Archive - Mar 2011

March 31st

Tyler Durden's picture

Broker Talk: "Very Large Selling In All European Bonds: Spain, Italy, France"





Remember when we said March would be the cruellest month for Europe? Looks like someone did, at least on a NPV basis, and is now preparing for the next phase of the European Crisis. According to Newedge, there is very large selling on dealer screens in "all kinds of bonds: Spain, Italy, and France." It seems at least one trader is not waiting around to see what the Irish stress test results indicate, and the expectation is that, as Bloomberg noted earlier, bondholder haircuts will be fast and furious.

Today should be fun.

 

Tyler Durden's picture

Initial Claims 388K, Miss Expectations, Previous Revised Naturally Higher To 394K, Would Have Missed Too





And so we find that last week's surprising beat was actually a miss as is this week's, which came at 388K on expectations of 380K, last week revised from 382K to 394K. Snow not blamed as this number sets a big question mark on tomorrow's NFP number. Continuing claims last week was also revised higher from 3,721K to 3,765K, with this week missing expectations (3,705K) as well at 3,714K. And the 99 week cliff is impacting more and more as persons claiming benefits on all programs, including EUC and Extended Benefits, increased by just 4,372. A US Labour spokesman says nothing unusual in last week's claims, and revisions showed mild upward shift.

 

Tyler Durden's picture

Moody's Downgrades TEPCO From A1 To Baa1





The downgrade reflects the significant financial obligations the company faces as it continues to address multiple challenges resulting from the March 11 earthquake and tsunami that seriously damaged several of its nuclear and thermal generating facilities, most notably its Fukushima Daiichi nuclear plant. TEPCO continues to struggle to control reactor temperature and limit radioactive leaks at the plant, problems that appear far from being resolved. The downgrade takes into consideration the enormous costs the company will incur as it recovers from this disaster, including costs for replacement power, the building of new generation plants to replace the permanently damaged plants, and the decommissioning of the contaminated plant. These costs will inevitably increase TEPCO's already high debt leverage and could result in substantial rate increases that its residential and industrial customers may not be able to tolerate over the near term. These costs could lead to losses for at least the next two years if the company cannot increase the rates substantially.

 

Tyler Durden's picture

Frontrunning: March 31





  • Bondholder Haircut From Ireland May Shut Italy, Spain Funding (Bloomberg)
  • Bank of Ireland, Two Smaller Banks Said to Need $12.7 Billion of Capital (Bloomberg)
  • Hoenig Says Fed Shares Blame for Higher Commodity Prices; Urges Tightening (Bloomberg)
  • Gaddafi Foreign Minister Flees to UK (FT)
  • Fed's Stimulus Exit May Not Wait for Global Turmoil to Pass, Bullard Says (Bloomberg)
  • Kuwait's cabinet resigns to avoid questions (Al Jazeera)
  • Cairo Revolution Finds New Target: Free Market (WSJ)
  • Stop The Madness: Make The Dollar As Good As Gold (Forbes)
  • Stark Defends ECB Plan to Lift Rates (FT)
  • Bill Gross Says Treasuries Have Little Value, Echoing Buffett (Bloomberg)
 

Tyler Durden's picture

Japanese Economic Collapse Confirmed By PMI Plunge From 52.9 To 46.4, Largest Drop Ever





In the first economic metric since the Japanese earthquake struck, Japanese manufacturing activity slumped to a two-year low in March and posted its steepest monthly decline on record, confirming all the worst fears about supply chain disruptions and production operations, according to the Japanese PMI released on Thursday. From Need to Know News: "The 6.5-point drop in March was the largest on record, surpassing the falls seen after the collapse of Lehman Brothers in September 2008 and the U.S. terror attacks in September 2001, MarkIt Economics said, adding that the March PMI index was the lowest since 41.4 marked in April 2009. Kohei Okazaki, economist at Nomura Securities, said March industrial output due out on Apr. 28 is expected to show a m/m fall of at least 10%. The PMI index is closely correlated to industrial output released by the Ministry of Economy, Trade and Industry. Markit, a UK-based research firm, conducted the latest survey between March 11 and March 25, and only 67% of those polled responded. It releases manufactures PMIs for 25 areas in the world every month." And in addition to all the collapse in all output metrics, adding insult to injury is the confirmation that inflation is now ravaging the land: the input price index increased to 65.2, the highest since September 2008, due to higher costs of raw materials such as crude oil and naphtha. It now appears that Japan is about to have the worst stagflationary episode in its history ever.

 

Tyler Durden's picture

One Minute Macro Update: Irish Banks Might Need Some Luck





Markets mostly negative this morning in anticipation of early results from Ireland’s bank stress tests and an announcement from Portugal’s president. Compelled by lawsuits emerging from the Freedom of Information Act, today the Fed will release details about its discount window lending activities during the recent financial crisis. The Fed announced yesterday that it will auction $5B in 28 day term deposits next Monday in an attempt to reverse the liquidity injected into the economy during the 2008 crisis. Early Irish bank stress test results began leaking yesterday afternoon, but will formally be announced later today. The Irish government will need to take up the slack in banks’ capital needs, which may translate to further Euro zone aid or bondholder hits. ECB’s Weber reportedly said that creditors may be sharing the burden on bank losses. The Irish government is also contemplating a merger between two of its biggest banks as a restructuring tool. The latest nuclear news out of Japan highlights the possibility of chain reactions from the Fukushima power plant. The Nomura PMI showed Japan’s first post-earthquake manufacturing figures with a sharp drop to 46.4 v 52.9 prior, the first contraction since last October (a score of 50 indicates no growth)

 

Tyler Durden's picture

Today's Economic Data Docket - Initial Claims, Chicago PMI And More Fed Speeches





Not much in the economic docket, with just Initial claims, Chicago PMI and Factory orders pending, as well as a bunch of Fed speeches throughout the day: today's its the doves' turn. Small POMO closes at 11:00 AM EST.

 

Tyler Durden's picture

Silver Set For All Time Record Quarterly Close - Gold To Silver Ratio On Way To 17 To 1 As Per 1980?





‘Poor man’s gold’ is set for a record nominal quarterly close which will be bullish technically and set silver up to target psychological resistance at $40/oz and then the nominal high of $50.35/oz . Silver’s record quarterly close was $32.20/oz on December 31st, 1979. While silver is up 22 percent this year and is heading for a ninth straight quarterly advance, its fundamentals remain very sound. With gold above its nominal record of 1980, poor man’s gold continues to be seen as offering better value. To the masses in India, China and Asia, silver is the cheap alternative to gold and an attractive store of value and hedge against inflation and debasement of paper currencies. Increasing global investment and industrial demand in the very small and finite silver bullion market is a recipe for higher prices. Thus, as we have long asserted the gold silver ratio is likely to revert to its long term average of 16 to 1. A return to a ratio of 16 to 1 is likely due to basic supply and demand and the geological fact that there are 16 parts of silver for every one part of gold in the earth’s crust.

 

Tyler Durden's picture

European Inflation Comes At 29 Month High Of 2.6%, Well Above Expectations, Sends EURUSD Above 1.42





Earlier Eurostat released its February European CPI number which was higher than January (2.4%) and consensus (2.4%), coming at 2.6%. That is the fastest inflation growth in more than two years in March as
European Central Bank policy makers prepared to raise interest
rates to fight increasing price pressures.Per Bloomberg: "Inflation in the 17-nation euro region quickened to 2.6 percent from 2.4 percent in February, the European Union’s statistics office in Luxembourg said today in an initial estimate. That’s the fastest since October 2008 and exceeds the ECB’s 2 percent limit for a fourth month. Economists forecast inflation to hold at 2.4 percent, the median of 32 estimates in a Bloomberg News survey showed." The primary reason for the jump in inflation are energy costs, leading to such paradoxes as $9/gallon gasoline, as Europe is far more expose to Brent prices than the US which has spiked this year: "Crude oil prices have surged 15 percent this year as output from Libya slumped. An armed conflict between Libyan leader Muammar Qaddafi’s troops and rebel forces has forced companies including Total SA and ConocoPhillips to suspend operations and evacuate staff. Crude was trading at $105.30 a barrel today." The result of the release was a kneejerk jump in the EURUSD to 1.423 as a modest hike by the ECB seems now virtually assured. Of course, a hike in rates means that the already cooling Economy will deteriorate even more. What that means for a continent that is now harboring increasingly more insolvent nations only Trichet (and Bernanke) knows.

 

RANSquawk Video's picture

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 31/03/11





RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 31/03/11

 

williambanzai7's picture

PoWeR CoRRuPTs; NUCLEAR POWER CORRUPTS ABSOLUTELY





A guest post by C. Douglas Lummis...

 

March 30th

Leo Kolivakis's picture

"Big CPP" Dragged Into Canadian Politics?





Another federal election campaign in Canada (sigh!) and this time pension politics are front and center...

 

Phoenix Capital Research's picture

Don’t Believe the Chart, the US Dollar is Dropping Like a Stone





I was recently on a trip to South America looking at real estate. While there I was told repeatedly by developers that they didn’t want to sign a contract in US Dollars. Instead they wanted to do it in the local currency. This has NEVER happened before during my trips abroad (even as recently as 2009). When I pushed for having contracts based in Dollars, the price went up EVERY week. The reason? The US Dollar is falling in relation to the local currency on a daily basis.

 

asiablues's picture

No More Storage in Cushing: WTI will be $90 in a Month





The news is only going to get worse for WTI longs, as the next couple of weeks will bring the total storage at Cushing close to the max capacity of 44 million barrels due to the fact that more traders took delivery on WTI on the last CL rollover.

 

ilene's picture

More on How Inflation Turns Us Into Con Artists





John Maynard Keynes once said of inflation:

"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

 
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