Week Dec 16 2011 – Weekly Recap & The Week Ahead
“Millions saw the apple fall, but Newton was the one who asked why.” — Bernard Baruch
1. EU Banks Saddled with a Tangle Web of Loans — according to WSJ, Dozens of banks across Europe have sold large quantities of insurance to other banks and investors that protects against the risk of ailing countries defaulting on their debts. Banks in the region have sold €178B ($238B) worth of CDSs on GIIPS bonds to each other and tried to hedge this by buying €169B worth. At least 38 banks have sold the instruments, with Deutsche Bank (DB) selling €37.4B and buying €34.5B.
2. Barron Posts 2012 Favorite Stocks Pick — click here to see the full list.
3. EU Banks face €350bn Basel III shortfall — A new study by Boston Consulting Group found that European banks will have to raise nearly €200bn in new capital or cut their balance sheets by nearly 20%, to achieve the tougher new Basel III banking reform rules that start taking effect in 2013.
4. Italian yields hit another record high in bond auction — Italy experienced more woe at a bond auction as investors put to rest any hopes that the eurozone’s fiscal union pact will calm the markets. Yields rose to a fresh euro-era high of 6.47% in a sale of €3B of five-year bonds, surpassing the previous record of 6.29% that Italy paid last month.
5. FOMC Policy Unchange — the FOMC maintained its benchmark rate at 0%-0.25% and continued its twist policy by extending the average maturity of holdings.
6. House OKs payroll tax cut — House lawmakers voted along party lines to approve a payroll tax-cut package that includes a provision for the Keystone XL pipeline which is opposed by the White House, and all but guarantees the bill will be vetoed. The Republican bill, which now goes to the Senate, also extends unemployment benefits and prevents cuts in Medicare payments to doctors.
7. Congress Reached Deal to Fund Government, Opening Door to Extending Payroll Tax Cuts — Republican and Democratic leaders returned to the bargaining table and struck a deal on a $1 trillion spending bill to keep the government operating.
The week ahead — Economic data from Econoday.com:
