Tag Archive: Eurozone

  1. The Markets

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    After a week that left investors wondering what’s next – much like fishermen on a lake as the wind kicks up and the water gets choppy – the wind settled and the fish started biting. U.S. stock markets posted their best weekly returns in almost two years last week. When all was said and done, investors were $900 billion richer on paper, according to experts cited by Barron’s. (more…)

  2. The Markets

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    LA “LESS THAN BELLE” FRANCE

    French citizens are usually quite cynical over their leaders and especially those who these days seem to be guided by their spin ‘Meisters’ in managing their media coverage. In France the leaders’ media story was obviously going to be dominated by the centenary of the outbreak of the First World War, as well as the liberation of Provence and Paris. This provided a
    perfect platform for the President to look statesman-like and a natural leader for the nation. (more…)

  3. The Markets

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    During the dog days of summer, a triple dip – three melting scoops of frozen goodness perched precariously on a waffle cone – can be delicious. There are other kinds of triple dips that are a lot less welcome, though. Just look at Italy. (more…)

  4. WHERE ARE THEY NOW?

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    Remember that island in the Mediterranean that was in turmoil about a year ago and turned to the European Union (EU) for a bailout?  The situation in Cyprus was a bit confounding because the country was growing relatively robustly and had a small budget deficit. The issue was the country’s banks which were bigger than its domestic economy. Cyprus had about 8 trillion euros in deposits and only 4.5 trillion euros of annual government revenues, according to BCA Research cited in The Economist. Since bank deposit guarantees are only as good as the country providing them, Cyprus needed some help.

    Eurozone leaders responded to the Cypriot bailout request with demands for austerity and reforms – pretty much the same thing they’d been requesting from other bailout recipients – but a ‘bail-in’ also was part of the package. What is a bail-in?  The EU required debt holders and uninsured depositors help absorb bank losses and fork up new capital. Although the idea was initially rejected by the Cypriot parliament, the government capitulated relatively quickly. The Economist described it like this:

    “At first, a raid on insured [bank] deposits was envisaged, though ultimately they were spared and the main victims were uninsured depositors – a decision made easier by the fact that many of them were Russians. But getting creditors both to absorb losses and to recapitalize the country’s biggest bank (which also had to absorb the second-biggest and even more comprehensively bust bank) is not proving to be a great success.”

    How unsuccessful has it been? The Cypriot economy contracted by about 5 percent in 2013 and is expected to continue to wither this year. Unemployment in the country is at 17 percent.

    There are several lessons that can be learned from events in Cyprus, according to The Economist: 1) It’s important to have a state-backed ‘bad’ bank where bad loans can be held and dealt with over the long term; 2) Forcing uninsured depositors to take a hit helped protect taxpayers, but it also damaged public confidence in banks; and 3) Fiscal policy makers need pragmatic and flexible solutions because every banking crisis is different.

  5. Market Update

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    Lexington were delighted to see that U.K. stock markets finished the week – and the quarter – on a positive note!

    The U.S. Federal Reserve’s accommodative monetary policy and strong profit growth helped provide the lift needed to propel the FTSE 100 to a 5-year high. The U.S. Dow Jones Industrials Index also finished the week above its previous record close. For the quarter, the FTSE 100 was up about 9 percent, the FTSE Small-Cap index was up about 11.3 percent, and the FTSE AIM index was up about 3.4 percent.

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  6. Market Update

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    Like a not-quite-dead villain in a horror film, the Eurozone crisis raised its ugly head again last week, scaring investors and causing many stock markets to close flat or slightly down for the week, according to Barron’s. Investors’ worries strengthened demand for Treasuries, pushing the yield on the benchmark 10-year bond lower.

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  7. Market Update

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    During periods of strong market performance, like the one we’ve experienced since the end of last year, it’s important to remember that markets ebb and flow over time. Since December 31, 2012, Lexington can confirm that the FTSE All-Share Index has gained 10.7 percent and the Standard & Poor’s 500 added 8.8 percent. Last week, the FTSE All-Share reached highs last seen during 2007, and the S&P 500 ended the week less than one percent from its record high, which was also realised during 2007.

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  8. Market Update

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    Lexington felt it was a bumpy week for stock markets. Early on, markets in many countries were negatively affected by the outcome of Italian elections. Italy’s anti-establishment Five-Star Movement, led by comedian Beppe Grillo, won about one-fourth of the votes in both the country’s upper and lower houses. Markets lost value as investors anticipated political gridlock could delay Italian economic reforms. Since Italy is the third largest economy in Eurozone and its public debt is significantly higher than its Gross Domestic Product, political stalemate in Italy could negatively affect the Eurozone.

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