Markets crash yet again...

Euro plummets on Friday 13th as French downgrade looms

AFPJANUARY 13, 2012

France's President Nicolas Sarkozy addresses his New Year wishes to the Justice representatives at the presidential Elysee Palace Friday. Sarkozy, who is facing a tough re-election battle, will also have to contend with the looming downgrading of France's triple-A credit rating.

Photograph by: Charles Platiau, AFP/Getty Images

PARIS — Standard & Poor's imminent downgrade of eurozone economic giant France's triple-A credit rating sent stocks sliding and the euro plummeting on a grim Friday 13th for the single currency.

In Brussels, EU government sources told AFP the ratings agency had warned members of the bloc that France would be downgraded by one notch, while fellow top-line creditors Germany, Luxembourg and the Netherlands would be spared.

"The Standard & Poor's downgrade (for France) is by one notch," one of the sources said. The credit rating agency had indicated in December that a cut of two notches could have been applied to the eurozone's second biggest economy.

The downgrade could force France's borrowing costs up, at a time when it has already been forced to impose austerity measures to control its deficit, and is a political humiliation for President Nicolas Sarkozy.

Sarkozy faces a tough re-election battle in less than 100 days and reportedly told allies last month: "If we lose the triple-A, I'm dead."

France's budget minister and government spokeswoman Valerie Pecresse refused to confirm the imminent downgrade, insisting: "France is a safe investment."

But opposition Socialist lawmaker Jean-Marie Le Guen branded the loss of the triple-A "a triple failure for Sarkozy", amid charges from the left that the president's tax cuts had left France more exposed than its neighbours.

Belgium, already two ranks below the top rating at double-A, will also remain steady. The official was not able to comment on whether the eurozone's other triple-A powers, Finland and Austria, were safe.

The Financial Times reported on its website that France and Austria would both by downgraded by one notch to AA+.

The single currency fell back to $1.2638, a 16-month low, while London's FTSE 100 closed down 0.46 per cent, Frankfurt's DAX closed down 0.58 per cent and in Paris the CAC 40 dropped 0.11 per cent by the end of trading.

American stocks also fell on opening. S&P was expected to confirm the downgrade after Wall Street closes at 2100 GMT.

And there was further bad news from debt-wracked eurozone minnow Greece, when a group representing major private lenders said they had failed to reach an agreement to slash its debt burden.

Talks on a Greek write-down have "not produced a constructive consolidated response by all parties," the Institute of International Finance said.

The proposed deal would have seen banks taking a 50 per cent "haircut" on Greek debt, which would remove about 100 billion euros ($127 billion) from Athens' massive burden and avoid a full-blown default.

"Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach," the IIF said, in a statement issued in Washington.

"There is extreme tension," a source in Athens confirmed to AFP. "All parties involved in this crucial negotiation ought to be aware of this very grave condition and assume their responsibilities to avoid the worst."

European shares and the euro had been climbing before reports began.

"The markets are in a delicate situation at the moment and, as with all delicate situations, investors need to tread carefully," Spreadex trader Simon Furlong told AFP.

"Any further downgrades to eurozone countries, especially ones of the likes of France and Germany would be a devastating blow for European leaders ahead of the European summit at the end of the month."

European leaders are due to meet in Brussels on January 29 to nail down details of a fiscal pact designed to reassure bond markets that their deficit reduction plans are on course and their debts safe.

Earlier this week, ratings agency Fitch offered markets reassurance that it did not plan to downgrade France's top triple-A credit rating in 2012, unless the country suffered major economic shocks.

But Standard & Poor's still had the eurozone bloc under scrutiny and — while the firm did not confirm that it was to act after markets closed on Friday — the reports seemed to have ended the optimism.

France had been on notice that its triple-A debt rating was on the line, amid fears over its large public deficit and its own banks' exposure to even riskier sovereign debt in eurozone partners Greece and Italy.

Earlier Friday, Italy raised 4.75 billion euros ($6.09 billion) at mostly lower rates in a bond auction, reflecting what was then still improved market confidence and European Central Bank efforts to boost eurozone liquidity.

German Foreign Minister Guido Westerwelle said he would travel to Greece on Sunday for talks on the crisis,taking with him a message of "encouragement" and "expectation", Berlin announced.

Meanwhile, German Chancellor Angela Merkel's spokesman said she will host the leaders of Portugal, Sweden and Austria next week for informal talks on the eurozone debt crisis and fiscal integration, her spokesman said.

Optimism abounds after bond auctions

The chase by Marty Cej:

European stocks are higher, U.S. stock index futures are pointing to early gains and most industrial commodities are advancing after bond auctions in Spain and Italy garnered greater demand than expected and borrowing costs fell. The auctions not only raised billions of much-needed euros but also optimism that demand for European debt may be robust enough to help keep borrowing costs low for the countries that need the help most.

It's important to note, however, that the demand for Italian and Spanish debt is not so much a vote in the countries' plans for fiscal austerity but a no-brainer bet for the euro-zone's banks who can borrow money from the European Central Bank for next to nothing and buy short-term paper that yields almost three times as much. Still, it seems that everyone is getting the money they need, so what's the harm? The ECB and Bank of England left their benchmark interest rates unchanged this morning. The ECB's decision comes after two straight cuts and could help underpin optimism that Europe might be righting the ship.

Market sentiment was also helped by a drop in China's inflation to a 15-month low, raising expectations that monetary authorities will ease policy to spur growth. Risk on, risk off? Today, Mr. Miyagi says, "Risk on."

One commodity that is not benefiting from improving economic data out of the U.S., expectations for lower rates in China and better-than-expected European bond auctions is natural gas. The hard-luck case of the commodity world is down another 2 percent today and sitting at a two-year low. It seems as if any hillbilly out shootin' for some food can bust a hole in the ground with a shotgun blast and find a few billion cubic feet of natural gas. I must also note that it is January 12 and I walked to work in the rain. In Canada. I'm in Canada. Two weeks ago, Vero Energy sold its natural gas assets because the company could no longer bear up under the pressure of tumbling gas prices. Vero got a great price for the assets but that was two weeks ago. How many more small oil and gas companies are in the same boat? What kind of asset sales can we expect to see out of Alberta and Saskatchewan? Who are the potential buyers? Are we poised for a surge of M&A?

Also, let's talk about the drillers. Are they switching from gas to oil? Is the case for exploration companies as strong now as it was a few weeks ago?
Shaw Communications reported fiscal first-quarter earnings that fell short of analysts' average expectations. Paul Bagnell will pick the report apart for the details that matter most to investors.

Chevron warned after the close last night that fourth-quarter earnings will fall "significantly" below the third-quarter's numbers. While operating earnings will be broadly in-line with the preceding quarter, currencies played havoc with the company's bottom line. Chevron said that while it generated a foreign exchange gain of $450 million in the third quarter, it will take a loss in the fourth. The Chevron story sharpens our focus on one of the most important emerging themes this earnings season: the impact of the stronger U.S. dollar on earnings from abroad. We need to do more on this front.

In economics, we're watching retail sales and first time claims for unemployment benefits out of the U.S. and the new housing price index out of Canada.
And we're waiting to hear from Prime Minister Harper who is slated to speak from Halifax in a few moments before jetting off to Vancouver for more of the same. He is taking part in ceremonies related to the massive $33-billion shipbuilding contracts doled out in Nova Scotia and BC.

Gold Getting Ready To Run Again?

Some companies that you should take a closer look at...

Edgewater Explorations (EDW:TSXV)

dgewater Exploration is a Canadian-based mineral exploration and mine development company with gold assets in prolific gold regions Ghana West Africa and La Coruña, Spain.

Together with FeatherStone Capital Advisors, Edgewater successfully secured two mid-stage gold projects from Red Back Mining and Lundin Mining. Red Back Mining, now Kinross Gold Corp. optioned to Edgewater the Enchi Gold Project in West Africa, Ghana, located 70 km southwest of Kinross’ 5 million oz Chirano Gold Mine. The Enchi Gold Project covers a 40 Km strike length of the Bibiani Shear Zone that hosts a number of major gold mines and deposits including the Chirano Gold Mine and the 5 million oz Bibiani gold deposit. Ghana is the second largest gold producer in Africa with 2009 production totalling 2.9 million ozs.

In Addition, the Company owns a 100% interest in the Corcoesto Gold Deposit (”Corecoesto”) in northwest Spain as well as an additional 7 gold and gold-copper projects totalling 50,013 ha in southwest Spain. An updated Technical Report was recently filed for Corcoesto by Alan Noble, P.E. of Ore Reserves Engineering. The Report estimates a Measured and Indicated resource of 5,722,000 tonnes grading 1.74 g/t gold and containting 325,000 ozs of gold (0.65g/t gold cut-off) with Inferred Resources of 20,265,000 grading 1.76 g/t gold containing 1,149,000 ozs of gold. Open in many directions Edgewater believes the under-explored asset has the potential to expand beyond the current Resource Estimate. Edgewater has begun a scoping study on the Corcoesto Gold Project and has a 35,000m diamond drilling program underway in Ghana.

Corvus Gold (KOR:TSX)

Corvus Gold Inc. is engaged in the acquisition and exploration of gold-related mineral properties located in Alaska and Nevada. As a spin off of International Tower Hill Mines, the company currently holds four prospective projects in Alaska and one project in Nevada ranging from early stage to advanced exploration. Three of these projects have current National Instrument 43-101 compliant estimated Indicated and Inferred resources.

Corvus’s mandate is to become a non-operating gold producer with significant carried interest and royalty exposure. To meet this objective, the Company has joint ventures on each of its Alaskan projects and anticipates that these projects will have significant partner funded work taking place in 2011 with the potential for additional partner funded work for 2 – 4 years afterwards. In Nevada , Corvus controls a 100% interest in the North Bullfrog Project which has a number of high priority, bulk tonnage and high-grade vein targets which was explored by a Phase I 17,820-metre drill program completed in June 2011 that resulted in an updated resource report in October 2011. With a current size of 1.6M oz gold indicated and inferred resources, a preliminary economic assessment of the project is currently underway and is expected in Q1 of 2012.

Tasman Metals TSX.V : TSM (TAS:NYSE)

Tasman Metals Ltd (TSX.V : TSM; Frankfurt : T61; NYSE-AMEX: TAS) is a Canadian mineral exploration and development company focused on Strategic Metals in the European region.

Strategic metal demand is increasing, due to their unique properties that make them essential for high technology and environmentally-beneficial applications. Strategic metals include the 15 rare earth elements (“REE”), and also zirconium, yttrium and niobium. Since over 95% of REE supply is currently sourced from China, the EU is actively supporting policy to promote the domestic supply of strategic metals to secure high-tech industry. Wind turbines and hybrid vehicles like the Toyota Prius simply cannot be built without rare earth minerals.

Tasman’s exploration portfolio is uniquely placed, with the capacity to deliver “high-tech” metals from politically stable, mining friendly jurisdictions with developed infrastructure.

Ucore Rare Earths (UCU:TSXV or UURAF:OTC)

Ucore Rare Metals Inc. is a well-funded junior exploration company focused on establishing REE, uranium and other rare metal resources through exploration and property acquisition. With multiple projects across North America, Ucore’s primary focus is the 100% owned Bokan – Dotson ridge REE property in Alaska. The Bokan – Dotson ridge REE project is located 60 km southwest of Ketchikan, Alaska and 140 km northwest of Prince Rupert, British Columbia and has direct ocean access to the western seaboard and the Pacific Rim, a significant advantage in expediting mine production and limiting the capital costs associated with mine construction.Ucore Rare Metals Inc. is a well-funded junior exploration company focused on establishing REE, uranium and other rare metal resources through exploration and property acquisition. With multiple projects across North America, Ucore’s primary focus is the 100% owned Bokan – Dotson ridge REE property in Alaska.

The Bokan – Dotson ridge REE project is located 60 km southwest of Ketchikan, Alaska and 140 km northwest of Prince Rupert, British Columbia and has direct ocean access to the western seaboard and the Pacific Rim, a significant advantage in expediting mine production and limiting the capital costs associated with mine construction.The Bokan properties are located in an area reserved for sustainable resource development with an existing road network providing access to the main target areas. REE mineralization at the Bokan-Dotson ridge project occurs in a well-demarcated vein system related to a Mesozoic Bokan peralkaline granitic complex. However, a number of other occurrences of REE mineralization are also located within, or at the margins of the complex. Viewed in a geological and geophysical context, the Bokan complex is a distinctive circular structure and is highly prospective for rare earths deposits.

Dire warning from Sino-Forest...The Saga Continues

The chase by Marty Cej:

Sino-Forest, the Hong Kong-based and Toronto-listed forestry company that saw more than $6 billion in value evaporate last year amid fraud allegations, said late last night that its historic financial statements and audit reports should not be relied upon. The admission appeared in an announcement that the company is "optimistic" that it will reach a waiver agreement with some of its bondholders. While shares of Sino-Forest remain halted with a nominal value of a penny a share, the stock of Greenheart Group, a Hong-Kong listed timber merchant, rallied 50 percent overnight to close at 90 Hong Kong cents. Sino-Forest remains one of the most compelling stories in Canadian financial market history for several reasons, many of which will be explored Friday morning with short-seller Carson Block, whose allegations in June toppled Canada's biggest forestry company. Sino-Forest continues to struggle to explain and refute Block's allegations or address issues raised by the company's auditor and the OSC. Beginning at 8:30 am Eastern, Block will take us through the research that led him to accuse Sino-Forest of fraud and to tell us whether it can happen again.
Among the most widely-read stories on BNN's website this morning was the warning from Canadian bank CEOs that Canada's housing market is showing signs of peaking. We made it our top story yesterday afternoon and will continue to pursue it today with Bank of Montreal CEO Bill Downe, who joins us for half an hour starting at 1:00 pm Eastern. It's a story that affects every Canadian and all of our viewers.
Auto parts maker Magna said that 2012 revenue will rise to a range of $27.8-billion to $29.3-billion, just shy of the average expectation for sales of $29.6-billion. It's hard to say whether this announcement will be taken by the market as a warning since sales will be higher than 2011 and the new forecast is higher than its own previous forecast if still below the market' expectations. The fact is the company continues to put more of its stuff into each car, sales are rising and the operating margin is widening. There is a lot to examine in the company's announcement this morning. Thankfully, Frances Horodelski is a CFA and can spit out ratios like a Nascar fan spittin' out tobaccy juice. Yeehaw, I say. Yeehaw.
After Steve Ballmer's rousing speech to kick off the Consumer Electronics Show in Las Vegas and intimidating poor Ryan Seacrest on stage, Microsoft now says that industry-wide sales of PCs will probably fall short of analysts forecasts in the fourth quarter due to supply issues stemming from floods in Thailand. Watch shares of the PC makers, the chipmakers and Microsoft. Ford Motor Co. said yesterday as well that its profit was hurt by the Thailand floods. Are there any more warnings to come from companies with significant production in this key country?
The Federal Statistics Office in Weisbaden, Germany, said today the German economy shrank "roughly" 0.25 percent in the fourth-quarter, leading some economists to conclude that Europe's largest economy has already slipped into recession. While most economists and investors agree that broader Europe is already in a recession, perhaps even a severe one, word that Germany may be in the same boat has sent European stocks, North American index futures and copper prices lower. While the Federal Statistics Office in Weisbaden says its estimate is "unofficial," I dare you to call up the Federal Statistics Office in Weisbaden and challenge their figure. I dare you.
Keep an eye on oil today as Germany pushes for a European embargo on importing Iranian oil. Iran also said today that one of its nuclear scientists was killed by a magnet bomb fixed to his car by a motorcyclist who sped past. Iran has blamed Israel for the assassination, which adds to a number of killings of Iranian nuclear scientists in recent years.
Mitt Romney solidified his status as the frontrunner for the Republican presidential nomination by taking the New Hampshire primary last night. Libertarian Ron (The Fed Oughta Be Dead) Paul surged to a second-place finish, which surprised no one since New Hampshire's official slogan is "Live Free or Die" and its unofficial slogans include "New Hampshire: Go Away and Leave Us Alone" and "New Hampshire: Don't Take it For Granite."