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Press Release Category Business - Financial - NJI Release Date: October 15, 2012

European markets hit by bad news

October 15, 2012
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There was a collapse of European markets against the background of the riots in Spain, as well as the Reserve Bank of Philadelphia head's statements questioning the effectiveness of the Federal Reserve Bank to stimulate the US economy. On this informational background, the euro dropped to a two-week low against the dollar - 1.2850 dollar.

PR9.NET October 15, 2012 - Late on Tuesday, Charles Plosser, the Head of Regional Bank of Philadelphia admitted that the third round of "quantitative easing" launched by the Federal Reserve Bank will not bring the desired results in labor market stability. According to Charles Plosser, the new program of redemption, announced this month by the Federal Reserve Bank, will not improve the employment situation and economic growth, but may adversely affect the reputation of the central bank. He believes that the methods of monetary policy are not enough to deal with problems of the American economy. First of all, a strategy to fight inflation risk should be built, says the head of the Federal Reserve Bank of Philadelphia.

The situation was deteriorated by the massive protests in Greece and Spain against the tightening of fiscal policy. It became known that the Spanish government plans to present a draft budget for 2013 providing austerity measures today, September 27. These measures may be able to prevent from having to submit the formal request for a loan from the European Union and the IMF. According to the experts, the government will keep the forecast on its budget deficit at 4.5% of GDP.

All these factors have led to the fact that on September 26 the European indices were sharply lower. European indices FTSE (-1,56%), DAX (-2%), CAC (-2,82%) and MIB (-3,29%) also fell heavily on Wednesday, rolled off the yearly highs. The region's banks paper have also experienced sharp decline - Deutsche Bank (-4,47%), RBS (-3,62%), UBS (-2,45%), Credit Suisse (-2,89%), BNP Paribas (- 5,5%), Credit Agricole (-7,45%), Banco Santander (-4,51%). In addition, on this informational background, the euro dropped to a two-week low against the dollar - 1.2850 dollar.
Oil prices dropped sharply, the price of a mixture of European Brent fell by $ 1 to $ 109 per barrel.

"Protests in Spain, the upcoming stress tests of Spanish banks and the problems with Greece put pressure on the single European currency. Technically, euro quotes get closer to the local support, which is $ 1.282. We tend to expect the euro's decline would offset near this point and a rebound will be followed by a short-term consolidation, "- said the analyst Trade Portal Alex Malikov.

The financial advisor Dmitry Chernavski assumes that the head of the Federal Reserve Bank of Philadelphia, Charles Plosser 's statement about the effectiveness of the new US Federal Reserve Bank redemption program was a formal reason for negative expectations. The actual reason is in realizing the real-economic problems by investors, says Dmitry Chernavski. "The alarming news from Spain and Greece force investors to close long trading positions and increase the "short ones"," - said Dmitry Chernavski.

"European politicians should consider The Founding Fathers of the United States of America. Benjamin Franklin said: "We must all hang together, or surely, we will all hang separately". "Today, the bond markets doubt the protests in Madrid and Athens, this issue is to be resolved in the first place,"- said Mike Ingram, market analyst at BGC Brokers.

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