ETX Capital Daily Market Bite, 24th June, 2013; Markets Fall; China Liquidity Squeeze Weighs
June 24, 2013 10:29 am
June 24th 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
A soft start for European financial markets this morning, as traders still ruminate over the implications of Fed tapering QE by year-end together with concerns over a possible liquidity squeeze in China. Share markets in Asian markets overnight fell sharply on worries about stress in the Chinese interbank lending markets — Chinese equity markets witnessed their biggest losses in 4 years in overnight trade. China’s central bank injected liquidity in the market after the country pulled back from a severe credit squeeze with money rates falling on the news of intervention by the central bank. Markets are worried that tightening of money rates will mean that strong credit growth will not continue through 2013 — Goldman Sachs cited this as one of the drivers behind cutting its Chinese GDP forecasts for 2013 and 2014. Resource shares in Europe are responding to the worrying signs out of China, which weigh on commodity prices too, adding further pressure on the sector.
Deal news in Europe provides a degree of support in Europe as Kabel Deutschland recommends shareholders to accept Vodafone’s EUR7.7billion bid for the company. Vodafone puts itself in front of a bidding war with Liberty Global who last week tabled an offer for Kabel too but this fight could come to an early end if the deal between Vodafone and Kabel is completed. Elsewhere, in a bid to reduce its debt, Telefonica has agreed to dispose of its Irish business to Three in a deal worth up to EUR850million; the deal once completed should bring down the heavily indebted Spanish telecom operator’s net debt down by EUR780million. Looking ahead to the rest of the session, there’s little out on the economic calendar other than the German IFO survey which is expected to increase slightly from the month prior but could be hit by the recent poor foreign demand that Germany is suffering from.
June 24th 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
A soft start for European financial markets this morning, as traders still ruminate over the implications of Fed tapering QE by year-end together with concerns over a possible liquidity squeeze in China. Share markets in Asian markets overnight fell sharply on worries about stress in the Chinese interbank lending markets — Chinese equity markets witnessed their biggest losses in 4 years in overnight trade. China’s central bank injected liquidity in the market after the country pulled back from a severe credit squeeze with money rates falling on the news of intervention by the central bank. Markets are worried that tightening of money rates will mean that strong credit growth will not continue through 2013 — Goldman Sachs cited this as one of the drivers behind cutting its Chinese GDP forecasts for 2013 and 2014. Resource shares in Europe are responding to the worrying signs out of China, which weigh on commodity prices too, adding further pressure on the sector.
Deal news in Europe provides a degree of support in Europe as Kabel Deutschland recommends shareholders to accept Vodafone’s EUR7.7billion bid for the company. Vodafone puts itself in front of a bidding war with Liberty Global who last week tabled an offer for Kabel too but this fight could come to an early end if the deal between Vodafone and Kabel is completed. Elsewhere, in a bid to reduce its debt, Telefonica has agreed to dispose of its Irish business to Three in a deal worth up to EUR850million; the deal once completed should bring down the heavily indebted Spanish telecom operator’s net debt down by EUR780million. Looking ahead to the rest of the session, there’s little out on the economic calendar other than the German IFO survey which is expected to increase slightly from the month prior but could be hit by the recent poor foreign demand that Germany is suffering from.
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