Merkel calls for more transparency in global finance after recent turmoil in markets
Monday, 20 August 2007
BERLIN, Aug 19 (Agencies): German Chancellor Angela Merkel reiterated her call for increased transparency in global finance following the recent turmoil in markets around the world, in an interview to be published today.
"At the end of the day we all risk paying the price of the opaqueness often associated with the selling on of loans," Merkel told the Bild am Sonntag newspaper.
The turbulence in stock and debt markets this week showed "to what extend it is necessary to have greater transparency in international financial markets," Merkel said.
In recent days, central banks around the world have pumped tens of billions of dollars into the global financial system amid signs that private banks and firms are having trouble raising funds and rolling over debt.
The crisis was sparked by concerns that US homeowners would be unable to make repayments on so-called subprime mortgages, which had been repackaged as complex financial instruments and sold to other investors including hedge funds.
Publicly-owned regional German bank SachsenLB said Saturday it has had to be bailed out to the tune of 17.3 billion euros (23.3 billion dollars) by the country's savings banks because of exposure to the US subprime loan crisis.
Another German bank, IKB, was rescued earlier this week with an 8.1 billion dollar liquidity line extended by state-owned development bank KfW, its main shareholder.
Meanwhile, New York report says: The Federal Reserve came to the stock market's rescue Friday but unless credit markets remain stable this week, the salvation may prove little more than a brief respite from its late summer sell-off.
"It restores confidence, but we're not out of the woods yet," said Bill Hoskins, managing director of fixed-income research at Mellon Capital Management, in San Franscisco.
In a surprise before the market's open Friday, the Fed cut the discount rate on its loans to banks to 5.75 per cent from 6.25 per cent. The fed funds rate on interbank loans was left at 5.25 per cent.
Hoskins said the Fed has created a safety net that makes it possible for banks to lend to credit-worthy borrowers. But he also said financial institutions remain leery about lending to one another after the blowup in subprime mortgages.
Subprime loans are the lowest tier of the mortgage market where borrowers received loans despite poor credit histories.
If investors are looking past faltering credit markets for cues on what to do next, the week offers only a few pieces of economic data and a very thin calendar of corporate earnings.
Stocks, which erased nearly all of a 300-point decline in the Dow industrials in the final hour of Thursday's trading, rocketed higher Friday after the Fed's move.
But the rally Friday was not enough to prevent the major indexes from finishing with losses for the week.
The Dow Jones industrial average ended the week down 1.2 per cent, the Standard & Poor's 500 index fell 0.5 per cent and the Nasdaq composite index declined 1.6 per cent.
For the year, though, all three US stock indexes are still higher. The Dow is up 4.9 per cent, the S&P is up almost 2 per cent and the Nasdaq is up 3.7 per cent. Friday's surge helped the S&P recover from the previous two days, when the broad index had given up all its gains for the year.
Investors will obviously start the new week hoping that Friday's rebound will hold.
"I'm expecting some follow-through on the upside," said Ralph Acampora, chart analyst and director of research at Knight Capital Group in Jersey City, New Jersey.
"At the end of the day we all risk paying the price of the opaqueness often associated with the selling on of loans," Merkel told the Bild am Sonntag newspaper.
The turbulence in stock and debt markets this week showed "to what extend it is necessary to have greater transparency in international financial markets," Merkel said.
In recent days, central banks around the world have pumped tens of billions of dollars into the global financial system amid signs that private banks and firms are having trouble raising funds and rolling over debt.
The crisis was sparked by concerns that US homeowners would be unable to make repayments on so-called subprime mortgages, which had been repackaged as complex financial instruments and sold to other investors including hedge funds.
Publicly-owned regional German bank SachsenLB said Saturday it has had to be bailed out to the tune of 17.3 billion euros (23.3 billion dollars) by the country's savings banks because of exposure to the US subprime loan crisis.
Another German bank, IKB, was rescued earlier this week with an 8.1 billion dollar liquidity line extended by state-owned development bank KfW, its main shareholder.
Meanwhile, New York report says: The Federal Reserve came to the stock market's rescue Friday but unless credit markets remain stable this week, the salvation may prove little more than a brief respite from its late summer sell-off.
"It restores confidence, but we're not out of the woods yet," said Bill Hoskins, managing director of fixed-income research at Mellon Capital Management, in San Franscisco.
In a surprise before the market's open Friday, the Fed cut the discount rate on its loans to banks to 5.75 per cent from 6.25 per cent. The fed funds rate on interbank loans was left at 5.25 per cent.
Hoskins said the Fed has created a safety net that makes it possible for banks to lend to credit-worthy borrowers. But he also said financial institutions remain leery about lending to one another after the blowup in subprime mortgages.
Subprime loans are the lowest tier of the mortgage market where borrowers received loans despite poor credit histories.
If investors are looking past faltering credit markets for cues on what to do next, the week offers only a few pieces of economic data and a very thin calendar of corporate earnings.
Stocks, which erased nearly all of a 300-point decline in the Dow industrials in the final hour of Thursday's trading, rocketed higher Friday after the Fed's move.
But the rally Friday was not enough to prevent the major indexes from finishing with losses for the week.
The Dow Jones industrial average ended the week down 1.2 per cent, the Standard & Poor's 500 index fell 0.5 per cent and the Nasdaq composite index declined 1.6 per cent.
For the year, though, all three US stock indexes are still higher. The Dow is up 4.9 per cent, the S&P is up almost 2 per cent and the Nasdaq is up 3.7 per cent. Friday's surge helped the S&P recover from the previous two days, when the broad index had given up all its gains for the year.
Investors will obviously start the new week hoping that Friday's rebound will hold.
"I'm expecting some follow-through on the upside," said Ralph Acampora, chart analyst and director of research at Knight Capital Group in Jersey City, New Jersey.