Archive - Aug 27, 2012 - Story

• UK is closed today
• Weidmann Says ECB Purchases Could Become ‘Addictive Like a Drug’ (Bloomberg)
• Dutch Premier Rutte Defends Austerity, Says No to More Greek Aid (Bloomberg)
• Storm Isaac forces Republicans to rework convention script (Reuters)
• Christie chose NJ over Mitt's VP role due to fears that they'd lose (NYPost)
• Ayrault warns EU fiscal pact rebels (FT)
• Is Canada's New $100 Bill Racist?  (BusinessWeek)
• Will Fed Act Again? Sizing Up Potential Costs (WSJ)
• Samsung Slumps Most in 4 Years on U.S. Sales Ban Concerns (Bloomberg)
• States may require insurers to hold more capital (WSJ)
• Wen Says China Need Measures to Promote Export Growth (Bloomberg)
• Economist Appearing On Max Keiser Show Forced To Resign (Forbes)

As the European double, and in some cases triple, dip, continues to take its toll on the periphery (in some cases retroactively, with Spain realizing that 2010 and 2011 GDPs were mysteriously lower than expected, previously printing at -0.1% and 0.7%, revised to -0.3% and 0.4%), the core continues to be dragged ever more into the quicksand of insolvency. The latest confirmation came from Germany, where for the fourth month in a row the IFO survey showed that firms have grown more pessimistic for the 4th month in a row in August, declining from 103.3 to 102.3, on expectations of a 102.7 print, with the Current Assessment dropping from 111.6 to 111.2, while Expectations declining from 95.6 to 94.2. What is disturbing is that this is happening even as the EURUSD continues to be at multi-year lows, which is certainly beneficial to German exporters. The obvious implication is that the higher the EUR rises, the less confident German businesses will be, which also explains why to Germany the best Nash (dis)equilibrium in Europe is to keep the periphery on the edge as long as possible, and the EURUSD as low as possible.

Today the Chinese stock market did something unthinkable: it plunged to fresh post 2009 lows on news so bad they would have been enough to send the stock markets of such "developed" bizarro economies as the US and Europe limit up. The catalyst, as Bloomberg reports, was that Chinese industrial companies’ profits fell in July by the most this year, a government report showed today, adding to evidence the nation’s economic slowdown is deepening. Income dropped 5.4 percent last month from a year earlier to 366.8 billion yuan ($57.7 billion), the fourth straight decline, National Bureau of Statistics data today showed. That compares with a 1.7 percent slide in June and a 5.3 percent drop in May. What is disturbing is that the slide persisted even as revenue in the first seven months increased 10.6 percent to 50 trillion yuan, today’s report showed. Which means that cost and wage pressures are starting to truly bite Chinese corporations, that the US ability to export inflation to China is much more limited, and that one can forget the PBOC easing monetary conditions any time soon for many of the reasons discussed in the past week. It also means that China is now stuck hoping that Wen Jiabao will at least implement some fiscal stimulus. The reality however, judging by the SHCOMP's reaction, is that the benefit from fiscal programs in China, and everywhere else, is far more limited than monetary policy intervention. End result: SHCOMP down 1.74%,to 2,055, a three year low.