- Dollar Suffers its Biggest Drop in Nearly Three Months as Risk Appetite Surges, but Will it Last?
- Euro Benefits from the Dollar’s Tumble but Greek Bailout Troubles Endure
- British Pound Finds Little Encouragement from Inflation at Levels that Historically Point to Rate Hikes
- Australian Dollar Rallies after RBA Minutes Reveal Last Meeting’s Hold was a Close Call

Dollar Suffers its Biggest Drop in Nearly Three Months as Risk Appetite Surges, but Will it Last?
Drawing a perfect contrast to yesterday’s low-liquidity and low-volatility session, the dollar marked its biggest daily drop since November 25th today as risk appetite burst back to life. The combination of last week’s slow retracement of the January bear wave, an extended absence for American liquidity and the prolonged anticipation of Greek bailout details all worked towards encouraging the sharp advance in investor sentiment through the session. Ultimately, this was a substantial step towards a meaningful reversal for underlying optimism and the US dollar; but this is far from confirmation that a new trend is underway. Risk appetite is a guiding force in its own right; and its consequential peaks and troughs can overwhelm tangible fundamentals trends or even highlight particular elements of the market itself. These are the circumstances that surround the European Union’s efforts to deal with its financially-burdened members. Should risk appetite catch, the market can very well over-look the troubles that this major economic region is facing and instead highlight standout signs of recovery. Are speculators and investors ready to once again spurn risk and leverage themselves for return? Unlikely. The influx of speculative capital through 2009 inflated asset prices to levels that are arguably well above values that are warranted under the restrained outlook for economic recovery. As a loose gauge for how much excess risk premium was worked off in the past month’s retracement, the Dow Jones Industrial Average slipped just a little more than 8 percent from its high this year and carry interests retreated less than 7 percent. Then again, the market can remain rational longer than any one of us can remain solvent.

Euro Benefits from the Dollar’s Tumble but Greek Bailout Troubles Endure
Given the remarkable rally in risk appetite and EURUSD Tuesday, it would seem that the threat of a Greek default has completely diminished. However, this is not the case. In fact, it was the exaggerated sense of fear in capital markets this past month that intensified scrutiny of the European Union’s struggle to bring its member back to code. According to official’s schedule yesterday; the full 27 member nations were expected to convene today on the topic of possibly helping Greece and dealing with other problems that may very well arise going forward. Yet, the commentary that would reach the market would offer little additional information on reaching hard-fast steps towards rescuing the struggling economy should conditions worsen. In fact, Greek Finance Minister Papaconstantinou would remark today that the country is ahead of schedule in reducing its deficit and was not preparing additional measures for the March 16th meeting. Confidence is important to convey; but this lack of a backup plan could prove burdensome. All in all, it seems policy officials may look to skirt this issue in hopes that market sentiment has improved without their having to take steps. That would be quite the gamble. As for scheduled data, the Euro Zone ZEW investor sentiment survey fell for a fifth month; while the German Current Situation component rose to a 15-month high.

British Pound Finds Little Encouragement from Inflation at Levels that Historically Point to Rate Hikes
While a bounce in overall sentiment would help the British pound gain traction against many of its major counterparts; the single currency found little support from a very influential and seemingly hawkish economic release. The year-over-year reading of the consumer price index for January advanced as expected to a 3.5 percent clip while the core reading hit 3.1 percent. This pushed the reading well above the 3.0 percent limit, the level at which the central bank has to pen a letter to the Exchequer. In the note, BoE Governor King said this surge was likely “temporary” and allowed a significant timeframe to ignore heated inflation readings by saying it should cool by the second half of 2010.

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Despite global slowdown and the economic climate looking tough Cyprus investment property has not lost its sheen. There is no dearth of opportunities for investment in the country because there are many factors combined that make this location an investment opportunity supreme. Particularly at the present time.

The cultural ethos of Cyprus attracts and warmly welcomes visitors from all over the world and has expanded its airport to an international one to cater for tourists and investment from around the world. You can already see a mix of cultures here as people form all over the world are settling in to the country. More and more residential settlers from many nations are electing to live here voluntarily. This is because of the health service, taxation as well as a low cost of living. Added to a world beating low crime rate. On all fronts Cyprus is a great location! It is now attracting property investors in their droves due to the stability of the economy and the legal system.

One of the biggest selling points for Cyprus is that the majority of the local populace speak and understand English very well. This in turn has a huge impact on tourism and the demand for property. In many ways Cyprus is a reflection of a better world which we have lost in recent times.There are many ways in which this is a great place to live. Firstly there is still a climate of respect for the elderly, neighbours genuinely care about you, kids here are still civil and you can go out till late at night whatever your age and rarely if ever see any trouble. You can go out to Ayia Napa the party capital on the Island and be surrounded by up to fifty thousand drinkers and have a pleasant and relaxing evening. There are several other great reasons for living here but the best has to be that most people can even leave their doors open at night without being robbed. It therefore comes as no surprise that Cyprus has been voted the top destination in the world to retire by Ex pats, for all of the reasons above..

The economy of Cyprus is progressive and investment friendly! A large factor that I will like to point out that has made Cyprus a property investment hotspot is the 2004 declaration wherein Cyprus was given the status of a full member of the European Union. That is why there has been a heightened interest of real estate investors for Cyprus and the activities of buying and selling property have intensified here. This has resulted in Cyprus being one of the best places to invest in property globally in the last decade.

Another little known fact is that due to the economic slowdown on the property front there has never been a better time to buy or invest in property here as the majority of expensive as well as cheap property has gone down in price by up to 25% of what it was only less than two years ago. As a buyer or investor you can get a truly amazing property here with four to five bedrooms most ensuite, a swimming pool and a truly pristine primely coveted location for under 300-00 euros including marble floors and more. A bargain in anyones language!

From an economic stand point property investors can make some tasty profits here. Tourists spend no less than 7 months to a year in Cyprus and live in rented villas or apartments.The demand for rental villas is exceptional So, anyone owning a decent property in a good location can earn serious rental income. Secondly, if anyone wants to resell a property, buyers are easily available in the form of retirees coming from UK.

Asian markets are trading firm on Wednesday with investors going in for some hectic buying, tracking a positive close on Wall Street overnight and higher commodity prices. Hopes of a global economic recovery on the back of the European Union’s move to help Greece get out of its debts and some encouraging reports from across the globe are also bolstering sentiment to a significant extent.

Financials, resources and industrials stocks are among the notable gainers in the Australian market. Stocks from various other sectors are also trading firm. The benchmark S&P/ASX 200 index is up 96.2 points or 2.1% at 4,664. The broader All Ordinaries index is currently trading at 4,683, up 92.4 points or 2% over its previous close.

On Tuesday, the S&P/ASX 200 index had ended up 22.3 points or 0.49% at 4,568, while the All Ordinaries index moved up 20.4 points or 0.45% to 4,591.

Among bank stocks, ANZ Bank is up 3.5%, National Australia Bank is trading higher by 3.3%, Westpac Banking Corporation is gaining about 2% and Commonwealth Bank of Australia is up with a gain of 2.5%. Macquarie Group is trading higher by 1.4%.

In the materials space, BHP Billiton is up 1.8%, Rio Tinto is gaining about 2.8% and Newcrest Mining is trading higher by 3.75%. Bluescope Steel, Orica, Incitec Pivot, Fortescue Metals and Lihir Gold are also trading notably higher.

Among energy stocks, Woodside Petroleum is up 1.6%, Santos is gaining 1.65%, Oil Search is up 2.2% and Origin Energy is trading stronger by about 2.5%.

Shares of Warrnambool Cheese & Butter Factory Co Holdings Ltd are up nearly 8% after the group received an improved takeover offer from Murray Goulburn Co-Operative Co Ltd. On Tuesday, WBC had reported a significant rise in first-half profit and said its outlook is positive.

Coffey International is down nearly 8% due to weak results. The global engineering and project management provider’s net profit fell 20% to A$10.85 million in the six months to December 31, from A$13.51 million in the prior corresponding half. Operating earnings before interest, tax, depreciation and amortization fell 14% to A$31.1 million. The company has blamed a strong Australian dollar exchange rate and the global financial crisis for the fall in its first-half profit.

On the economic front, an index measuring skilled job vacancies in Australia added 1.6% to 44.4 in February compared to the previous month, the Department of Employment and Workforce Relations said. That follows a 1.1% monthly increase in January.

Among the individual components, marketing and advertising positions jumped 9.9% on month, while metal trades and construction jobs also were sharply higher. The availability of health profession and accounting positions saw significant declines. By region, New South Wales, South Australia, Western Australia and Tasmania saw an increase in skilled vacancies, while Victoria, Queensland and the Northern Territory all saw declines.

A forward-looking index measuring the Australian economy added 1.3 points or 0.5% in December compared to the previous month, the Westpac/Melbourne Institute index revealed, coming in at 245.8. That follows the 1% monthly increase in November. On an annualized basis, the index jumped 6.2% after jumping 5.4% on year in the previous month. The survey also showed that the coincident index climbed 1 point or 0.4%.

In the currency market, the Australian dollar opened notably higher thanks to the positive close on Wall Street overnight. The Aussie was quoting at US$0.9008-US$0.9011 in early trades, up 0.85% from Tuesday’s close of US$0.8932-US$0.8937. The Australian dollar is currently trading at 0.9007 to the U.S. dollar.

The Japanese stock market is trading firm on Wednesday with investors picking up stocks cutting across various sectors.

The benchmark Nikkei 225 index, which rose to 10,258, was up 210.37 points or 2.1% at 10,245 at the end of the morning session.

The mood is so positive that just three stocks out of the 225-stock strong Nikkei 225 index are currently down in the red.

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Come April, the entire credit market could see a marked change. For starters, farm loans will be extended at a bank’’s base rate. In addition, the market for short-term loans will shrink. Unlike now, when banks are offering less-than-a-year loans at 6-7 per cent, the lenders will not have the freedom to lend below the base rate from April.

From all available indications, the base rate for most public sector banks will be around 9 per cent and they will be unable to offer below that rate.

“The base rate will put an end to cross-subsidisation. All the rates above the base prime lending rate (BPLR) will now come closer to the base rate and sub-BPLR loans will move above the base rate. Banks will have better bargaining power and bargaining will be more scientific,” said Punjab National Bank Chairman and Managing Director KR Kamath.
Punjab & Sind Bank Chairman and Managing Director GS Vedi said base rates would bring in more transparency and would be beneficial to the borrower.

In a note, ICICI Securities said if the Reserve Bank of India’’s draft guidelines were implemented from April, as proposed, the new norms might affect short-term borrowings by non-banking finance companies and some companies, as their current short-term borrowing rates were lower than the base rate for most banks.

“Bankers were mispricing loans under the present system. Sub-BPLR lending for loans up to Rs 2 lakh, which is proposed to be permitted, will help improve availability of credit and pricing for small borrowers,” added Union Bank of India Chairman and Managing Director MV Nair.

“SME (small and medium enterprises) borrowers, who got loans at higher rates, will be able to reduce their cost of borrowing,” Indian Overseas Bank Chairman and Managing Director SA Bhat told a news agency. At present, SMEs are availing credit at around 14-16 per cent.

In addition, a private sector bank executive said banks would exercise the interest rate reset option at faster frequency, as the base rate would be more dynamic. Given that it will be linked to the cash reserve ratio, which RBI uses as a tool to periodically adjust liquidity and the cost of deposits, the rates are going to be more dynamic. Besides, it will also be a function of loan demand and the amount of liquidity available in the market.

For instance, given that banks are parking around Rs 75,000 crore to Rs 80,000 crore through RBI’’s reverse repo window used to suck out excess liquidity, they are expected to continue maintaining higher than the prescribed 25 per cent statutory liquidity ratio. “The market for short-term loans will shrink, but banks will look to invest more in corporate bonds and commercial papers given the restriction on lending below the base rate,” said Corporation Bank Chairman and Managing Director JM Garg.

But there are some issues on which bankers are seeking greater clarity.

“It is unclear whether the tenor premium can be considered as tenor discount. For instance, if I want to lend for short term, it doesn”t make sense to add a tenor premium to my base rate. Any lending for a tenor below my base rate tenor should have a tenor discount,” the chief financial officer of a private sector bank said.

Besides, some of the lenders will approach RBI to put curbs on sub-base rate lending in phases. “It will affect our overall structure given that majority of the loans are below the existing benchmark rate,” said an executive at one of the largest banks in the country.

Corporation Bank’’s Garg said the bank would see yield on advances rise marginally from the present level of 10 per cent, as 80 per cent of the loans were extended below the prevailing BPLR. “On short-term loans, I was earning 6 per cent, which will be 9 per cent or higher from April,” he said.

But, as far as margins are concerned, PNB’’s Kamath said it would be zero sum game.
Meanwhile, at a meeting with bank chiefs on Thursday, RBI said that lenders should be ready to roll out the base rate mechanism from April and added that it would address any concerns that banks had.

If you are familiar with the credit card companies in the US, a lot of the leading names in the UK will be familiar to you as well. Companies such as Capital One and MBNA are names that most Americans would immediately recognize and own established a large following in the UK as well.

One name that is simply well known to residents of the UK is the Barclay card. They offer cards to residents and non-residents so that anyone who even occasionally visits the area can possess the convenience of UK credit cards.

Their initial 0% interest price is not the longest at a typical 3 months, but few rival the average overall interest value. One of their most coveted cards the Platinum Simplicity card has a typical interest price of under 10% and no fees for balance transfers.

Then again, its imperative to note that while they do offer rates that appreciably lower than other cards, their borrower standards are also higher. The only reason they can offer such a good deal is because they are most selective with their customers than other companies might choose to be.

The MBNA Europe card is one more of the widespread UK credit cards for those that prefer a card that offers them some type of enticement for use. Typically it can be expected that the interest rate will be at least a few points higher than with other cards but the types of reward programs they offer still make it very competitive.

Typically MBNA has a lot of restrictions with their card members in the UK. Generally this is something like the consumer must be 23 years old and make at least 20,000 pounds per year.

A fantastic card for consumer who travels frequently is the Marriott Rewards card. Again the interest rate may be higher than with a non-rewards card but since you can use your points for hotel reservations at Marriott locations worldwide, this is perfect for a frequent traveler.

Other card companies offer cards that will cater to those who want rewards for their supermarket shopping or a card that presents many revolving special interest rate offers. All of these things are available with UK credit cards.

After getting off to a good start, the local equity markets continued to add weight in the mid-morning session tracking strong global cues. The BSE Sensex and the S&P CNX Nifty touched fresh highs and were trading near those levels. The bears were bleeding in trade as the bulls were dominating the entire sectoral space of the Bombay Stock Exchange (BSE). Metal stocks were the major gainers in trade led by Tata Steel, Hindalco Inds and Sterlite Inds up anywhere between 4.35% and 3.23%. Tata Steel has posted its first consolidated profit in four quarters for the three months ended on December 31, 2009. Stocks from consumer durables, realty and capital goods space were also doing well at this point of time. All the 30 components of the BSE’s sensitive index were trading in the green. Second line stocks were also witnessing value picking from investors. The market breadth on the BSE remained strong; the gainers thrashed the losers in a ratio of 1729:557 while 61 shares were unchanged.

The 30-share BSE Sensex zoomed 227.61 points or 1.40% to 16,454.29. The index touched a high and a low of 16,457.11 and 16,228.91, respectively.

The BSE Mid-cap and Small-cap indices gained 1.31% and 1.20%, respectively.
In the BSE sectoral space the main gainers were, Metal up 2.92%, Consumer Durables (CD) up 1.90%, Realty up 1.76%, Capital Goods (CG) up 1.57% and Bankex up 1.51%.

There were no losers in the BSE sectoral space.
Meanwhile, the chairman of Prime Minister’s Economic Advisory Council (EAC) C Rangarajan, on Tuesday, said that India should move towards the path of fiscal consolidation as the economic growth was resuming.

Rangarajan said that the process of fiscal consolidation must begin now as the economy was picking up again while the fiscal deficit, at the level it currently is, will be unsustainable in the long run. Hit first by the global commodity rally and then the recession in advanced economies following the events of September 2008, the Indian government was forced to take expansionary fiscal policies which pushed the deficit to a 16 year high of 6.8% in FY10.

Tata Steel up 4.35%, Hindalco Inds up 4.27%, Sterlite Inds up 3.23%, L&T up 2.23% and Tata Power up 2.13% were the major gainers on the Sensex.

There were no losers on the benchmark index.
The Indian government said on Tuesday that all the hurdles in the way of the much-awaited auction of third generation (3G) radio spectrum had been cleared, although there was yet no clarity regarding the possible timing of the event. The auction has been delayed thrice owing to differences between telecom and defence establishments on availability of spectrum.

But union communications minister said that the Ministry was yet to receive directions from the Law Ministry as well as the Finance Ministry. ‘There is no clarity yet. I am waiting for directions from the Finance Ministry and the Law Ministry and have not got any from them,’ said A Raja.

The S&P CNX Nifty soared 1.44% to 4925.45 from its previous close of 4855.75. The index touched a high and a low of 4926 and 4857.60, respectively.

Tata Steel up 4.43%, Hindalco Inds up 4.33%, Sterlite Inds up 3.38%, Tata Power up 2.62% and L&T up 2.33% were the top gainers on the Nifty.

While Idea down 0.09% and Hero Honda down 0.08% were the only losers on the broadly followed index.

Among Asian markets, Hang Seng advanced 1.77%, Jakarta Composite rose 0.67%, KLSE Composite added 0.84%, Nikkei 225 surged 2.57%, Straits Times gained 1.10% and Seoul Composite soared 1.66% and.

Introduction of base rate will result in sharp reduction.
Bankers are still busy with their calculators trying to work out the proposed base rate that the Reserve Bank of India (RBI) plans to introduce from April but they estimate the benchmark rate will decline to around 9 per cent from 11-15.75 per cent at present.

State Bank of India, the country’s largest lender, has estimated its base rate at around 9 per cent against the prevailing benchmark prime lending rate (BPLR) of 11.75 per cent. Ditto for Union Bank of India.

Similarly, a Bank of India executive said the base rate will be around 300 basis points lower than the prevailing BPLR of 12 per cent.

Corporation Bank sees it a tad higher, while Allahabad Bank and Punjab & Sind Bank expect the rate to be between 9 and 10 per cent.

Last evening, RBI issued draft guidelines that proposed to shift from a system of benchmark prime lending rate to a system of base rate from April.

RBI has proposed that banks calculate the base rate on the basis of the cost of funds, overhead costs, adjust for the “negative carry” for funds impounded for the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) and add a profit margin.

The main ingredient will be the cost of deposits, with banks that have lower costs, such as SBI, having an edge over the others. “Given that the base rate will be a function of the cost of deposits and operating efficiencies, banks with higher Casa (current and savings account balances) and lower cost-assets (ratio) will benefit as their base rate would be lower than industry average, thereby allowing them to earn higher spreads on their products,” ICICI Securities said in a note.

At the same time bankers warned that the rates they have calculated are based on the present cost of deposits. “It base rate may vary every quarter because of cost of funds, CRR and SLR. It will become very dynamic and can change on quarterly or even on a monthly basis,” said Corporation Bank Chairman and Managing Director JM Garg.

The adjustment for negative carry on CRR and SLR will result in a gain of around one percentage point for banks.

While Union Bank of India Chairman and Managing Director M V Nair, who is also the chairman of the Indian Banks” Association said that the move will bring about more transparency in pricing, bankers said, it will put an end to the bargaining power of large companies. That is because RBI wants to put an end to sub-base rate lending for all segments other than export finance and directed rate of interest (DRI) scheme for low income groups.

Bankers said only large public sector companies and AAA-rated private players would be able to avail of loans at base rate. Similarly, only short-term loans such as working capital will be available at the base rate.

Short-term rates for large players may go up, but the good news is that bankers expect the lending rates for small and medium enterprises to fall.

“Even that will be a function of demand and supply, if the credit demand is high and liquidity is tight, then the best borrower will also have to pay a premium,” said Corporation Bank’s Garg.