Week Jan 13 2012 – Weekly Recap & The Week Ahead
“I made my money by selling too soon.” – Bernard Baruch
1. German economy shrank in Q4 as crisis weighs — according to Reuter, Germany showed first signs of feeling the pain from the euro zone’s debt crisis as the economy shrank in the last three month of 2011, despite outperforming its peers for main part of the year thanks to strong domestic demand and exports.
2. Saudis may not be able to counter effect of Iran sanctions — Saudi Arabia is reportedly nearing its oil output capacity limit and may have little room to respond to potential shortages caused by sanctions on Iran. Currently pumping just under a record 10M bpd, the country has an on-paper capacity of up to 12.5M bpd.
3. Romney gains momentum with New Hampshire win — Mitt Romney has taken another important step in gaining the GOP nomination for the presidency, comfortably winning the New Hampshire primary ahead of a crucial test in South Carolina next week.
4. S&P500 Approaching Technical Resistance — view the chart listed below
5. Sears loses source of ready cash flow — Sears (SHLD) has taken another hit after CIT Group said it will stop factoring accounts payable for it – cutting off a source of ready cash flow for the embattled retailer.
6. Yields fall sharply at Spanish, Italian debt sales — according to Reuter, The Spanish Treasury raised 10 billion euros ($12.7 billion) from the auction of three bonds, doubling its target of up to five billion, and yields dropped by about 1 percentage point. Italy also fared well, paying less than half what it did a month ago to sell one-year bills at its first auction of the year. A major reason for the success was that local banks used the ECB’s ultra-cheap lending to support the sale.
7. European Central Bank holds rates steady — The ECB Governing Council left its key lending rate at 1%, matching its historic low. The central bank also left the interest rate on its marginal lending facility unchanged at 1.75% and maintained the interest rate on its overnight deposit facility at 0.25%.
8. Hedge funds hunker down for Greek debt — according to Reuter, The deal asks creditors to voluntarily write down 50 percent of the notional value of their bond holdings. Hedge funds may opt out. The stakes for Greece are high. Without the deal, the international lenders will not bail Athens out a second time, which means it will likely default around March 20, when a 14.5 billion euro (12.1 billion pounds) bond falls due.
9. S&P hits euro zone with downgrades — late Friday (1/13/2012), Ratings agency Standard & Poor’s (S&P) cut France, Austria, Malta, Slovakia and Slovenia by one notch, stripping France and Austria of rare triple-A ratings that were key to their ability to support efforts to rescue struggling euro zone members. The ratings agency also downgraded by two notches Italy, Spain, Portugal and Cyprus. Portugal and Cyprus were cut to junk status.
The week ahead — Economic data from Econoday.com:
