Archive - Jun 17, 2010

There has been some ridiculous moves in overnight FX: as the chart below shows, those trading the CHF have had to consume several times the RDA of Dramamine to stay on this particular ride. The whopping move was due to comments out of the SNB that the bank is "preparing for an exit." The bank softened its intervention language, noting that "deflationary" risks have largely disappeared (see note from Goldman below on full SNB implications). Ironically, this was the least of the night's highlights. As pointed out last night, the EURUSD was initially dropping on comments that the ECB will continue devaluing the EUR by buying bonds (and potentially commercial paper) until the situationstabilizes. But then Tim Geithner's idiocy v2 kicked in as all of a sudden everyone in Europe started touting the ridiculous straw-man that are Stress Tests: France's minister of economics noted that the "sooner banks publish results the better." And as we saw domestically a year ago, there is nothing more honest than the administration imposed stress tests (especially accompanied by a complete suspension of accounting rules). Hilariously, the vice chairman of one of the most insolvent companies in the world, the infamous STD, or Banco Santander, said he was convinced the stress tests will show the "extraordinary strength of Spain's banks." You just can't make this up. Then Germany also touted what a great thing stress tests would be. Somehow all this doctored propaganda managed to raise the EURUSD by over 150 pips, bringing the pair to almost 1.24. Lastly, Spain's horrendous auction, where the 30 Year closed at 5.908% compared to 4.758% previously, even with the ECB directly involved, was supposed to be seen as good news. All in all, EURUSD should be testing 1.22 support. Instead it is back to 1.24 resistance. Well played, Tim Geithner.

• Asian shares were solidly higher Wednesday after Wall Street rallied Tuesday.
• China boosts holdings of US Treasury debt by $5 billion.
• Euro zone May inflation confirmed at 1.6 pct y/y.
• France may raise retirement age from 60 to 62 in 2018.
• Obama says oil spill shows US must cut oil 'addiction’.
• OECD recommends Dutch workers stay on the job longer, accept less when they retire.
• Russia preparing to buy Canadian, Australian dollars to diversify reserves.
• Yen trades near 1-week low on improving global economic outlook.
• Best Buy Co.'s Q1 profit rose a disappointing 1.3% to $155M despite 6.9% rise in revs.
• Brazilian meatpacker Marfrig to acquire distributor Keystone Foods for $1.26B.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 17/06/10

With all of the brouhaha over BP and the oil spill, how many analysts and investors truly took the time to calculate the probability of actual insolvency. It is clear that the liabilities from the spill has been understated and underestimated multiple times. Here is an empirical, objective analysis of where BP, and by default, APC stands in terms of the potential for bankruptcy.

Open Letter to the US DOJ: In response to your open investigation regarding the suppression of silver prices in the COMEX futures markets by JP Morgan, we believe that two PM ETFs, the SLV, of which JP Morgan serves as custodian, and the GLD, of which HSBC serves as custodian, firmly deserve a thorough investigation as well.