Week Sept 14 2012 – Weekly Recap & The Week Ahead
“Don’t fight the Fed” — unknown
1. German Court Opens Door for Rescue Fund — Germany’s Constitutional Court has ruled that the eurozone’s ESM rescue fund and the “fiscal compact” are constitutional, opening the way for the country’s president to sign the proposals into law. However, the court said that German liability must not surpass €190B without the Bundestag providing further authorization.
2. Spain considers request for ECB bond purchases — as reported by Reuter, Spain is considering asking for assistance from the ECB’s bond-buying program, PM Mariano Rajoy has told Finnish newspapers. His comments indicated Spain may apply for a precautionary assistance program under which the euro zone’s rescue funds could buy Spanish bonds as they are auctioned without the country being taken off the credit markets, rather than the kind of full sovereign bailout granted to Greece, Portugal and Ireland.
3. EU unveils new powers for ECB — European Commission President Jose Manuel Barroso today outlined EU plans to turn the ECB into the eurozone’s banking supervisor, the first step towards a banking union. The ECB would begin overseeing the bloc’s largest banks from July 2013 and smaller institutions six months later, although national authorities would retain control of daily supervision. Giving the ECB supervisory power will also enable the ESM to provide aid directly to banks.
4. Ford, GM mull European factory closures — the WSJ reported, Ford (F) is preparing to restructure its operations in the region and close a factory, possibly a 4,000-staff facility in Genk in Belgium. Meanwhile, GM (GM) is in talks with labor unions about shutting an aging plant in Bochum in Germany as it also struggles to turn around major losses.
5. Draghi’s planned bond-buying scheme lower yields for Italy & Spain — Yields dropped at an Italian auction of €6.5B of government paper, including €4B of 3-year debt which carried a rate of 2.75%. That’s down from 4.65% in July and the lowest since October 2010. The falling yields were attributed to the ECB’s planned bond-buying scheme, but it’s early days yet to see how long Italian yields will stay low, not to mention those of Spain.
6. Fed bets big in QE3 to rescue economy — per Reuter, the Federal Reserve launched another aggressive stimulus program last Thursday, saying it would pump $40 billion into the U.S. economy each month until it saw a sustained upturn in the weak jobs market. The dollar has taken a dive as well as Treasurys.
7. S&P 500 Sectors Distance From All-Time Highs — courtesy from the Bespoke Investment Group, the S&P500 index is currently just 9% below its all-time high; However, the ten S&P 500 sectors would need to rally in order to trade to an all-time high(see chart below).
The week ahead — Economic data from Econoday.com:
Tags: spx500 Sectors from High