fiasco was like watching a car wreck in slow motion,” Andrew T. Gardener, president of Tanglewood Legacy Advisors LLC, based in Houston, said in e-mailed comments. “Only a small number of investors were directly involved. The rest of us will soon get out the keys and go for a drive.”

To contact the reporters on this story: Elizabeth Ody in New York at; Margaret Collins in New York at

To contact the editor responsible for this story: Rick Levinson at