Some say that the common currency prevents less productive economies from cheating by weakening their national currencies and forces them to become more efficient and competitive. Industrial production data shows that it is not the case. Italy, France, Greece and Portugal have not only stopped producing more; they are producing now less than in 1990! The decay started immediately after the introduction of the euro in 2002!
The latest evidence of the unprecedented scramble for yield and duration came yesterday when it was revealed that Austria would join the rest of the Eurozone in selling ultra-long dated debt in the form of 70 Year bonds. It didn't take long to find willing buyers, and moments ago Bloomberg reported that this offering has just priced to yield 53 bps more than that on the February 2047 security.
After a furious rally in the past week on hopes that Italy's oldest, and most insolvent, bank, Siena's Monte Paschi has turned the corner and would return to profitability while outside investors would finally help it in its seemingly endless quest to find $5 billion in outside capital, today BMPS shares plunged after first opening limit up in what can only be characterized as a roller coast market.
European, Asian stocks and S&P futures are all up again in early trading, a repeat of the Monday session, buoyed by a generally upbeat corporate earnings season, rising economic confidence and signs of improvement in the world’s biggest economies. After Charles Evans' hawkish comments on Monday, the market is now pricing in a 71% chance of a rate increase this year, up from 68% last week.
Should the referendum pass, but Renzi lose the next election, a eurosceptic party will have control over Italy. Renzi’s gamble is that he will win the referendum, consolidate power ahead of the next election, and stave off election of M5S. That’s quite the gamble given how support for Renzi has collapsed.
Europe truly is a continent full of powder kegs. Even before you add refugees. However, the US and UK are first in line when it comes to the risk of being rendered ungovernable. Partly simply because of timing, and partly because the differences between various ‘groups’ and movements are as pronounced as they are already today. Both countries are running out of carpet to sweep their dirt under.
The near-zero interest rates favor short-term production schedules with minimal capital requirements, resulting in low-risk production lines of cheap goods. That’s why we have “pound- shops” and 99p shops and all the other shabby outlets that now litter every suburban high street - creating the illusion of zero inflation.
“[w]e have the information... If the F.B.I. asks, we are ready to supply the I.P. addresses, the logs, ... but nobody contacted us. It’s like nobody wants to sort this out...analysis of the internal data allows [us] to confidently refute any conclusions about the involvement of the Russian special services in this attack..."
Moments ago Deutsche Bank stock, which has been well away from the headlines in the past two weeks, spiked following a Manager Magazin report according to which the Qatar and Abu Dhabi Sovereign Wealth Fund together with Chinese investors would be willing to raise their stake in DB to 25% in the case of a capital increase.