RSS Feed by Calculated Risk on 6/14/2010 09:02:00 AM
Monday, June 14, 2010
BIS reports Bank Exposure to Euro area countries facing market pressure
The Bank for International Settlements (BIS) put out the BIS Quarterly Review, June 2010 yesterday. As part of the review, the BIS estimated the exposures of banks by nationality to the residents of Greece, Ireland, Portugal and Spain:
As of 31 December 2009, banks headquartered in the euro zone accounted for almost two thirds (62%) of all internationally active banks’ exposures to the residents of the euro area countries facing market pressures (Greece, Ireland, Portugal and Spain). Together, they had $727 billion of exposures to Spain, $402 billion to Ireland, $244 billion to Portugal and $206 billion to Greece (Graph 3).
French and German banks were particularly exposed to the residents of Greece, Ireland, Portugal and Spain. At the end of 2009, they had $958 billion of combined exposures ($493 billion and $465 billion, respectively) to the residents of these countries. This amounted to 61% of all reported euro area banks’ exposures to those economies. French and German banks were most exposed to residents of Spain ($248 billion and $202 billion, respectively), although the sectoral compositions of their claims differed substantially. French banks were particularly exposed to the Spanish non-bank private sector ($97 billion), while more than half of German banks’ foreign claims on the country were on Spanish banks ($109 billion). German banks also had large exposures to residents of Ireland ($177 billion), more than two thirds ($126 billion) of which were to the non-bank private sector.
French and German banks were not the only ones with large exposures to residents of euro area countries facing market pressures. Banks headquartered in the United Kingdom had larger exposures to Ireland ($230 billion) than did banks based in any other country. More than half of those ($128 billion) were to the non-bank private sector. UK banks also had sizeable exposures to residents of Spain ($140 billion), mostly to the non-bank private sector ($79 billion). Meanwhile, Spanish banks were the ones with the highest level of exposure to residents of Portugal ($110 billion). Almost two thirds of that exposure ($70 billion) was to the non-bank private sector.
Click on graph for larger image in new window. This graph shows the exposure of bank by nationality to the risky countries.
The bailout of the risky countries is very much a bailout of the banks - especially the banks of Germany and France.
The BIS puts the numbers in perspective:
The exposures of BIS reporting banks to the public sectors of the euro area countries facing market pressures can be put into perspective by comparing them with these banks’ capital. The combined exposures of German, French and Belgian banks to the public sectors of Spain, Greece and Portugal amounted to 12.1%, 8.3% and 5.0%, respectively, of their joint Tier 1 capital. By comparison, the combined exposures of Italian, Dutch and Swiss banks to the same public sectors were equal to 2.8%, 2.7% and 2.0%, respectively, of their Tier 1 capital. Those ratios stood at 3.4%, 1.2% and 0.7%, respectively, for Japanese banks and 2.0%, 0.8%, and 0.7%, respectively, for UK banks. The exposures of US banks to each of the above public sectors amounted to less than 1% of their Tier 1 capital.It is the German and French banks that are most at risk.
Sunday, June 13, 2010
Small businesses "collapse" around the Gulf
by Calculated Risk on 6/13/2010 09:15:00 PM
Here is the Weekly Summary and a Look Ahead
From Kim Murphy at the LA Times: As businesses collapse, claimants still waiting for checks from BP
Across the gulf, residents already shellshocked by the tar balls, oil soup and dead sea life washing up on their beaches are now getting hit with a second wave: the sudden collapse of their livelihoods, and the equally intimidating challenge of getting BP to pay for it.One real estate agent said his "phone quit ringing a month ago", but is that because of the oil gusher or other factors? This will takes years to sort out ...
...
Hotels, restaurants, machine shops, bars, tour companies all became collateral damage when the Gulf of Mexico ... became an industrial cleanup site.
Concern about auto sales
by Calculated Risk on 6/13/2010 05:31:00 PM
From Neal Boudette and Sharon Terlep at the WSJ: Auto-Sales Optimism Fades
According to AutoData, light vehicle sales were up 17.2% over the first five months of 2010 - compared to the same period in 2009. This was an increase from 3.95 million to 4.63 million cars and light trucks.
However - according to Boudette and Terlep - fleet sales were up 32% during the first five months, and sales to individuals were only up 13%.
And without individual buyers it will be hard to maintain sales growth.
George Pipas, the top sales analyst at Ford Motor Co., said he is seeing evidence that consumers are deferring decisions on major purchases, in large part because home values and income growth haven't rebounded.It will be sometime before home values increase significantly (I expect further price declines later this year), and income growth in most industries will be muted with high unemployment. So we should probably expect the growth in auto sales to slow significantly.
"These are two things that really have to happen before you will see auto sales move up more significantly," Mr. Pipas said.
Weekly Summary and a Look Ahead
by Calculated Risk on 6/13/2010 11:59:00 AM
Two housing related reports will be released this week: the NAHB builder confidence survey on Tuesday and housing starts on Wednesday.
On Tuesday, the June Empire State manufacturing survey will be released at 8:30 AM. The consensus is for a slight increase from the May reading. Also on Tuesday, the June NAHB homebuilder survey will be released at 10 AM. The consensus is for about the same level as May.
Also on Tuesday, St. Louis Fed President James Bullard will speak on "Getting Serious About Asset Bubbles and Monetary Policy" in Hong Kong at 6:15 AM ET.
On Wednesday, Housing Starts for May will be released at 8:30 AM. The consensus is for a 3.3% decrease to 650K (SAAR) in May from 672K in April. Based on the sharp decline for permits in April, starts might fall even further in May (I'll take the under this month). Also at 8:30 AM, the BLS will release the Producer Price Index (PPI) for May. The consensus is for a decrease of 0.5%.
Also on Wednesday, the MBA will release the mortgage purchase applications index. This has been falling sharply suggesting a sharp decline in home sales after the expiration of the tax credit. And the Federal reserve will release the May Industrial Production and Capacity Utilization report at 9:15 AM. Expectations are for production to increase 1% and capacity utilization to increase to 74.5% (the highest levels since late 2008).
On Thursday, the May Consumer Price Index (CPI) will be released at 8:30 AM. The consensus is for a 0.2% decrease in prices. Also on Thursday, the closely watched initial weekly unemployment claims will be released. Consensus is for a decline to 450K from 456K last week. Also on Thursday, the Philly Fed survey and the Conference Board's index of leading indicators will both be released at 10 AM.
And on Friday, the BLS will release the Regional and State Employment and Unemployment report for May at 10 AM. And of course the FDIC will probably have another busy Friday afternoon ...
And a summary of last week:
On a monthly basis, retail sales decreased 1.2% from April to May (seasonally adjusted, after revisions), and sales were up 6.9% from May 2009 (easy comparison).
Click on graph for larger image in new window.This graph shows retail sales since 1992. This is monthly retail sales, seasonally adjusted (total and ex-gasoline).
The red line shows retail sales ex-gasoline and shows the increase in final demand ex-gasoline has been sluggish.
Retail sales are up 8% from the bottom, but still off 4.6% from the pre-recession peak.
This graph shows the MBA Purchase Index and four week moving average since 1990.The purchase index has collapsed following the expiration of the tax credit suggesting home sales will fall sharply too. This is the lowest level for the purchase index since February 1997. From the MBA:
“Purchase and refinance applications dropped this week, even after an adjustment for the Memorial Day holiday. Purchase applications are now 35 percent below their level of four weeks ago, as homebuyers have not yet returned to the market following the expiration of the homebuyer tax credit at the end of April,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.
The Association of American Railroads reported traffic in May 2010 was up 15.8% compared to May 2009 - and traffic was still 11.8% lower than in May 2008.This graph shows U.S. average weekly rail carloads. Traffic increased in 18 of 19 major commodity categories YoY.
From AAR:
U.S. railroads averaged 294,758 carloads per week in April 2010 and 288,793 in March 2010. Thus, May 2010’s average was actually down slightly from those months ... One month does not a trend make, but it would obviously be worrisome if the decline continued.
The Census Bureau reports:
[T]otal April exports of $148.8 billion and imports of $189.1 billion resulted in a goods and services deficit of $40.3 billion, up from $40.0 billion in March, revised. April exports were $1.0 billion less than March exports of $149.8 billion. April imports were $0.8 billion less than March imports of $189.9 billion.
This graph shows the U.S. trade deficit, with and without petroleum, through April.The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.
Although both imports and exports were off slightly in April, both have been increasing sharply - but are still below the pre-crisis levels. Once again China and oil are the major contributors to the trade deficit.
Best wishes to all.
Obama Pushes for $50 Billion in State Aid
by Calculated Risk on 6/13/2010 08:13:00 AM
From Jackie Calmes and Sheryl Gay Stolberg at the NY Times: Obama Presses for Aid to Cities and States
President Obama on Saturday implored Congress to provide more aid to states and cities to blunt “the devastating economic impact of budget cuts” by local governments that imperil the jobs of teachers, the police, firefighters and other public employees.The WaPo quotes Obama as writing there will be "massive layoffs of teachers, police and firefighters" without the additional funds.
In a letter to Democratic and Republican Congressional leaders, Mr. Obama said the “mounting employment crisis” in the states “could set back the pace of our economic recovery.” ... education secretary, Arne Duncan, has said that without federal aid, up to 300,000 fewer teachers would be in classrooms this fall ...
