Archive - Jun 28, 2011 - Story

• Greek Unions Strike as Papandreou Seeks Support (Bloomberg)
• Massive Strike Set for U.K. (WSJ)
• U.S. Money Funds Risk Losses From Europe Crisis (Bloomberg) - Mainstream media finally wakes up
• Dubai Denies Emirate Neighbors Fuel in Struggle to Pay Debt (Bloomberg) The untold story
• Europe looks for contingency plan B (FT)
• Plan B Budget Emerges in California (WSJ)
• Greek woes may eclipse Lehman: Ackermann (Reuters)
• Italian, Spanish Bonds Advance Before Sale on Greek Optimism (Bloomberg)
• China, U.K. Forge New Trade Deals (WSJ)
• Confidence in Canada Economy at Two-Year Low, Nanos Poll Shows (Bloomberg)

Even as everyone is glued to webcasts out of Athens, there will be some secondary data in the US, first of which is the Case-Shiller index, as usual about 3 months delayed, and thus very much irrelevant, and second is the circular loop of an indicator that is the Conference Board (it's up when the market is up, it's up when the market is down but when the respondents are Wall Street CEOs, it's up when stocks plunge but when gas is down a cent, and in fact, it is never down). More importantly, the third to last POMO in QE2 will be completed at 11 am. Lastly, $35 billion in 5 year notes will be "sold" to Primary Dealers.

The first piece of red herring news out of Europe is already on the tape, after Reuters reports that 15 out of 91 banks are expected to fail the second round of stress tests: "Up to one in six European banks is set to fail an EU-wide financial health check, according to euro zone sources close to the stress-testing, as officials scramble to set up backstops for those at risk. Euro zone sources said the European Banking Authority is set to announce within weeks that between 10 and 15 of the 91 banks being tested had failed the tests, with casualties expected in Greece, Germany, Portugal and Spain. In the drive to ensure the credibility of the bank assessments, the European Banking Authority (EBA), which runs the tests and the European Central Bank, which sets the macroeconomic scenarios, are pushing for a higher number of banks to fail than last year's seven. "How many do we expect to fail? I would say 10 to 15," said one senior euro zone central banking source." Of course, the reason why this is total non-news is that while the EBA will huff and puff, the end result, just like last year, will be absolutely no failures, as Europe has no failsafe mechanisms to deal with the aftereffects of a bank failure chain reaction. Expect futures, which dipped briefly on this news to more than rebound, as this merely confirms that the ECB will inject even more money to keep the SS Ponzi afloat for a few more months.

It's time for your daily Syntagma (not to be confused with Stigmata...yet) square live video feed, where things already are starting to have a far more violent tone compared to the primarily peaceful protests so far this year, courtesy of a substantially larger police presence as over 5,000 cops are expected to join the festivities. The protest marks the first day of the previously reported 48 hour general strike which will culminate with tomorrow's decision on the 5 year mid-term austerity plan.

Despite UK inflation being 4.5% in May, more than twice the Bank of England's target, the BOE’s Posen’s ultra dovish comments are leading to speculation that zero percent interest rates and ultra loose monetary policy will continue for the foreseeable future. This poses risks to those on fixed incomes in the UK, savers, the poor and the elderly, and to countries that export to the UK such as Ireland. Posen said that the Bank of International Settlements (BIS) call for central banks to raise interest rates was “nonsense”. Posen also said there is little risk of a repeat of 1970s-style stagflation. His comments are odd given the fact that the UK is already experiencing high inflation and declining economic growth and looks on the verge of a contraction in economic growth and another recession and possibly a depression. Posen’s lack of appreciation of the real risk of inflation and stagflation both of which the UK is already experiencing leave him open to the accusation that he is talking “nonsense”. These real risks and the BOE’s ultra loose monetary policy will likely result in sterling continuing to weaken in the coming months.

A snapshot of the European Morning Briefing covering Stocks, Bonds, FX, etc.
Market Recaps to help improve your Trading and Global knowledge