Microsoft Corp. shares have fallen to attractive levels after a selloff that caused the software maker to lose its status as the world’s biggest technology company by market value, according to Goldman Sachs Group Inc.
Microsoft slumped 18 percent in May through yesterday, when Apple Inc.’s market value exceeded Microsoft’s by $2.94 billion. Technology companies in the Standard & Poor’s 500 Index retreated 11 percent since April 30. Microsoft shares lost 4.1 percent yesterday after Chief Executive Officer Steve Ballmer said that the effects of the European debt crisis will spread outside the region.
“While European contagion is a concern, Ballmer’s comments were not Microsoft specific,” Sarah Friar, an analyst at New York-based Goldman Sachs, wrote in a report to clients dated yesterday. “The shares underperformed large-cap tech despite having relatively lower exposure outside of the U.S. Given significant underperformance and attractive valuation levels, we are buyers of the shares.”
Microsoft had the biggest gain in the Dow Jones Industrial Average, surging 5.3 percent to $26.34 at 10:54 a.m. in New York. It jumped 5.4 percent earlier, the most intraday since Oct. 23.
Thursday, May 27, 2010
Wednesday, May 26, 2010
Nokia C6 Deals Cost Effective Price
To address the need of the consumers who expect minimal requirement along with simplistic cosmetic work Nokia has come out with their new offering named Nokia C6. Available in two attractive color options comprising black, deep red this smart phone proves to be a users delight as it comes equipped with all the latest features that promise to give best in its class results. Display size being the focal part here this smart phone leaves nor room for complaint as this dual screen phone with its impressive resolution gives out crystal sharp pictures without any distortion. This smart classic phone is ideally targeted at those users who expect minimal requirement without any comprise on standard features like media player, camera, FM radio along with exciting set of games. Audio output of this device sounds simply superb as it powerful speakers give amazing sound clarity that enable its listeners to groove while listening to their favorite music tracks.
Flashing point about this smart phone is its 5 megapixels camera that comes equipped with
4 x Digital Zoom,CMOS Sensor, automatic white balance, full screen viewfinder and capture mode . Due to the presence of these smart tool one can capture and view distortion free images with great clarity. Other camera based utilities that comes equipped with this device include 5 MP, 2592 x 1944 pixels, autofocus, LED flash, Video and screensavers. Further its advanced messaging system like Nokia Xpress Audio Messaging allow the users to send the messages in different modes that include SMS, MMS, EMS. For the entertainment purpose Nokia C6 comes loaded with smart interesting features like audio and video player along with FM radio and FM recording.
People today like to bank on the mobile phone deals that come tagged with several benefits. One such amazing deal that has struck the limelight and is ruling the chart on all the UK based online mobile shops is contract deals on Nokia C6. Once the user avail this kind of wonderful facility he/she gets entitled to receive numerous benefits like free text messages, free talk time. Apart from these assets the users even gets a chance to grab some amazing gifts of his choice that include gaming consoles, LCD TVs or even iPod music player. So this cost effective deal coming with several benefits give its users best value for the money as one can now buy this handset at a cost effective price.
Flashing point about this smart phone is its 5 megapixels camera that comes equipped with
4 x Digital Zoom,CMOS Sensor, automatic white balance, full screen viewfinder and capture mode . Due to the presence of these smart tool one can capture and view distortion free images with great clarity. Other camera based utilities that comes equipped with this device include 5 MP, 2592 x 1944 pixels, autofocus, LED flash, Video and screensavers. Further its advanced messaging system like Nokia Xpress Audio Messaging allow the users to send the messages in different modes that include SMS, MMS, EMS. For the entertainment purpose Nokia C6 comes loaded with smart interesting features like audio and video player along with FM radio and FM recording.
People today like to bank on the mobile phone deals that come tagged with several benefits. One such amazing deal that has struck the limelight and is ruling the chart on all the UK based online mobile shops is contract deals on Nokia C6. Once the user avail this kind of wonderful facility he/she gets entitled to receive numerous benefits like free text messages, free talk time. Apart from these assets the users even gets a chance to grab some amazing gifts of his choice that include gaming consoles, LCD TVs or even iPod music player. So this cost effective deal coming with several benefits give its users best value for the money as one can now buy this handset at a cost effective price.
Greece Faces Debt Restructuring or Default, Mundell, Hanke Say
Nobel Prize winning economist Robert Mundell said debt restructuring may be “inevitable” in parts of the euro area and Steve Hanke, the architect of currency regimes from Argentina to Estonia, warned a Greek default may become unavoidable.
Mundell, who won the economics prize in 1999, predicted debt restructuring for “one or two” euro nations within five years. Hanke of Johns Hopkins University said Greece’s “death spiral” will end in default if debt obligations can’t be renegotiated.
Euro-area ministers agreed on May 2 to provide 110 billion euros ($135 billion) of aid to Greece as the country struggled to control a deficit that reached 13.6 percent of gross domestic product last year, more than four times the European Union limit. When that failed to stop the euro’s slide, the EU and International Monetary Fund offered a financial lifeline of almost $1 trillion to member states.
“Greece’s death spiral will end with debt restructuring or the outright default of its sovereign debt,” Hanke wrote in an article on the website of the Cato Institute in Washington D.C. dated yesterday. “While politicians and bureaucrats from the EU, IMF and Greece tell us that the bailout package will defuse Greece’s time bomb, don’t believe their ‘cheerful Charlie’ chant.”
Not ‘Deconstruction’
Mundell, whose Nobel Prize was for work on exchange rates and capital mobility, said at a conference in Warsaw today that “debt restructuring may be needed for one or two fiscally weak euro members. In five years it may be inevitable, but it doesn’t mean euro deconstruction, it just means debt restructuring.”
Europe needs greater fiscal centralization, including the creation of euro-area Treasury notes and bonds, Mundell said.
“The euro has done marvelously well in its 10 years of existence, but it is operating with one of its two hands tied behind its back,” Mundell said. “There is no area bill like a U.S. Treasury bill. A euro-area bill will greatly improve the ascent of the euro as the reserve currency along the dollar.”
Europe’s currency has dropped 14.2 percent against the dollar this year, the biggest loss among its 16 most-active counterparts, according to data compiled by Bloomberg. It traded at $1.2283 as of 6:20 a.m. in London, after dropping to a four- year low of $1.2144 on May 19.
Exit Possible
Nouriel Roubini, the New York University professor who predicted the global financial crisis, also warned today that financial markets aren’t “credibly” convinced Greece will control its budget deficit.
The euro will weaken further, and some countries may be forced to abandon the common currency, Roubini said at a conference in Bucharest, Romania today.
“I’m not predicting the breakup of euro zone, but the probability is not zero that some of weakest members of euro zone might decide to exit it,” he said.
There are also concerns Spain and Portugal as well as Greece lack the political will to cut spending, Roubini said. Greece pledged to implement austerity measures equal to almost 14 percent of GDP in exchange for the EU rescue funds.
“The markets are not credibly convinced Greece can do the fiscal adjustment it engaged to do,” Roubini said. There are “also questions whether, from a political point of view, there’s going to be support for budget consolidation in these countries -- Greece, Portugal and Spain.”
Double-Dip Risk
Without the option of currency devaluation, Greece needs to push through tax reform to improve its competitiveness, Hanke said. The country ranks 109th in an “ease of doing business” survey of 183 countries, according to the World Bank.
“Without growth, Greece is doomed,” said Hanke, who was an architect of currency policy in Indonesia, Venezuela, Estonia and Kazakhstan among other nations.
There are “serious economic difficulties in the euro zone,” Roubini said today. “There’s even a risk of a double- dip recession.”
The 16-member euro area emerged from its five-quarter recession in the three months through September. A double-dip recession would mean the region’s economy contracting again for at least two consecutive quarters.
The euro region economy will grow 0.9 percent this year after contracting 4.1 percent in 2009, the European Commission estimated May 5. Germany, the bloc’s biggest economy, will expand 1.2 percent in 2010 and 1.6 percent next year. Greece’s economy will contract 3 percent this year and a further 0.5 percent in 2011, the commission estimates.
Greece would benefit from scrapping employer contributions to payroll taxes and imposing a uniform value-added tax rate, Hanke said. Such measures would boost competitiveness “roughly” equivalent to a 40 percent to 45 percent currency devaluation, he said, citing research by Domingo Cavallo, Argentina’s former Economy Minister, and Joaquin Cottani, former Undersecretary of Economic Policy in Argentina.
Mundell, who won the economics prize in 1999, predicted debt restructuring for “one or two” euro nations within five years. Hanke of Johns Hopkins University said Greece’s “death spiral” will end in default if debt obligations can’t be renegotiated.
Euro-area ministers agreed on May 2 to provide 110 billion euros ($135 billion) of aid to Greece as the country struggled to control a deficit that reached 13.6 percent of gross domestic product last year, more than four times the European Union limit. When that failed to stop the euro’s slide, the EU and International Monetary Fund offered a financial lifeline of almost $1 trillion to member states.
“Greece’s death spiral will end with debt restructuring or the outright default of its sovereign debt,” Hanke wrote in an article on the website of the Cato Institute in Washington D.C. dated yesterday. “While politicians and bureaucrats from the EU, IMF and Greece tell us that the bailout package will defuse Greece’s time bomb, don’t believe their ‘cheerful Charlie’ chant.”
Not ‘Deconstruction’
Mundell, whose Nobel Prize was for work on exchange rates and capital mobility, said at a conference in Warsaw today that “debt restructuring may be needed for one or two fiscally weak euro members. In five years it may be inevitable, but it doesn’t mean euro deconstruction, it just means debt restructuring.”
Europe needs greater fiscal centralization, including the creation of euro-area Treasury notes and bonds, Mundell said.
“The euro has done marvelously well in its 10 years of existence, but it is operating with one of its two hands tied behind its back,” Mundell said. “There is no area bill like a U.S. Treasury bill. A euro-area bill will greatly improve the ascent of the euro as the reserve currency along the dollar.”
Europe’s currency has dropped 14.2 percent against the dollar this year, the biggest loss among its 16 most-active counterparts, according to data compiled by Bloomberg. It traded at $1.2283 as of 6:20 a.m. in London, after dropping to a four- year low of $1.2144 on May 19.
Exit Possible
Nouriel Roubini, the New York University professor who predicted the global financial crisis, also warned today that financial markets aren’t “credibly” convinced Greece will control its budget deficit.
The euro will weaken further, and some countries may be forced to abandon the common currency, Roubini said at a conference in Bucharest, Romania today.
“I’m not predicting the breakup of euro zone, but the probability is not zero that some of weakest members of euro zone might decide to exit it,” he said.
There are also concerns Spain and Portugal as well as Greece lack the political will to cut spending, Roubini said. Greece pledged to implement austerity measures equal to almost 14 percent of GDP in exchange for the EU rescue funds.
“The markets are not credibly convinced Greece can do the fiscal adjustment it engaged to do,” Roubini said. There are “also questions whether, from a political point of view, there’s going to be support for budget consolidation in these countries -- Greece, Portugal and Spain.”
Double-Dip Risk
Without the option of currency devaluation, Greece needs to push through tax reform to improve its competitiveness, Hanke said. The country ranks 109th in an “ease of doing business” survey of 183 countries, according to the World Bank.
“Without growth, Greece is doomed,” said Hanke, who was an architect of currency policy in Indonesia, Venezuela, Estonia and Kazakhstan among other nations.
There are “serious economic difficulties in the euro zone,” Roubini said today. “There’s even a risk of a double- dip recession.”
The 16-member euro area emerged from its five-quarter recession in the three months through September. A double-dip recession would mean the region’s economy contracting again for at least two consecutive quarters.
The euro region economy will grow 0.9 percent this year after contracting 4.1 percent in 2009, the European Commission estimated May 5. Germany, the bloc’s biggest economy, will expand 1.2 percent in 2010 and 1.6 percent next year. Greece’s economy will contract 3 percent this year and a further 0.5 percent in 2011, the commission estimates.
Greece would benefit from scrapping employer contributions to payroll taxes and imposing a uniform value-added tax rate, Hanke said. Such measures would boost competitiveness “roughly” equivalent to a 40 percent to 45 percent currency devaluation, he said, citing research by Domingo Cavallo, Argentina’s former Economy Minister, and Joaquin Cottani, former Undersecretary of Economic Policy in Argentina.
Monday, May 10, 2010
3G auction returns near Rs 55,000 cr-mark
NEW DELHI: India Monday concluded 148 rounds of an auction to award spectrum for third generation (3G) telecom services in the country, with the government's provisional revenue from the sale of airwaves nearing the Rs.55,000 crore ($12.2 billion) mark and the nationwide licence price reaching Rs.13,473.55 crore ($3 billion).
The provisional winning price for the pan-India 3G licence was around 285 percent higher than the Rs.3,500 crore reserve price fixed by the government.
At the end of the 26th day of the auction, which began April 9, the government's provisional revenue from the 3G auction stood at Rs.54,378.39 crore, which is well above the amount it had expected.
Earlier, the government had said that it hoped to rake in Rs.55,000 crore ($12.2 billion) from both the 3G auction and the rolling out of broadband wireless Internet services in the country. But with the aggressive bidding in few circles, the government is poised to get more than the estimated amount from the 3G auction alone.
Slots for three-four players are available in each of the 22 circles into which the country has been geographically divided for the 3G services, which will facilitate faster connectivity and enable applications such as Internet TV, video-on-demand, audio-video calls and high-speed data exchange.
Nine telecom companies - Bharti Airtel, Reliance Communications, Vodafone Essar, Idea Cellular, Tata Teleservices, Aircel, Etisalat, S Tel and Videocon Telecommunications - are participating in the online auction.
The government has already given Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) spectrum for 3G services on the condition that they pay the same licence fee as would be levied on private players after the auction.
Along with the fee that will be eventually paid by the two state-run enterprises for the licences, the government will provisionally get at least Rs.54,378.39 crore from the auction.
According to the Department of Telecommunications (DoT), the 3G auction may conclude this week.
Data on the DoT's website showed Mumbai continued to attract the highest bid at Rs.2,433.88 crore. The provisional winning price for Delhi stood at Rs.2,372.97 crore, followed by Karnataka at Rs.1,402.13 crore, Tamil Nadu at Rs.1,287.24 crore and Maharashtra at Rs.1,150.12 crore.
While Bihar, Mumbai, Delhi, Punjab, Orissa and Andhra Pradesh witnessed more players in fray than the number of slots available, Jammu and Kashmir, Haryana, Himachal Pradesh, Madhya Pradesh, West Bengal and Rajasthan could not attract enough bidders.
This 3G auction is a simultaneous auction for the 22 circles over a secure website. At each round, the price is hiked from between 10-1 percent based on demand.
The auction is being held on all days except Sundays and national holidays. The bid data, including the winning companies' names, will be made public after the auction's completion and approval by the government.
The winning firms will have to deposit the money within 10 days after the auction and the successful bidders would be allowed to offer 3G services on a commercial basis from Sep 1.
The provisional winning price for the pan-India 3G licence was around 285 percent higher than the Rs.3,500 crore reserve price fixed by the government.
At the end of the 26th day of the auction, which began April 9, the government's provisional revenue from the 3G auction stood at Rs.54,378.39 crore, which is well above the amount it had expected.
Earlier, the government had said that it hoped to rake in Rs.55,000 crore ($12.2 billion) from both the 3G auction and the rolling out of broadband wireless Internet services in the country. But with the aggressive bidding in few circles, the government is poised to get more than the estimated amount from the 3G auction alone.
Slots for three-four players are available in each of the 22 circles into which the country has been geographically divided for the 3G services, which will facilitate faster connectivity and enable applications such as Internet TV, video-on-demand, audio-video calls and high-speed data exchange.
Nine telecom companies - Bharti Airtel, Reliance Communications, Vodafone Essar, Idea Cellular, Tata Teleservices, Aircel, Etisalat, S Tel and Videocon Telecommunications - are participating in the online auction.
The government has already given Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) spectrum for 3G services on the condition that they pay the same licence fee as would be levied on private players after the auction.
Along with the fee that will be eventually paid by the two state-run enterprises for the licences, the government will provisionally get at least Rs.54,378.39 crore from the auction.
According to the Department of Telecommunications (DoT), the 3G auction may conclude this week.
Data on the DoT's website showed Mumbai continued to attract the highest bid at Rs.2,433.88 crore. The provisional winning price for Delhi stood at Rs.2,372.97 crore, followed by Karnataka at Rs.1,402.13 crore, Tamil Nadu at Rs.1,287.24 crore and Maharashtra at Rs.1,150.12 crore.
While Bihar, Mumbai, Delhi, Punjab, Orissa and Andhra Pradesh witnessed more players in fray than the number of slots available, Jammu and Kashmir, Haryana, Himachal Pradesh, Madhya Pradesh, West Bengal and Rajasthan could not attract enough bidders.
This 3G auction is a simultaneous auction for the 22 circles over a secure website. At each round, the price is hiked from between 10-1 percent based on demand.
The auction is being held on all days except Sundays and national holidays. The bid data, including the winning companies' names, will be made public after the auction's completion and approval by the government.
The winning firms will have to deposit the money within 10 days after the auction and the successful bidders would be allowed to offer 3G services on a commercial basis from Sep 1.
India mutual fund assets surge 32 pct in April
MUMBAI: Assets of Indian mutual funds surged 31.7 per cent to Rs 8.1 trillion, helped by large inflows into fixed income funds, data from the Association of Mutual Funds in India showed on Monday.
Income funds, popular among corporates and banks as a venue to park their surplus funds, saw a net inflow of Rs 1.8 trillion. Equity funds saw a net outflow of Rs 12.4 billion, the data showed.
Industry assets had plunged 19.9 per cent to Rs 6.1 trillion in March on outflows from fixed income funds.
Income funds, popular among corporates and banks as a venue to park their surplus funds, saw a net inflow of Rs 1.8 trillion. Equity funds saw a net outflow of Rs 12.4 billion, the data showed.
Industry assets had plunged 19.9 per cent to Rs 6.1 trillion in March on outflows from fixed income funds.
EU Crafts $962 Billion Show of Force to Halt Crisis
May 10 (Bloomberg) -- European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to stop a sovereign-debt crisis that threatened to shatter confidence in the euro. Stocks surged around the world, the euro strengthened and commodities rallied.
Jolted by last week’s slide in the currency and soaring bond yields in Portugal and Spain, European Union finance chiefs met in a 14-hour session in Brussels overnight. The 16 euro nations agreed in a statement to offer as much as 750 billion euros ($962 billion), including International Monetary Fund backing, to countries facing instability and the European Central Bank said it will buy government and private debt.
The rescue package for Europe’s sovereign debtors comes little more than a year after the waning of the last crisis, caused by the U.S. mortgage-market collapse, which wreaked $1.8 trillion of global credit losses and writedowns. Under U.S. and Asian pressure to stabilize markets, Europe’s governments bet their show of force would prevent a sovereign-debt collapse and muffle speculation the 11-year-old euro might break apart.
“A very thick line has been drawn in the sand,” said Andrew Bosomworth, Munich-based head of portfolio management at Pacific Investment Management Co. and a former ECB official. “This is all in. What more could they have done?”
A 110 billion-euro bailout package for Greece approved last week by the EU and IMF failed to reassure investors, prompting yesterday’s renewed bid to bolster the euro.
How to Pay
“It might temporarily calm nerves but questions will come back later on how they will pay for this package when all of them need fiscal consolidation,” said Venkatraman Anantha- Nageswaran, who helps manage about $140 billion in assets as global chief investment officer at Bank Julius Baer & Co. in Singapore.
The MSCI World Index climbed 2.6 percent to 1,128 at 12:15 p.m. in Brussels. Standard & Poor’s 500 Index futures rallied 4.4 percent. The euro appreciated 2 percent to $1.30. Crude-oil futures gained 3.4 percent.
“The message has gotten through: the euro zone will defend its money,” French Finance Minister Christine Lagarde told reporters in Brussels early today after markets punished inaction last week.
ECB policy makers said they will counter “severe tensions” in “certain” markets by purchasing government and private debt, and the bank restarted a dollar-swap line with the Federal Reserve.
‘Overwhelming Force’
“This truly is overwhelming force, and should be more than sufficient to stabilize markets in the near term, prevent panic and contain the risk of contagion,” Marco Annunziata, chief economist at UniCredit Group in London, said in an e-mailed note. “This is Shock and Awe, Part II and in 3-D.”
Treasuries tumbled on investors’ increased appetite for risk, with yields on benchmark 10-year U.S. notes rising to 3.57 percent from 3.43 percent at last week’s close. German bunds also declined, sending 10-year yields up 18 basis points.
The steps came after failure to contain Greece’s fiscal crisis triggered a 4.1 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.’s collapse. European stocks sank the most in 18 months, with the Stoxx Europe 600 Index tumbling 8.8 percent.
The ripple effect in the U.S., including a brief 1,000- point drop in the Dow Jones Industrial Average on May 6, prompted President Barack Obama to call German Chancellor Angela Merkel and French President Nicolas Sarkozy to urge “resolute steps” to prevent the crisis from cascading around the world.
Loan Package
Under the loan package, euro-area governments pledged 440 billion euros in loans or guarantees, with 60 billion euros more in loans from the EU’s budget and as much as 250 billion euros from the International Monetary Fund.
“They will have bought themselves a significant amount of time to do the right thing,” said Barry Eichengreen, an economics professor at the University of California, Berkeley.
In a step that skirts EU rules barring direct central bank lending to governments, the ECB said it will conduct “interventions” to ensure “depth and liquidity” in markets. The purchases will be sterilized, meaning they won’t increase the overall money supply in the financial system.
“This sets a precedent for the rest of the life of the Central Bank and will have likely surprised even the most seasoned observers,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “While the ECB’s intervention might attract bad press regarding its mandate and independence, we believe that this was necessary to short circuit the negative feedback loop which was getting more and more threatening for the global economy. ”
Central Banks Buy
Central banks in Germany, France and Italy all said they began buying government bonds today. None provided further detail.
The ECB also reactivated unlimited fixed-rate offerings of three-month loans, a key tool in the ECB’s efforts to fight the credit crisis.
In Brussels, finance ministers from the 16-nation euro region -- joined by ministers from the 11 EU countries outside the euro -- raced against time to weld the contingency lending arrangements before markets opened in Asia.
Inability to craft a convincing package in time would have left deficit-plagued countries at the mercy of the “wolfpack behavior” of speculators, Finance Minister Anders Borg of Sweden, a non-euro member, said as the meeting began.
Budget Cuts
The new war chest would be used for countries like Portugal or Spain in case their finances buckle. Deficits are set to reach 8.5 percent of gross domestic product in Portugal and 9.8 percent in Spain this year, above the euro region’s 3 percent limit. Both countries pledged “significant” additional budget cuts in 2010 and 2011, which will be outlined in May, an EU statement said.
The extra yield that investors demand to hold Greek, Portuguese and Spanish debt instead of benchmark German bonds fell from euro-era highs. The premium on 10-year government bonds plunged to 343 basis points from as high as 973 basis points for Greece. It fell to 201 basis points from 354 for Portugal and to 94 basis points from 173 for Spain.
Europe’s financial leaders sought to master the euro’s stiffest test since its debut in 1999 without wheelchair-bound Finance Minister Wolfgang Schaeuble of Germany, Europe’s largest economy, who was rushed to a hospital soon after the meeting started due to an adverse reaction to new medication. Interior Minister Thomas de Maiziere got on a last-minute flight to Brussels to take his place.
Merkel’s Meeting
As Merkel’s cabinet held a late-night meeting in Berlin on the euro rescue, her party unexpectedly lost control of Germany’s most populous state in a regional election, potentially costing her a majority in the upper house of the federal parliament.
Goaded by Germany, the ministers made a fresh commitment to closer monitoring of government finances and more rigorous enforcement of the deficit-limitation rules.
The vow to push budget shortfalls below the euro’s 3 percent limit echoes promises that have been regularly broken ever since governments in 1999 set a three-year deadline for achieving balanced budgets. The euro region’s overall deficit is forecast at 6.6 percent of gross domestic product in 2010 and 6.1 percent in 2011.
Britain, the EU’s third-largest economy, won’t contribute to a euro rescue fund, though it backs efforts to restore stability, Chancellor of the Exchequer Alistair Darling said.
“When it comes to supporting the euro, that is for the eurogroup countries,” Darling told Sky News.
Jolted by last week’s slide in the currency and soaring bond yields in Portugal and Spain, European Union finance chiefs met in a 14-hour session in Brussels overnight. The 16 euro nations agreed in a statement to offer as much as 750 billion euros ($962 billion), including International Monetary Fund backing, to countries facing instability and the European Central Bank said it will buy government and private debt.
The rescue package for Europe’s sovereign debtors comes little more than a year after the waning of the last crisis, caused by the U.S. mortgage-market collapse, which wreaked $1.8 trillion of global credit losses and writedowns. Under U.S. and Asian pressure to stabilize markets, Europe’s governments bet their show of force would prevent a sovereign-debt collapse and muffle speculation the 11-year-old euro might break apart.
“A very thick line has been drawn in the sand,” said Andrew Bosomworth, Munich-based head of portfolio management at Pacific Investment Management Co. and a former ECB official. “This is all in. What more could they have done?”
A 110 billion-euro bailout package for Greece approved last week by the EU and IMF failed to reassure investors, prompting yesterday’s renewed bid to bolster the euro.
How to Pay
“It might temporarily calm nerves but questions will come back later on how they will pay for this package when all of them need fiscal consolidation,” said Venkatraman Anantha- Nageswaran, who helps manage about $140 billion in assets as global chief investment officer at Bank Julius Baer & Co. in Singapore.
The MSCI World Index climbed 2.6 percent to 1,128 at 12:15 p.m. in Brussels. Standard & Poor’s 500 Index futures rallied 4.4 percent. The euro appreciated 2 percent to $1.30. Crude-oil futures gained 3.4 percent.
“The message has gotten through: the euro zone will defend its money,” French Finance Minister Christine Lagarde told reporters in Brussels early today after markets punished inaction last week.
ECB policy makers said they will counter “severe tensions” in “certain” markets by purchasing government and private debt, and the bank restarted a dollar-swap line with the Federal Reserve.
‘Overwhelming Force’
“This truly is overwhelming force, and should be more than sufficient to stabilize markets in the near term, prevent panic and contain the risk of contagion,” Marco Annunziata, chief economist at UniCredit Group in London, said in an e-mailed note. “This is Shock and Awe, Part II and in 3-D.”
Treasuries tumbled on investors’ increased appetite for risk, with yields on benchmark 10-year U.S. notes rising to 3.57 percent from 3.43 percent at last week’s close. German bunds also declined, sending 10-year yields up 18 basis points.
The steps came after failure to contain Greece’s fiscal crisis triggered a 4.1 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.’s collapse. European stocks sank the most in 18 months, with the Stoxx Europe 600 Index tumbling 8.8 percent.
The ripple effect in the U.S., including a brief 1,000- point drop in the Dow Jones Industrial Average on May 6, prompted President Barack Obama to call German Chancellor Angela Merkel and French President Nicolas Sarkozy to urge “resolute steps” to prevent the crisis from cascading around the world.
Loan Package
Under the loan package, euro-area governments pledged 440 billion euros in loans or guarantees, with 60 billion euros more in loans from the EU’s budget and as much as 250 billion euros from the International Monetary Fund.
“They will have bought themselves a significant amount of time to do the right thing,” said Barry Eichengreen, an economics professor at the University of California, Berkeley.
In a step that skirts EU rules barring direct central bank lending to governments, the ECB said it will conduct “interventions” to ensure “depth and liquidity” in markets. The purchases will be sterilized, meaning they won’t increase the overall money supply in the financial system.
“This sets a precedent for the rest of the life of the Central Bank and will have likely surprised even the most seasoned observers,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “While the ECB’s intervention might attract bad press regarding its mandate and independence, we believe that this was necessary to short circuit the negative feedback loop which was getting more and more threatening for the global economy. ”
Central Banks Buy
Central banks in Germany, France and Italy all said they began buying government bonds today. None provided further detail.
The ECB also reactivated unlimited fixed-rate offerings of three-month loans, a key tool in the ECB’s efforts to fight the credit crisis.
In Brussels, finance ministers from the 16-nation euro region -- joined by ministers from the 11 EU countries outside the euro -- raced against time to weld the contingency lending arrangements before markets opened in Asia.
Inability to craft a convincing package in time would have left deficit-plagued countries at the mercy of the “wolfpack behavior” of speculators, Finance Minister Anders Borg of Sweden, a non-euro member, said as the meeting began.
Budget Cuts
The new war chest would be used for countries like Portugal or Spain in case their finances buckle. Deficits are set to reach 8.5 percent of gross domestic product in Portugal and 9.8 percent in Spain this year, above the euro region’s 3 percent limit. Both countries pledged “significant” additional budget cuts in 2010 and 2011, which will be outlined in May, an EU statement said.
The extra yield that investors demand to hold Greek, Portuguese and Spanish debt instead of benchmark German bonds fell from euro-era highs. The premium on 10-year government bonds plunged to 343 basis points from as high as 973 basis points for Greece. It fell to 201 basis points from 354 for Portugal and to 94 basis points from 173 for Spain.
Europe’s financial leaders sought to master the euro’s stiffest test since its debut in 1999 without wheelchair-bound Finance Minister Wolfgang Schaeuble of Germany, Europe’s largest economy, who was rushed to a hospital soon after the meeting started due to an adverse reaction to new medication. Interior Minister Thomas de Maiziere got on a last-minute flight to Brussels to take his place.
Merkel’s Meeting
As Merkel’s cabinet held a late-night meeting in Berlin on the euro rescue, her party unexpectedly lost control of Germany’s most populous state in a regional election, potentially costing her a majority in the upper house of the federal parliament.
Goaded by Germany, the ministers made a fresh commitment to closer monitoring of government finances and more rigorous enforcement of the deficit-limitation rules.
The vow to push budget shortfalls below the euro’s 3 percent limit echoes promises that have been regularly broken ever since governments in 1999 set a three-year deadline for achieving balanced budgets. The euro region’s overall deficit is forecast at 6.6 percent of gross domestic product in 2010 and 6.1 percent in 2011.
Britain, the EU’s third-largest economy, won’t contribute to a euro rescue fund, though it backs efforts to restore stability, Chancellor of the Exchequer Alistair Darling said.
“When it comes to supporting the euro, that is for the eurogroup countries,” Darling told Sky News.
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