Mario Draghi holds a presser with the Brits. I mentioned yesterday that much of the 489 billion euros ($640 billion) that banks borrowed from the European Central Bank will go to paying off prior, shorter-term loans from the central bank. The Telegraph notes that about 300 billion ($391 billion) of that will indeed be used to pay off those old loans, so we are talking about roughly 200 billion ($261 billion) in "new" money.
And 200 billion euros is not a lot of money, but there will be another round of three-year lending from the ECB , at the end of February. After that: New bank rules which will require most of the large banks to raise their core Tier 1 capital ratios by next June. Raising capital will be difficult, so most observors still believe that deleveraging — cutting loan books, for example, is the most likely path.
What's next from Mr. Draghi and the ECB? He is scheduled to hold a press conference today with Mervyn King, head of the Bank of England, today about 11 a.m. ET. The big question: How far can he can push the Germans? Doves are clamoring for aggressive (50 basis points) rate cuts by February. And quantitative easing? Draghi is holding the line, insisting no. For the moment.
1. Merry Christmas. Someone's going to leave the club. Sir Philip Hampton, the chairman of Royal Bank of Scotland, said that "it is likely that one country, a small country, will drop out" of the euro. He didn't name any country specifically.
2. The upper house of the Italian parliament is expected to hold a confidence vote on a 30 billion euro ($39 billion) austerity bill later today. It has already passed the lower house.
3. The NYSE Euronext-Deutsche Boerse merger...in trouble? The negotiations with the European Union have reached a critical point. This has been very difficult to cover — the meetings are closed to the public, no documentation is released, and the participants have been tight-lipped.
But signs of worry are leaking out. The EU plans to give a preliminary decision on the deal some time in January. The final decision will be made by the 27 EU commissioners in early February. Dow Jones reported that at a meeting with the EU competition commissioner on Wednesday. The remedies (read: concessions) offered appeared not to have been sufficient.
The big issue: The near-monopoly on the listed derivative market. The Deutsche Boerse owns Eurex, NYSE owns Liffe. Together they have about 90 percent of the derivatives business in Europe, though that number is much lower if you include the over-the-counter (OTC) market.
But EU regulators do not seem to believe that the OTC derivatives market is a competitor to the listed derivatives market. I find this amazing, and simply wrong.
The partners have offered to sell off their single stock derivatives business and offered broader access to their clearing house for competitors, and to cap fees on derivative transactions for three years, but that may not be enough.
This is a real problem. Selling any of the two derivative businesses would destroy the logic of the merger.
4. American Greetings falls 10 percent this morning on considerably light volume after lowering guidance and missing analysts’ earnings estimates. American Greetings earned 50 cents a share versus The Street’s 81 cents a share expectation. The card company sees fiscal 2012 cash flow from operating activities, less capital expenditures, to be in the range of $35 million to 50 million, which is lower than previously expected. Third quarter revenue was $463.6 million, versus a $439.4 million estimate.
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