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Friday, 18 November 2011

2011 European Debit Crisis

Just like in 2008, bank stocks are being hit the hardest. Bank of America stock is down almost 50% so far this year. Overall the S&P financial sector is down more than 23% in 2011 so far. The banks are evn bigger now than they were in 2008. European Debt Crisis spread from the periphery to the core  Euro zone members Greece,Ireland,Italy, Spain and Portugal and also some non Euro-zone European Union countries. After France ,Spain faced a sharp spike in borrowing costs and Germany warned Italy's new prime Minister to move fast to prevent an even deeper debt crisis. Market was also disappointed by German Chancellor Angela Merkell's persistent refusal to issue joint euro area bonds or to allow the European Central Bank to play a larger role in resolving the debt crisis.
All of this panic is causing the price of Gold to reach unprecedented heights. If the current panic continue for an extended period of time, there is no telling how high the price of Gold may go.
In the US the U.S government has lost its AAA credit rating for the first time in the history. U.S government debt downgraded from AAA to AA+. Fitch predicted that US banks could be affected if the debt contagion continues to spread beyond the stressed European Markets of Greece, Ireland ,Italy,Portugal and Spain.The European Sovereign debt crisis is probably the biggest cause of the instability in world financial markets right now. The truth here is this debt crisis is just beginning.

India's debt ratings not under review:

Indias debt ratings are not under a formal review, a Moody's investors services analyst was quoted as saying. India's public debt at 70% of its GDP is preventing it from securing an investment grade rating. For the rating to be improved we will have to be comfortable that India's government debt is at a level that can be sustained over the medium term.
Last week Moody's down graded the out look on India's banking sector to negative from stable, citing a slowing domestic economy and chaos in global markets. this week the government asked Moody's for a higher sovereign rating citing good growth prospects and economic reforms as the strengths. The credit strengths were much better than most similar rated economics. To increase investment s in debt securities government raised the investment limit for FII's in Government securities by US$5 bn to US$15bn. At the same time the government raised the investment limit for FII's in corporate bonds by US$5bn to US$20bn. FII's limit in corporate debt now stands at a combined US $45bn of which US$25bn must be invested in infrastructure bonds. 

Related links:
Poor german auction shows crisis hitting core 

1 comment:

Investorpedia said...

The Weekly Report For November 21nd - November 25th, 2011

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