Rating Agency

Report: China Surpassed U.S. in 2010

European equities are taking losses as North America comes to market, with particular underperformance noted in the periphery bourses. Risk-aversion pushed both Spanish and Italian yields higher, with the spread between the Spanish 10-year and the Bund crossing above 400BPS for the first time since Late November 2011. The yields have now come off their highs but still remain elevated. It should be noted that markets are generally light today heading into the Easter weekend as investors take risk off the markets, so large surges in volumes have been observed. In the FX markets, EUR/CHF briefly broke below the SNB’s staunchly defended 1.2000 level on some exchanges, but uncertainty remains over the exact low due to different exchanges registering different prints. Needless to say, all exchanges witnessed a 30pip spike upwards in the cross with significant demand seen pushing the cross away from the floor. EUR/CHF now trades around the 1.2020 level.

Again, Goldman Sachs Investment Advice Sucks... and we all know the reason why!

Anyone who hasn’t sensed a mood change in this country since the 2008 financial meltdown is either ignorant or in denial. Millions of Americans fall into one of these categories, but many people realize something has changed – and not for the better. The sense of pure financial panic that existed during September and October of 2008 had not been seen since the dark days of 1929. Our leaders used the initial terror and fear to ram through TARP and stimulus packages that rewarded the perpetrators of the financial collapse rather than helping the middle class who lost 8 million jobs, destroyed by Wall Street criminality. The stock market plunged by 57% from its 2007 high by March 2009. What has happened since September 2008 has set the stage for the next downward leg in this Crisis. The rich and powerful have pulled out all the stops and saved themselves at the expense of the many. Despite overwhelming proof of unabashed mortgage fraud, rating agency bribery, document forgery on a grand scale and insider trading based on non-public information, the brazen audacity of Wall Street oligarchs is reminiscent of the late stages of the Roman Empire.   

• Obama budget defeated 414-0 (Washington Times) yes, the Democrats too...
• German Central Banker: ECB Loans Only Buy Time (AP)
• Baku grants Israel use of its air bases (Jerusalem Times)
• Japan May Understate Deflation, Hampering BOJ, Economist Says (Bloomberg)
• BRICS flay West over IMF reform, monetary policy (Reuters)
• Five Portugal Lenders Downgraded by Moody’s (Bloomberg)
• SEC Registration Captures More Hedge Fund Advisers (Bloomberg)
• EU Nears One-Year Boost in Rescue Fund to $1.3 Trillion (Bloomberg)
• Consumers plot emergency oil release as Saudi decries high prices (Reuters)
• Japan Plans to Draft Stopgap Budget for First Time in 14 Years (Bloomberg)

All you need to read and some more.

All you need to read.

Heading into the North American open, EU stocks are seen lower across the board as market participants reacted to cautious comments from Moody’s rating agency on Spain, which noted that Spain’s fiscal outlook remains challenging despite easier targets. Still, the ratings agency further commented that easier targets do not affect Spain’s A3 government bond rating with a negative outlook. Separately to this, a BHP Billiton executive said that Chinese demand for iron ore is flattening, while according to China's state-backed auto association, China's vehicles sales this year will probably miss their growth forecasts. As a result, basic materials sector has been the worst performing sector today, while auto related stocks such as Daimler and VW also posted significant losses. The ONS reported that inflation in the UK fell to 3.4% in February, down from 3.6% in January. However, higher alcohol prices stopped the rate declining further. Going forward, the latter half of the session sees the release of the latest US housing data, as well as the weekly API report.

All you need to read.

All you need to read.

The money for Greece has not yet been wired, and already a deeper dive into the previously released Troika report shows  what is glaringly obvious to anyone who follows the actual collapse of the Greek economy: that the country is already on course to miss its budget targets for the immediate future (for insane EU assumptions on what the Greek economy should look like through the lens of a Eurocrat, see our chart of the day). The Telegraph reports: "Athens has probably cut spending enough to bring its primary deficit down to 1.5pc this year as agreed. But "current projections reveal large fiscal gaps in 2013-14" according to a leaked draft report by the European Union (EU), the European Central Bank (ECB) and the International Monetary Fund (IMF). In its report, the troika said Athens will have to impose further fiscal cuts of as much as 5.5pc of GDP to meet next year's targets." And while Europe may be terminally fixed, translated this means that the aborigines of the southern colony of Bavaria Sachs will see their wages cut even more, and even more people will be unemployed soon just to appears the first lien debt holders. This in a country of 10.8 million where just 36% of the population works. So Greece, which today received a rare bit of highly irrelevant but good news, when Fitch became the first rating agency to upgrade the country's credit rating from Default to B- (even as its new bonds saw their yield surge to 19% on the second day of trading), will in a few short months be forced to once again deal with even more consequences of being the proud recipient of the inverted European bailout, whereby the country's gold is used to fund Eurobank capital shortfalls.

Greece defaults & if it works, what makes anyone with a thirdof a synapse think that Portugal/Ireland will NOT jump in line to stiff creditors? This is more the end of the beginning than the beginning of the end of the crisis.

It is not shocking that the worst of the worst rating agency has downgraded Greece to "Restricted Default" following the imposition of coercive measures to generate a "voluntary" restructuring. It is very shocking that Fitch had Greece at C until now...

That red color on your screen this morning is not a failure in the green pixel channel but an indication of three main things. First, European composite PMIs came in at 49.3, down from 50.4 in January, and below the preliminary print 49.7 released on February 22. The main reason was the slide in the Eurozone Service PMI which printed at 48.8 on expected 49.4. This included a deterioration not only in the peripheral countries but in the core stalwarts France and Germany too. Elsewhere, China reduced its growth target to 7.5% this year, the lowest goal since 2004. The government will also aim for inflation of about 4 percent this year, unchanged from its goal in 2011. China also announced that it will target a deficit of 800bn CNY for 2012, a rather surprising change from its previous stance. Rounding out the dour note is a Moody's announcement that Ireland is likely to need a second bailout when its current aid program ends, rating agency Moody’s warned today, and that it too may need a PSI just like Greece. Then again, scratch may and replace with will. From the Irish Times: "In its weekly credit outlook report, Moody’s also warned a No vote in the upcoming fiscal treaty referendum would bar Ireland from receiving further funds from the European Stability Mechanism (ESM). The agency predicted the Government would have to rely on the ESM for additional funding after the existing bailout program expires in 2014. "We expect Ireland to face challenges regaining market access in 2013 and it will likely need to rely on the ESM, at least partially, when the current support  programme expires,” it said." As a reminder, if Ireland proceeds with a referendum on the Fiscal compact, and the referendum fails, it will have no ESM support, and thus no second bailout potential. Finally, the ECB deposit facility usage soared to an all time record of €821 billion overnight, confirming that the LTRO 2, contrary to some wrong analysis, is not being used for Carry trades at all.

All you need to read.