Archive - Jul 18, 2011 - Story

Still don't have your playbill for the latest installment of beltway Kabuki? Confused by what each actor's motivations are in the "great compromise" farce? Here is The Hill with a summary of who wants what so that the race for this year's Nobel prize in most dramatic on screen teleprompted performance is no longer confusing to anyone, especially since the Treasury Secretary is applying for the Nobel prize for most clueless assorter hanger on, with his "we have no Plan B" approach to worst case contingencies.

The picture portrayed by last week’s EBA’s stress test results on the European banks failed to re-ignite appetite for risk today, as many market participants questioned the validity of the tests, which ignored a potential Greek default scenario. Moreover, markets remained apprehensive about any concrete outcome from the Eurozone leaders’ summit this Thursday, and together with concern surrounding the successful passage of a raft of supply from Eurozone countries, such as Spain, later this week promoted risk-aversion. This prompted European equities to trade under pressure, led by financials, whereas marginal widening was observed in the Eurozone peripheral 10-year government bond yield spreads. Elsewhere, strength in the USD-index weighed upon EUR/USD, GBP/USD, and commodity-linked currencies. Moving into the North American open, the economic calendar remains thin, however the TIC flows data and NAHB housing market report from the US are due later in the session. Markets also look ahead to corporate earning results from IBM, whereas in fixed-income, French T-Bill auctions are scheduled for later.

• Reid, McConnell Push Revised Debt Measure as Obama Seeks to Avoid Default (Bloomberg)
• Fallback plan gains momentum in debt talks (RTRS)... aka the "change nothing" plan, and raise debt ceiling by $2.5 trillion
• China house price inflation slows in June (FT)
• Riksbank Members Fear Greek Failure Could Spark Real Crisis (Market News)
• European Stocks Retreat for Third Day After Bank Stress Tests (Bloomberg)
• ECB would reject defaulted Greek bonds as collateral (RTRS)
• Greek debt cut won't solve problem - ECB's Weidmann (RTRS)
• An Arrest and Scotland Yard Resignation Roil Britain (NYT)
• Japan set to ban Fukushima cattle shipments after radioactive meat scare (Guardian)
• Spain and Italy top results in stress tests (FT)

As if a global solvency crisis and a possible rekindling of the only middle-east conflict that matters were not enough, here is China to remind everyone that keeping 1.3 billion people happy is not very easy. According to AP, "Several attackers, a policeman and three others were killed Monday during an attack on a police station in China's far western Xinjiang region, state media reported. It said other police rushed to the scene and shot dead "a number of thugs." One policeman, two hostages and a civilian were also killed, Xinhua said. A woman from the information office of Xinjiang Public Security Department in Urumqi confirmed the attack, but would not give any details. As is common with Chinese officials, she refused to give her name." To be sure the official explanation is one that breaks down the conflict along ethnic lines: the last thing the Chinese need is a spark to realize that the unhappiness they may feel (especially those without access to off balance sheet bank loans to fuel their gambling habits), is all too real.

Homebuilder sentiment and capital inflows data. And lots and lots of European and other headlines.

Absolute bloodbath in Europe:

• Italian 10-Year Bonds Extend Drop; Yield Climbs to 6 Percent
• Spain 10-Year Bond Yield Surges to Euro-Era Record 6.31 Percent

And more from Bloomberg...

As expected, gold is now over $1,600, after fears about Italy are back, the EUR is tumbling, and questions over the sustainability of fiat and Keynesianism are once again front and center. Elsewhere, silver is over $40. Unless a miracle appears out of nowhere to save the Eurozone and its fake paper currency, we expect $2,000 by the end of the year in gold, while silver should promptly regain its all time nominal highs of just over $50.

A snapshot of the European Morning Briefing covering Stocks, Bonds, FX, etc.
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