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 European shares fall again as G20 talk seen hollow

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lexie
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PostSubject: European shares fall again as G20 talk seen hollow   Fri Sep 23, 2011 8:14 am

Sep 23, 2011 07:45 EDT




European shares fall again as G20 talk seen hollow




LONDON (Reuters) - European shares fell on Friday after a fresh pledge of support from leading global economies to shore up the financial sector failed to placate markets, leaving them on course for a fifth straight month of losses.

Adding to the gloom were comments from Deutsche Bank suggesting European lenders could face a bigger than expected writedown on their Greek debt holdings, as talk of a Greek default intensified.

The Group of 20 leading economies, meeting in Washington, said they would take all the necessary steps to boost market confidence while the euro zone would look at ways to boost the effectiveness of the region's bailout fund.

Given the scale of the previous session's selloff, the news was enough to spark a tentative rally at the open on Friday, although the lack of detail meant conviction was low and sellers soon emerged to push the market to fresh 26-month lows.

"It's the usual platitudes... but they don't have the political capital to do what they need to do, which is bail out the southern European countries and recap all the banks. I think it's a complete nonsense," Andrew Lim, banks analyst at Espirito Santo said.

"The short-term funding market is dying for some banks, and the wholesale funding market has also pretty much dried up," he added.

French, Italian and Spanish banks were all at risk, he added, and while some bottom fishers in search of bargains were taking long-only bets on the sector, most people were out of the market, including hedge funds.

At 1108 GMT, the FTSEurofirst 300 index of leading European shares was down 1.6 percent at 859.33 points, just off its low of 856.97, a fresh 26-month low. It had closed Thursday down 4.7 percent.

The weakness prompted a fresh rise in the Euro STOXX 50 volatility index, up 5.7 percent to 50.48. The higher the volatility index, the lower investor appetite for risk.

Implied volatility had risen sharply after the Thursday selloff, with that for Germany's DAX up 9.3 percent, for Britain's FTSE 100 up 20 percent and for the French CAC-40 up 10 percent.

In comparison with the cash market, however, volatility had been "extremely well behaved," Franck Lacour, head of derivatives at HSBC, said.

"It feels like most of the directional players are either out of the market or very well protected. You haven't had the kind of panic in the volatility market like you had in 2008."

"If the market moves another 10 percent down, then it could become more difficult, because then people will have a lot less effective protection and more risks."

From a chart perspective, the Euro STOXX 50 index of leading blue-chip shares, down 1.3 percent at 2,001.55, had support at 2,000, Dmytro Bondar, technical analyst at RBS, said.

Short-to-medium term players remain bearish, however, which "points to a conclusion that should the 2,000 level be broken on a close basis, there will be more room for a drop to our next target at 1,810, which is a Fibonacci projection from the Dec'07 - Jan'08 impulse wave," Bondar said.

http://www.newsmeat.com/news/meat.php?articleId=119199094&channelId=2951&buyerId=newsmeatcom&buid=3281




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PostSubject: Re: European shares fall again as G20 talk seen hollow   Fri Sep 23, 2011 8:21 am

Sep 23, 2011 02:24 EDT




G20 vows 'strong' response to economic crisis




The Group of 20 major economies have vowed to mount a powerful response to the rising challenges facing the world economy as it reels from a debt crisis in the eurozone.

The pledge, made in an unexpected statement late Thursday, came after world leaders ramped up pressure on Europe take decisive action to contain its debt crisis as markets spun out of control.

The G20 finance ministers and central bankers vowed in a joint statement to deliver "a strong and coordinated international response to address the renewed challenges facing the global economy."

The finance chiefs noted "heightened downside risks from sovereign stresses, financial system fragility, market turbulence, weak economic growth and unacceptably high unemployment."

The G20 officials, grouping advanced and emerging-market economies, said they would work together to support growth and implement "credible fiscal consolidation plans."

"This will require a collective and bold action plan, with everyone doing their part," they said, hours after stocks plunged worldwide.

The officials said the action plan would be prepared for the G20 leaders summit on November 3-4 in Cannes, France.

They had not been expected to issue a statement following their working dinner in Washington on the sidelines of the International Monetary Fund and World Bank annual meetings.

At the opening of the meeting, World Bank head Robert Zoellick had called on Europe, Japan, and the United States "to address their big economic problems before they become bigger problems for the rest of the world."

"Not to do so is irresponsible," he added.

IMF managing director Christine Lagarde echoed his remarks, saying debt burdens and capital-weak banks "could actually suffocate the recovery" in the world economy and spark more crises in the poorest countries.

Financial and commodity markets were meanwhile hit by a huge sell-off sparked by Europe's public debt problems and perceptions that the US economy is falling back toward recession.

A day-long global stocks rout ended with a 3.5 percent loss on the Dow Jones Industrial Average and oil prices sank, with New York's main contract plunging 6.3 percent.

At a post-dinner news conference late Thursday, French Finance Minister Francois Baroin, whose country holds the G20 presidency, said the statement had not been planned and was partly a response to the market turbulence.

In the statement, the G20 pledged to "take all necessary actions" to preserve the stability of banking systems and financial markets "as required."

"We will ensure that banks are adequately capitalized and have sufficient access to funding to deal with current risks and that they fully implement Basel III along the agreed timelines," the statement said.

Central banks will continue to stand ready to provide liquidity to banks as needed, and monetary policies will maintain price stability and continue to support economic recovery, it said.

"We are taking strong actions to maintain financial stability, restore confidence and support growth."

The move came as tensions worsened in Greece, the epicenter of the eurozone crisis, where widespread strikes erupted over new budget cuts agreed to under EU and IMF pressure.

Athens hopes to receive more funds from a 110-billion-euro rescue program tied to austerity measures, without which it could default on its debt as early as next month, sending shock waves throughout the eurozone.

The G20 officials are to hold further meetings Friday, followed by a news conference.

Source: AFP Global Edition

http://www.newsmeat.com/news/meat.php?articleId=119197064&channelId=2951&buyerId=newsmeatcom&buid=3281



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