EBC will hold press conference today when normally they are on summer break. this is unusual and has never happend before. a possibility of a hike today but most think will announce for possible hike in september.
very strange affair. did not see the point of why they did it? sept hike already absorbed and discounted before meeting. use of strong vigilance already priced and discounted. i can only think that this was a statement on two issues. (1) they have been under political pressuse especially from the french and this was a big fuck you to them. (2) in light of market turmoil and subprime mess this was also a fuck you to the markets in that rates will go up and are going up in the future. there will be no bail outs with rate cuts
Very probable! They want to transmit the idea that they observe the credit mkts, the home mkts but what they care is inflation risk.
wonder if this is it - this IKB thing is WAY worse than what broke Sunday night - - and the AXA story is pretty fresh also - - AXA is large French insurer and a CAC 40 component This update just in: Insight: Subprime woes produce some unexpected casualties By Gillian Tett Published: August 2 2007 18:26 | Last updated: August 2 2007 18:26 How do you say âyikesâ in German? That is a question many investors might ask right now when they look at IKB, the specialised German lender. At the start of the week, IKB startled markets by admitting it had racked up vast losses on its credit portfolio â a move that prompted KfW, the German state bank, to underwrite around â¬8bn ($11bn) of IKB-owned securities. But, on Thursday, it emerged that IKB's exposure to the subprime sector had somehow ballooned to â¬17bn â many times the total market capitalisation of the group. And that is not the worst of it. These staggering problems emerged a mere 10 days after IKB issued an upbeat trading statement in which it hailed âa successful start to the financial yearâ â and denied that it faced subprime problems. Perhaps this information oversight simply emerged because IKB's own management did not know the scale of their own losses. After all, as we have written extensively on these pages, the value of complex credit instruments has fluctuated so wildly in recent weeks that even experienced hedge fund managers find it hard to measure their losses. However, woes of this scale certainly do not crop up in a matter of just 10 days, even in turbulent times. Thus, it is a fair bet that if IKB was a US company, there would already be lawyers lining up to press class action suits. No doubt politicians would also be demanding a public inquiry given that public money is now being used to clean up this mess, via KfW. Perhaps this will occur. If so, IKB could yet end up being truly good news for Deutschland AG. For it is a peculiar irony of Germany's business world that while the country produces hordes of sophisticated, ultra-smart engineers, it is notably poor at churning out the type of sophisticated bankers it also needs. As a result, many German financial institutions are woefully ill-equipped to handle complex derivatives risk (or indeed, capital market risks at all). That is troubling, given that many of these have been quietly shuffling into complex finance in recent years to boost returns. But the lessons of IKB go further than German banking. In some respects, investors should consider it reassuring that US subprime losses are now cropping up all around the world. For this shows that financial innovation is enabling bankers to distribute risk more widely than ever before. And that could potentially be a thoroughly good thing for financial stability right now, since if risk is spread around, it is less likely to cause a devastating shock to any single part of the financial world. The silver lining to the IKB cloud, in other words, is that it shows that American institutions are not the only ones reeling under subprime pain. The risk of large-scale American bank collapses is thus reduced. But one downside of spreading risk around in this manner is that it is fiendishly difficult for regulators to actually see where it is going, or to anticipate where problems are building up. After all, how many global investors â or policy makers â had even heard of IKB a week ago? Worse still, what the subprime saga shows is that as risk has been passed around in recent years, it has not just ended up in the hands of people well suited to manage this (such as hedge funds) â but those who are not. IKB was one of those lacking appropriate risk management skills. But I doubt it was alone. The shocks from this subprime saga probably have further to run. ? Meanwhile, if investors needed any more reason to feel uneasy, look at the extraordinary saga unfolding around AXA's two troubled mutual funds. Two months ago, it was widely presumed that anything carrying the tag of âmoney market fundâ was a stodgy, safe-ish bet. But AXA's two âdynamic money marketâ funds have apparently lost over 20 per cent of their value in a month, while being invested in securities with an average credit rating of A. AXA is now fighting to restore its reputation with an unprecedented bailout. But the bigger question now is how many other surprises now lurk in other, supposedly dull âdynamic money market fundsâ? Copyright The Financial Times Limited 2007