Archive - Oct 26, 2011 - Story

• Incoming ECB head gives euro zone pre-summit boost (Reuters)
• Fears Euro Summit Could Miss Final Deal (FT)
• Merkel Puts Rescue Fund to German Vote (Bloomberg)
• Iron ore in record slide as China demand slows (Reuters) BHP, Rio CDS Soar
• MF Global slumps 47% on unexpected loss (FT)
• Bankers fear political moves will kill off CDS (FT)
• EU Banks Warn of Credit Drought in Push for Capital (Bloomberg)
• Analysis: Obama's moves pack political rather than economic heft (Reuters)

Whilst the US equity markets closed down 2% last night, it is clear that there is little appetite to put on new trades in front of this summit meeting as evidenced by the lack of interest in Asia. Equities and FX markets were extremely quiet except for when the Aussie CPI came in weaker than expected sparking a fall in the AUD and a complete 25bp cut being priced in for next week’s meeting. To me the AUD looks very exposed to a steep fall as global growth is in trouble. The fall on Wall St was, in my opinion, more on the back of further weak data from the housing market in the US and consumer confidence which is collapsing fast, as the Case Schiller disappointed yet again. Is operation twist going to help? If the answer is no then Bernanke will have to try something else and this view is building as the fall in equities was accompanied by a fall in the Dollar and a steep rise in precious metals, all signs that fears of further QE are building.

As Merkel ends her speech to the Bundestag on her way out to the Euro Summit, here are the main rhetorical conclusions:

• MERKEL SAYS JUSTIFIABLE TO MAXIMISE EFSF FIREPOWER
• MERKEL SAYS GERMANY `IS NOT THE NAVEL OF THE WORLD'
• MERKEL SAYS EURO CAN'T BE ALLOWED TO FAIL
• MERKEL CITES 'HISTORIC DUTY' TO PRESERVE EUROPE, EURO

But none of that compares to what just was the use of the nuclear mutual assured destruction option, to wit

• Merkel: No one should take another 50 years of peace in Europe for Granted

And scene: Hank Paulson would be so proud

With European coverage today about to confirm with absolutely certainty that the only option for Europe is to baffle everyone with intolerable and ridiculous amounts of bullshit, and failing that, to delay, delay, delay (we are already hearing of another summit in 4 days), probably what is most indicative of what to expect out of Europe is what incoming ECB president Mario Draghi said is the situation in Italy which he called is "confused and dramatic." That pretty much sums it up. Anyone expecting any actionable result out of the drama queen country or continent, will be disappointed. In the meantime here are sporadic news which attempt to paint a picture of the total confusion in Europe...