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Daily UK and Europe Highlights - 12 August 2009
- Bank of England
- Bank of New York
- BOE
- Bond
- China
- Claimant Count
- Consumer Confidence
- Consumer Prices
- Councils
- CPI
- Crude
- Deutsche Bank
- Economic Calendar
- Estonia
- European Central Bank
- Eurozone
- Gross Domestic Product
- International Monetary Fund
- Jaguar
- Lithuania
- Lloyds
- None
- Poland
- Real estate
- Reuters
- Slovakia
- Trade Balance
- Unemployment
- United Kingdom
Good morning fellow Zero Hedgers. It is whacky Wednesday today.
Claimant Count numbers from UK and the BOE inflation report are out
today, though rest of Eurozone is a little quite today. Watch out
tomorrows highlight for coverage on a rather heavy Eurozone
data cupboard. Asian markets have been playing rounders with the
longs. Statistics Estonia reported that its GDP declined -16.6% in Q2
as opposed to the -15.1% fall in Q1. Folks, I would like to offer you
some smokable green plants but I have none. BHP Billiton, the worlds
largest miner reported the worst annual
profit excluding writedowns in the last seven years. Annual profit
came at approx -30% due to dwindling demand and spot commodity prices
but ahead of
forecasts.
However, the report out of ING Groep NV takes the prize today:
“Market impacts and the weaker economic environment continue to strain
ING’s results,” Chief Executive Officer Jan Hommen said in a statement.
“Credit quality worsened, leading to a rise in risk costs, while lower
property prices in many regions triggered negative revaluations on real
estate.”
Quick Asia update - Asian markets are mostly down by at least 1% and
Shanghai Composite is down by more than 4%. Australian Westpac
Consumer Confidence at 3.7%, Australian Wage Price Index stalled at
0.8%. Japanese Producer Prices y/y slid by -8.5% vs. -6.7% prev.
month, Revised Industrial Production at 2.3%. Not much came out of the
BOJ Monthly Report,
they kept their stance unchanged that the Japanese economy has stopped
worsening, they obviously missed today's Producer Prices memo. Indian
Industrial Output jumped by 7.8%
which is highest in last 16 months, it beats the expectations of circa
3.8%; this has been attributed to stimulus, various tax cuts and
government initiatives for creating rural jobs.
While we are on the subject of Asia, an interesting Bloomberg article
crossed my sight this morning which has not received a lot of attention
in the media, yet. The Chinese Commerce Ministry said that the efforts
by central planners to boost domestic demand would not be able to completely offset the slumping export demand.
Their concern was emphasised based on the recent figures coming out of
the Chinese industry. If you want an in-depth view on the matter of
exports and its ties to credit growth, Ambrose Evans-Pritchard's
article out yesterday evening, called China's Giant Ponzi Scheme, is a must read.
- Must read: BOE may strike cautious note as markets await Inflation Report (Telegraph, Reuters UK)
- Must read: UK jobless figures are expected to reach a 15-year high (Telegraph, Reuters UK)
- Must read: Young hit hard as unemployment set to hit 2.5m (Guardian)
- Jaguar Won’t Need U.K. Bailout After Bank, EIB Loans (Bloomberg)
- FSA is going to make a U-turn on Bankers Bonuses - this was to be expected (sigh) (Telegraph, Bloomberg)
- Sterling's recent storm risks intensifying - interesting yesterdays Trade Balance report (Telegraph)
- Must read: Banks profiteering on mortgage lending (Telegraph)
- Lloyds sells Insight Investment Unit to Bank of New York Melon (Reuters UK)
- ING Slaski (Poland) Profit Falls 22% on Bad Loans, Beats Estimates (Bloomberg)
- ING Profit Falls 96% on Risk Provisions, Writedowns in Real-Estate Assets (Bloomberg)
- European Central Bank chiefs agree to cap on gold sales (The Independent IE)
- German consumer prices post annual decline for first time in 22 years (The Independent IE)
- Irish Funds Chief Tells Government: Don’t ‘Stick it’ to Lenders (Bloomberg)
- UK local Councils 'not prepared for next wave of the recession' (Guardian)
- Satire: America's right turns its fire on NHS - hold on, doesn't America have its own problems? (Guardian)
- What the great fall will mean for life insurer's policyholders (The Independent)
- More mortgages help stabilise property market – but at a price (The Independent)
- Third of stores did not bother to pass on December VAT cut (The Independent)
- China oil and iron ore imports surge (FT)
- Must read: Bank of England policies suppress bond yields (FT, associated IMF study)
- Must read: Estonian Economy Shrank Annual 16.6% Last Quarter (Bloomberg)
- Romania's First-Half Current-Account Deficit Narrows on Falling Imports (Bloomberg)
- Bulgarian Inflation Slowed in July on Falling Food Costs, Weakening Demand (Bloomberg)
- Must read: Lithuania Suffers `Painful Adjustment' as State Funds `Strained,' IMF Says (Bloomberg)
- Hungary's Central Bank Gains Rate-Cut Momentum After July Inflation Report (Bloomberg)
- Hungary's Government Revenue to Drop $1.5 Billion Next Year, Oszko Says (Bloomberg)
- Slovakia June Inflation Rate Advances to Four-Month High on Housing Costs (Bloomberg)
- Consumer Prices Decline for Third Month on Energy Costs, Retail Discounts (Bloomberg)
- ECB's Liikanen Says Next Few Months Will Show If Euro Region Through Worst (Bloomberg)
- European Stocks Are in `Bear-Market Rally,' Deutsche Bank Strategists Say (Bloomberg)
- Prime Minister Berlusconi Asks Media to Leave Him Alone, Giornale Reports - let him be with his companions! (Bloomberg)
- ECB says EUR 1.845bln borrowed using the overnight loan facility, EUR 48.587bln deposited
- ECB says Eurosystem covered bond purchase programme totals EUR 5.929bln
- German Bund Tap auction for EUR 4.8506bln 3.5% 04-Jul-19, Bid/Cover 1.8 vs. Prev. 1.3
- IEA lowers forecast for global refinery crude runs in Q3 2009 to 72mln BPD, down by 400,000 BPD from previous forecast
Economic Calendar:
- UK Jobless Claims Change (Jul) M/M 24.9K vs. Exp. 28.0K (Prev. 23.8K, Rev. to 21.5K)
- Eurozone Industrial Production SA (Jun) M/M -0.6% vs. Exp. 0.3% (Prev. 0.5%, Rev. to 0.6%); Y/Y -17.0% vs. Exp. -16.3% (Prev. -17.0%, Rev. to -17.6%)
- French CPI (Jul) M/M -0.4% vs. Exp. -0.5% (Prev. 0.1%)
- French Current Account (Euro) (Jun) M/M bln -3.5B vs. Prev. -2.2B (Rev. -2.3B)
- Spanish House Transactions Y/Y for June came to -25.5% vs. prev. month -32.2%.
- Italian CPI (NIC incl. Tobacco) (Jul F) M/M 0.0% vs. Exp. 0.0% (Prev. 0.1%); Y/Y 0.0% vs. Exp. 0.0% (Prev. 0.5%)
- Estonia Q2 GDP contracted -16.6% vs. -15.1% in Q1
Interesting articles from other Blogs, this morning:
- Cameron's NHS IT expert does not share enthusiasm for 'Google government' (I agree with Mr. Camron) (Guardian)
- Firing and the City - cost cuttings and pessimistic surveys from the ground (FT Fund Manager Blog)
- Why is the RBS's boss selling its shares? - he should have applied to their trading desk (Reuters Commentaries)
- Team Obama punts again on derivatives - overview on the Obama plan for regulating this market (Reuters Commentaries)
- US economy has bottomed: Soros - bugs higher up in the insect food chain are joining the prognostication (FT Alphaville)
Make sure you to watch the RAN Squawk 'EU Morning Briefing' video and visit the RAN Squawk News page.
»
- advertisements -
So, when does the meltdown occur in Europe. Why can't I get any info on the state of affairs in France, (where I live). You'd think the banks here are in a different world...
Thanks Cheeky
Meat on the bones,...just what I hunger for!
Cheeky.
Feel free to corect me before i swallow another blue!
So while the zombiebanks do this little arbitrage trade with the Fed,..slowly getting back to life,..the U.S is sinking fast into deep deflation (will the rest of corporate america really stand for this as they go out of business?),...it will also feed on massive unemployment,...I guess its a race between the top banks with their fine connections in Washington and the rest of America?,..I really do se that "pitchfork march" on wallstreet,...unless the massmedia can keep them at home/disillousioned/misinformed,..???
So pissed off and confused!
now, I'm just speculating when i say; that the economical model du jour might be that the banks provide the credit necessary to big corporations in order for them to " consolidate their operations " meaning; cut the credit for small and medium size businesses because " they poses a risk " and grant a credit to the above behemoths to increase their market size and share. And they can make an excuse for doing so by claiming that those behemoths are either " to big to fail " or " are positioned well to go trough the current economic downturn relatively un-scattered, and posses no significant credit risk ". That would produce a 2 way mirage for the average Joe on the street. firstly it would make it seem like the economy is really improving, and that the banks are ready to lend the money out ( both is, clearly false ) ... now the banks could bet their money on the market knowing which moves will certain corporations make, and in doing so, they can earn some significant dollars which would allow them to continue their practice du jour.
and of course the MSM would characterize that as a sign of improvement, when its actually the biggest corporate, governmental and federal take-over of all times. And the little guy would be indoctrinated with that propaganda till the day he finds himself sleeping under the bridge because he lost his business and his home, and all that just because the bank didn't want to give him credit because " he posses the risk ".
Then we might see some RPG grenades flying in the downtown Manhattan. But until that happens, make sure your money is safe, dont gamble, lay back and enjoy the show.
these (expletive deleted) financial networks are (expletive deleted) amazing the way they (expletive deleted) talk the markets up and then down with no shame - I watch Bloomberg and have to say (after years of watching CNBS) that they are actually the worst - their morning anchor may as well be a cartoon character reading off a slow motion tele-prompter -
But Cheeky,..
Getting scared (almost tempted to find a blue pill),...does that mean they can print the money, prop the balancesheets of the zombiebanks,..who will then one day wake from their coma,..all debt being payed of (via printed tarp,talf,ppip and so on),...AND THE U.S. STILL HAVE A STRONG DOLLAR?
Yes we can...all we have to do is believe and everything will be OK. The only thing that could be a problem is people becoming nattering nabobs of negativity. Put on your happy faces, drink your cups of joe (or tea) and turn off your brain - the Fed and governments of the world will tell you when its safe to think again.
well if the FED is paying banks a certain percentage not to loan the money, and the banks get the money which they deposit into FED at 0% they can always leverage the difference and borrow from the FED at the same rate and do the whole process again ad infinitum, and in some idealistic universe they could, with doing just that; actually become solvent again.
Look at this chart for comparisons to other recoveries
http://www.calculatedriskblog.com/2009/08/new-market-graph.html
Don't know why I torture myself and watch CNBC.. I guess only b/c Marc Faber was on today. Here Marc is saying that nothing has been solved.. real unemployment in the US is over 15%, all the results in the stock market is b/c of govt intervention, there is no real growth... and idiot Becky Quick keeps trying to put a fake positive spin on all this, it was soooo obvious...
what an embarssment CNBS has become.. BNN is defnitetely much much better~
I posted below about Bloomberg - their morning anchor Betty L is a total retard who sits there with her friggin knees protruding into the camera as she struggles to put two syllables together - What Zero Hedge should do is organize a poll on the worst anchors/reporters rated on a scale of 1-3 three being pathetic and 1 being intolerable
Let's face it, though: BNN is heavily tilted to green shoots as well. Sad when not-as-bad seems good.
To Raymond Shaw
I live in Copenhagen,..would love to get a post on the DK economy,..the danish media (not like cnbc though),..just,.bla,bla,..yaaaaaaaaaaaawn,..zzzzzz!
Not much in there on our exposure to eastern europe,..except the bankers point off view!
Is there a nation on this planet where the MSM doesn't mouth the bankers' point of view? Cuba, N. Korea, Iran maybe?
Any thoughts from elsewhere in the world?
Hey C.
I have a little follow up question on the China dollar diversion,....does that mean that the Fed can only keep interest rates on the 10y (and out) down as long as they print the money,...what happens to u.s housing when they stop printing?...how long can they print before it blows up?
basically they can print indefinitely, as long as there is no money chasing any real goods ( as we have now ) ... but IF they stop printing; everything goes boom Hiroshima-style
CB are you a monetarist, or do you believe that store-of-value can be printed? Do you ascribe to the money velocity theory, and equate credit and money?
no, i am certainly not a monetarist,while i agree with some aspects of that theory ( maintaining price stability trough rationalizing money supply, but strongly oppose the centralized character of the institution which should do that job), and no i do not believe that the store-of-value can be printed; because that is an oxymoron; valuable is something that is not in abundance and that is not a abstract creation; that's why i strongly favor gold, silver and platinum. And no i do not equate credit and money, and not because of an economic perspective i share or do not share with the people responsible for defining money; but purely for the destructionst nature such concept posses ( look at the inflation chart from 1913-2008)
I believe I share your views that printing store-of-value is an oxymoron, and that 'valuable' is not an abstract. To me, that means that the fact of printing dilutes the currency printed, whether or not the new 'money' reaches circulation.
actually not true. look at the DXY and the value it had in July of 08 and look at the value it had yesterday; and that was after almost 2 trillion dollars were printed. BUT you only see an improvement in the equities market because that is where most of the money went. now, I'm sorry for not answering your question about the velocity, because that matter is strictly correlated with this one.. I'm an Austrian so when i talk about the money velocity the first thing that comes to my mind is (velocity down= higher demand do hold ), ( velocity up=lower demand to hold). I'm sure you are bright enough to know what that means in a Keynesian environment. and if the sectoral velocity ( ie. the equity markets ) is x times higher than the velocity in lets say commodities you have inflationary effect in one sector and deflationary in another one, with the overall effect on the economy possibly being either inflation or deflation.
My point lies in your reply. $2 Trillion HAS been printed, yet DXY has not crashed. Did they print store of value? If they have, they've defied the non-abstract quality of 'valuable' which you and I agree on. And if they haven't, they've merely created tokens of exchange which people accept as valuable, either because they were trained as monetarists and equate credit and money or because they want to continue to 'believe'. In other words, you can't replace a credit bubble with a currency bubble without destroying the credibility of the currency. Yet that is what they have done so far.
The DXY has not crashed because of the credit replacement theory. The destruction of credit is far greater than the growth of credit hence the currency has not lost its floor yet.
Not until those M3 figures start on their way back up. Reserves are just piling up at the banks. Anyways, it's topic that has been discussed about at great lengths by Tyler, Mish et. al.
On top of that, despite what traders may think of the Dollar, the world still has its faith in this currency... just look at the volume of transactions which are conducted in the USD across various countries which don't have faith in their own currencies (Africa countries, some Asian countries, etc.)
And if they haven't, they've merely created tokens of exchange which people accept as valuable, either because they were trained as monetarists and equate credit and money or because they want to continue to 'believe'
you can't replace a credit bubble with a currency bubble without destroying the credibility of the currency
Yet that is what they have done so far
Exactly !!!!!! so far being a crucial term here; remember on a long enough time line ....
well, if something to be considered as valuable it has to satisfy this three criteria:
a) non-abstract
b) considered exchangeable for good or service
c) physicaly durable trough time period longer than ( lets say ) 10 yrs.
FIAT currencies satisfy only one of those three criteria and that would be be b. and ergo it is based on a consideration of exchangeability and nothing else.
From the question on China!
Thanks for the input Cheeky,..very helpful!
The Hang Seng was down over 3% and the Nikkei almost 1.5%, but again this did not spread to EUR and UK. I believe it will take a series of big moves down in Asia (Hang Seng -7% moves), with risk aversion, in order to have a 8/07-11/07 liquidity issue again.
Meanwhile, the BRIC de-couple or destruction debate will continue.
Dax was down a lot yesterday so could have been a bit of a short squeeze/profit take given the move and shorts a bit nervous these days!
had to laugh at that Hester selling his RBS shares.tells you all you need to know about the health of the banking system...lol....he is the true cheeky b......
as for BLT,you have to wonder how they're holding up so well with China's exports being down 23% and what's gonna happen when they run out of storage for all the physical whatever they've been buying?
Good post guys,..keep it comming!
I have a question for z.h. on China,..what will happen at the "2010 major NPL´ festival",...apart from the Chinees govt atempt to pull som major-bamboo-greenshoot-propaganda out their ass for all of us to swallow?
The serious question is,..will they begin a sell-off og their dollar holdings to finance and reflate/cover up thier mistakes?
(Just a little Copenhagen interpretation),..Would like to get your take on the matter?
hello Anon
Well i am, for one, not sure that China will just dump their dollar holding in such non-discrete way. They have been diversifying since mid-April when commodities prices were at their year lows and they had spend almost 25% of the dollar holdings on commodities. They have strategically bought it as a) a hedge against future FED actions and b) because of their own stimulus and increased demand.
And i also think that they will continue to buy future US debt, but in 3,5,7 year issuance, and not on 15 or 30 year ones, because they need to have the strong dollar in the short term because of a) buying power when it comes to buying commodities and b) because strong dollar suits their strategic positioning as a net-export country. Also they will continue to do so until they build up their domestic demand and de-crease the savings rate and bring more equilibrium to their economy. you can access all the data you need if you google China+economy; there is a wide pool of data and analysis which can help you.
From http://peakoil.com/modules.php?name=News&file=article&sid=50520&mode=thr...
China oil and iron ore imports surgeBy Javier Blas in London
How do you reconcile the above with a dropping BDI?
Re: IEA Raises 2009, 2010 Oil Demand Forecasts on China (Score: 1)by mcgowanjm on Wednesday, August 12 @ 06:06:30 PDT
(User Info ) Japanese prices in record decline Japanese wholesale prices were down by a record 8.5% in July compared with a year earlier, highlighting the growing deflationary pressure in the economy. Which means that this: ...citing accelerating industrial activity in China, the world’s fastest-growing consumer of crude. ...is not accurate. Baltic Exchange Capesize Index has now begun descent to Dec08 lows. China's Iron Ore and Coal Imports May Drag down BDI in Q3 http://experts.e-to-china.com/analysis/general_analysis/Commerce/2009/06... Sensex down 4.4% today. It was down 5% a couple(?) weeks ago. At this point in the 30s-era DOW, today would have been the beginning of the end… no more time to trade out of your positions… a few percent off the top and then, before you knew it, the first leg of decline chopped your prior gains nearly in half. Oil demand will now be crushed.
im short China; but yes you make an excellent point.
And right on time DRYS screams up
and away:
http://finance.yahoo.com/q?s=drys
up 4.4%. ;} Thanx for your reply.
BLT profit down 30%, but....better than estimates, that's alright then, it's a green shoot!
rofl, look at ING -96% and i have read tonight in an article written on one major MSM site that it " beat the analyst expectations "
Cheeky bastard you should set up your own blog! You post like crazy anyway and its awesome shit!
naw, there are plenty of smart people writing awesome stuff for me to enter that arena. and also the " market " is over-saturated and has no real prospect of a significant future growth. lol. and i think the topics i would write about are to " esoteric " and interdisciplinary and thus not particularly interesting for a broader audience to read. i like this blog because there are many scary-smart individuals here and it challenges me to put an extra effort in expressing my thoughts. something i would surely not do if i would to write my own blog. i like it here.
I love reading you...;-)
down 96%, well that's certainly a green shoot, it can only go up now
yeah that's class....:)
good morning Raymond, and once again thank you for the updates
now, if you allow me, i would like to address some points in this article
1. Must read: Estonian Economy Shrank Annual 16.6% Last Quarter
As i have stated before the economical troubles in the Baltic states will most definitely have future impact on Swedish banks, and there is a high probability that the Government of Sweden will have to address those troubles trough bank-nationalization like we have seen in the mid 90s. Also, heavily dependant on the loans from major Russian banks further fall can be expected in these economies as Russian banks seem to have closed their credit lines due to increasing fears of sovereign default of Baltic states. Also there is some trouble spelled for certain mid-sized German banks if the loans which were provided to private and public entities in those countries default or under-perform. That would bring a next leg down ( which i fear would be even more severe than the one we have seen in 08) in EU economy. This will, consequently, impact Austrian banks which lent wast amounts ( 1.3 trillion eur ) to Russian businesses and Russian banks who were/are highly leveraged ( some major Russian banks had a leverage of 40:1 )
2. Hungary's Government Revenue to Drop $1.5 Billion Next Year, Oszko Says
Let me continue from my first comment and say that most Central European countries were heavily dependant on foreign investments, but their major investment pool was Russia ( with the exception of Croatia which was mainly an investment area for German and Austrian individuals and enterprises ) and they will continue to deteriorate due to the facts i wrote in my first comment. I really don't see any growth in Central European countries given the state of major lenders to those countries ( Austrian and German banks ), major investment pools ( Russia, Austria ) and the structure of the banking system in those countries which favor giving credit to consumers instead of private business.
I will not go any further, because i am sure that the readers can conclude that major problems in European economies are there because of three major factors
a) banking sector over-exposure to Eastern and Central Europe economies
b) general global availability of credit
c) economical lack of balance and lack of coordination among top EU countries and the divide that has happened among them due to national interests put above the interests of the union ( primarily in France, Italy and the UK, with Germany right behind them.
once again Ray, thank you for the updates
By the way Cheeky, the situation in Denmark is pretty rabid as well. Dankse Bank recently released finanical report looks like a mine field as well, pun not intended.
Might do a post on that.
yep, just reading it; the exposure to deteriorating economies is staggering; particularly Ireland and the Baltic; i swear to God somewhere up in the north there is another Iceland waiting to happen. but as i can see from their report on " other banking activities " they have successfully avoided Russia. that's a big plus; but still i cant get the picture of Baltic states out of my head. Just look at the differences between the percentage fall in lending and the percentage increase in savings. They are going to have some major problems.
yep; that means that Italian banks are toast, and that Austria as a nation will see their CDS go trough the roof in the upcoming months. they have lent the equivalent of 70% of their GDP to CEE.
Cheeky Bastard,
Thank you for your inputs. The next two quarters will tell us how bad the write-offs are going to get since there is no respite from economic data from some of the Eastern Europe trouble makers. I think Evans-Pritchard did an article on the Russian banking system which is worth a read and echoes your views:
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5713031...
Evans-Pritchard is always a valuable source of information, particularly on Eastern and Central European economies and their impact on major European banks. He had an article back in march which analyzed the potential size of the losses Austrian and German banks could have if Russia goes trough heavy recession ( like the one it is going right as we speak ) of long duration ( 2-5 yrs ) ... and this is also a great article for all those who are interested in this topic -----------> http://seekingalpha.com/article/124789-are-austria-s-banks-more-at-risk-than-their-italian-counterparts
http://fistfulofeuros.net/afoe/economics-and-demography/austrian-banks-the-most-exposed-to-eastern-europe-forex-lending/