Chinese Shares Post Biggest Percentage Loss Since 2009
The yen fell against most major currencies as positive US earnings data and a selloff in growth currencies slowed. The Aussie dollar gained after Australian central bank minutes raised expectations for more rate hikes. The euro gained on the dollar after Germany’s ZEW economic report exceeded expectations. Shares on Wall Street rose despite concerns about recent fraud charges against Goldman Sachs. The fraud charges prompted concerns about more and stricter regulation of Wall Street. High yielding currencies recent gains were pared after Chinese shares were hit with the biggest percentage loss since August 2009. An unnamed forex trader at a UK bank said, “There seems to be a pause in yen buy-backs for now on Wall Street and good earnings results, but I am not sure whether the yen’s rise on risk-off moves is over yet.” The greenback gained 0.3% vs. the yen trading at 92.64 yen. The euro extended recent gains against the yen and rose 0.3% to 124.94 yen. The Reserve Bank of Australia’s April policy meeting said that given an expected boom in Australia’s terms of trade it would not be prudent to delay a rate hike.
ECB Member Weber Says Greece May Need 80 Billion Euros
There was more bad news for the euro after European Central Bank Governing Council member Axel Weber told German legislators that Greece may require loans of up to 80 billion euros ($111.8 billion USD) to prevent default. Weber also told the lawmakers that the Greek situation is worsening and that “the numbers are changing all the time.” The German newspaper Bild reported that Weber said that the amount of aid required by Greece may not be known until much later. Earlier EU leaders agreed to a 30 billion euro loan program for Greece but the loan agreement did not calm market fears about Greece’s economic situation. The premium investors are demanding to hold Greek debt vs. German benchmarks rose to a record 482 basis points on Monday. Germany’s deputy finance minister, Joerg Asmussen said that the EU will provide pooled loans and that buying Greek bonds is out of the question. Asmussen stated, “If it comes to financial aid for Greece, then the path will be a pooled credit, which in the case of Germany would be done via (state bank) KfW. The solution of buying Greek bonds is off the table.”
Ash Cloud Hammers Travel Industry
To add to the euro zone’s woes the ash cloud from an Icelandic volcano eruption has disrupted air travel and is affecting the euro zone economy. It has been estimated that airlines are losing about $200 million dollars per day. Travel disruptions forced the Athens government to reschedule talks with EU, ECB and IMF officials.
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