The G20 leaders showed a united front as they pledged to shore up global growth, introduce regulatory reform in a relatively short timeframe and avoid protectionism. However, the timeframe for resolution of these reforms is as soon as March 31st. Success will hinge on the new US Administration’s willingness to take big decisions, a mere 2 months after taking office. US analysts think that it will make more sense to try and overcome the crisis first before implementing far-reaching reforms. These reforms include efforts to strengthen the credit derivative markets, create colleges of national supervisors to monitor global banks and provide guidance for valuation of illiquid securities. There will be a follow up summit on April 30th, probably in London.
Iceland said yesterday that it had reached a deal with Britain and other European countries on guidelines for dealing with foreign investors in a collapsed bank, in an agreement likely to clear the way for a stalled IMF support package for Reykjavik. Conflicts over money in Icesave accounts at Landsbanki, which collapsed, had been delaying billions of dollars in loans for Iceland from the IMF and other lenders.
The precious metals are continuing their consolidation. Gold is doing better than the more industrial metals, with the pressure on the auto industry capping platinum and palladium. The US senate is taking a close look at what it can do to support GM, Ford and Chrysler. In Europe, the German government is ready to open talks with GM’s Opel but does not plan to offer blanket aid to entire industries suffering due to the financial crisis.
Good week for:
Oil speculators. Investors who placed Summer bets that oil would fall below $100 a barrel are set to make huge profits today with the expiry of December put options. Some, as much as 2,000%.
Bad week for:
Adolf Merckle. Germany’s 5th richest person might have to sell his stake in drug company Ratiopharm and cement maker Heidleberg after losing millions of euro on short selling Volkswagen stock. VW’s share price surged to an all time high two weeks ago.