Europe’s Tottering Banks

Europe faces new wave of oil refinery extinctions

Even though the Euro-Stoxx Bank Index remains way below its old high just below the 500 level, it has recently convincingly overcome a strong short term resistance level at 120: (click to enlarge) Euro-Stoxx Bank index: moving above resistance. Welcome to the Barbershop? The question is whether this lack of concern is actually appropriate in view of the risks. Reuters continues: Before the ECB takes over as supervisor late next year, it will conduct health checks of the roughly 130 banks under its watch. This is the nub of the problem facing finance ministers at the two-day talks. With the eurozone barely out of recession, a failure to put aside money to deal with the problems revealed could rattle fragile investor confidence and compound borrowing difficulties for companies, potentially killing off the meek recovery. In turn, that raises the question about who pays for the holes that are found in balance sheets in countries such as Spain and Italy. While Rome and Madrid would like easy access to the euro zone’s permanent bailout fund, the European Stability Mechanism, Germany, Finland and other strong countries say each country should pay for its own clean-ups. This time around, the task of cleaning up banks should not be quite as daunting as five years ago because shareholders, bondholders and wealthy depositors can expect to take some of the losses, as happened in the bailout of Cyprus in March. But if that is not enough, it will fall to governments to pick up the tab. Although technical, talks about banking union have sparked an acrimonious debate touching on fundamental questions such as rewriting basic EU law that risk dividing the European Union. (emphasis added) Judging from the state of the debate as of the Cyprus bailout, the new rule is that not only bondholders and shareholders, but also large depositors of failing banks must expect haircuts. Depending on how big such haircuts eventually become, they could actually end up shrinking the euro area’s money supply.

Credit: Reuters/Wolfgang Rattay FRANKFURT | Wed Oct 16, 2013 11:32am EDT FRANKFURT (Reuters) – A surge in UK auto sales and an extra working day boosted Europe’s new car market in September, giving evidence that demand may be slowly bottoming out after plumbing lows not seen in over 20 years. The European car market has been a prime casualty of the continent’s economic crisis as hard-pressed consumers defer purchases and a number of leading makers such as Peugeot (PEUP.PA) have been forced into radical restructurings. Automotive industry association ACEA said on Wednesday new car registrations in the European Union climbed 5.4 percent from a year ago to 1.16 million vehicles in September, only the third monthly gain in the past two years. The figures echo findings earlier this month that sales of new cars had grown in France and Spain during September. ACEA’s numbers showed the improvement was led by a 12 percent rise in sales in top market Britain to 403,000 vehicles, while sales in Germany shrank 1.2 pct to 247,000. The monthly total was still the second-lowest September figure since ACEA began gathering data for the 27 EU member states in 2003. Industry watchers have been looking for signs of recovery after the EU car market crashed to record lows in August. “The worst is behind us. The decline in sales has considerably slowed and we are now witnessing signs of recovery in demand,” said Peter Fuss, senior advisory partner at the Global Automotive Centre of accountants EY (formerly Ernst & Young). “The sales, however, continue to be artificially boosted by huge discounts and self-registrations by dealers,” Fuss added, referring to cars still held in showrooms. He warned it would take at least two years before the market was strong enough to grow on its own without the aid of incentives. BETTER GAUGE In a sign of recovery in the ailing euro zone periphery, car demand in Greece, Ireland and Portugal jumped by double-digit rates, albeit from depressed levels. For the first nine months of the year as a whole, ACEA said registrations in Europe still fell 4 percent from the year before to 9.33 million, on the back of weak demand in Germany, Italy and France – and in the Netherlands, where sales have plummeted 29 percent year-to-date. September volumes may be a better gauge of underlying trends than August, since the latter’s results are artificially depressed given many European car buyers are on holiday. It is also a crucial month for the UK market, since it accounts for about 18 percent of annual volumes.

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The loser is Europe. It has to be. There is no consolidation going on and no great consolidation hope,” Torbjorn Tornqvist, chief executive officer of trading house Gunvor told the Oil & Money conference this month. Diesel imports from Russia, Asia and the U.S. Gulf Coast reached a record 4 million tonnes in September, according to traders. “The trend of U.S. exporting products is going to continue, you’re going to see diesel coming from the United States to Europe for the foreseeable future,” the head of Glencore’s oil division Alex Beard said this month. 2013 may go down as one of the weakest in recent decades, as refining margins in the third and fourth quarter plummeted due to high crude costs and weak product demand. Total, Europe’s biggest refiner, said refining margins in the region had dropped to a near four-year low of $10.6 per tonne in the third quarter. Other than the old, simple East European refineries, plants in coastal areas such as Italy that are easily accessible for importing remain the most vulnerable. This year was set to go down as one of the worst for the European refining industry, with refinery utilisation slipping down to around 78 percent in 2013, according to JBC.