- Euro zone leaders may raise ESM, EFSF capacity limit (Reuters) - since denied by Germany
- EU talks on doubling financial firewall (FT) - since denied by Germany
- Martin Wolf: Merkozy failed to save the Eurozone (FT)
- Ireland to seek cheaper bail-out (FT)
- Fast-track ‘fiscal compact’ drawn up (FT)
- Clarke rejects call for EU power grab (FT)
- Obama Sets Campaign Theme as ‘Make-or-Break Moment’ for the U.S. Economy (Bloomberg)
- Spain Weighing a Fast, Costly Cleanup of Banks (WSJ)
- Merkel, Sarkozy Unite as S&P Issues Warning (Bloomberg)
- Austerity package key to Italy averting collapse (FT)
- GOP Rejects Democrats' New Payroll-Tax Bill (WSJ)
- Europe can get out of crisis (China Daily)
- Belgium, at Last, Forms Government (WSJ)
- Geithner to Add US Weight to Euro Zone Talks (CNBC)
- Asia Faces ‘Much Greater’ Global Risks: ADB Says (Bloomberg)
- Understanding sectoral balances for the UK (FT)
- Monti cabinet agrees Italy austerity plans (FT)
- Sarkozy, Merkel kick off week of crisis talks in Paris (Reuters)
- China to prepare for social unrest (FT)
- China to stabilize exports, expand imports amid lackluster global demand (China Daily)
- U.K. banks face higher financing costs (FT)
- Reid Seeks to Break Impasse on Payroll Tax Cuts, Unemployment (BusinessWeek)
- U.K. Economic Growth Forecasts Cut by EEF as Manufacturers See Stagnation (Bloomberg)
- Germans Remain Unflappable During Euro Crisis (Spiegel)
- Wolfgang Munchau: France and Germany look set to fudge it yet again (FT)
From significant outperformance early in the European trading day, Financials lost considerable ground as the US opened and bank funding problems were admitted. Obviously, Europe had some catch up to do to the afternoon session in the US Friday, but it went beyond that with Senior Financials closing near the day's wides even as the broader equity market in Europe was only down around 1.3%. The underperformance (against their intrinsic value and peer asset classes) of both Main (the investment grade credit index) and Senior Financials (which are both the lowest cost liquid indices to 'hedge' with in European credit suggest significant macro protection is still being added here. EUR making new multi-month lows below 1.33 as EURJPY tanks and CEEMEA sovereigns widening dramatically also does not help restore confidence as Gold gets a safety bid and USD strengthens.
Markets reacted positively to news that the White House and senior Congressional leadership had agreed, in principle, a deal to raise the US debt ceiling, which provided support to European equities, and weighed on Bunds, whereas the Eurozone peripheral 10-year government bond yield spreads narrowed across the board. A renewed appetite for risk provided strength to WTI and Brent crude futures, and spot Gold prices came under pressure. Elsewhere, commodity-linked currencies, including AUD, NZD and CAD, remained the prominent beneficiaries at the cost of safe-haven currencies, such as CHF, JPY and USD. In other forex news, GBP came under extensive pressure after manufacturing PMI data from the UK demonstrated a contraction, and reached its lowest level since Jun'09. Moving into the North American open, the economic calendar remains thin, however markets look ahead to the ISM manufacturing data from the US. With regards to the US debt debate, focus now shifts to whether the US debt ceiling deal can go through the House and Senate before an August 2nd deadline, and any reaction from major rating agencies pertaining to US's sovereign ratings.
Following electoral upheavals in Portugal, Germany and Finland, it is time to add Italy to the list, after Silvio Berlusconi's center-right coalition appears to have lost the critical election in Italy's financial capital, Milan, which also happens to be the center of the Bunga Bunga man's business and media empire. And while the mayoral election is merely symbolic for now, its outcome has substantial consequences for Italian governance (and thus stability): "With most votes already counted, leftist Giuliano
Pisapia was set to capture Milan city hall with some 55 percent of the
vote against around 46 percent for outgoing center-right mayor Letizia
Moratti. The local elections were seen as a referendum on the billionaire prime minister. "This is the first defeat for Berlusconi's center-right coalition since they came back to power, and it sends a clear signal of voters' disillusionment," said Maurizio Pessato of pollsters SWG. "These results make early elections more likely, possibly next year, and I don't see any chance of meaningful economic reforms being implemented by a lame duck government." As is by now known, while Spain has recently reentered the bond vigilante's scope after its bonds have continued to traded near record highs, Italy has so far been spared. That will change soon: "Italy is the only euro zone economy in which, taking account of inflation, citizens are poorer on average than they were 10 years ago. Berlusconi's government last month cut its growth forecast for this year to 1.1 percent from 1.3 percent and cut next year's outlook to 1.3 percent from 2.0 percent. S&P's lowered its credit outlook on Italy this month due to its weak growth and failure to adopt reforms, although worries of an immediate impact on the markets eased after the Treasury sold long-term bonds near the top of its target range Monday." Will this be the catalyst that is seen as "change" to the status quo by enough bond holders that Italy becomes that last peripheral European domino to fall?
China's Dagong Sees No Threat Of Fed Monetization Ending, Believes "World Credit War" Is About To EscalateSubmitted by Tyler Durden on 03/29/2011 14:13 -0500
Starting to get doubts about QE3? Don't tell that to the official Chinese rating agency Dagong, who in traditional uber-pragmatic fashion, has the following summary observation on US monetary policy, and any imaginary changes thereto: "The second round quantitative easing policy ongoing in the United States can not change its weak domestic demand in the short term. In fact, it can only lower the interest rate of US Treasuries so as to maintain stable interest rate in the capital market in the long term, playing the indirect role of clearing some obstacles for a stable recovery. However, the plan of purchasing 600 billion US dollar Treasury bonds can not realize its predicted goal; and therefore, the United States will hardly change its predetermined monetary policy in 2011." What does this mean for China and the rest of the world: "The continuous implementation of such unconventional monetary policy in the United States will lead to the escalation of world credit war and inflict greater losses for related parties in the world credit system." Any questions?
Leading Indicators of Revolt in the Middle East and Northern Africa: Corruption, Unemployment and Percentage of Household Money Spent on FoodSubmitted by George Washington on 02/21/2011 13:17 -0500
The Numbers Behind the Middle Eastern and North African Revolts
Italian Eni SpA Joins BP, Royal Dutch Shell, RWE, Statoil And OMV In Shuttering Libyan Operations, Stock PlungesSubmitted by Tyler Durden on 02/21/2011 09:05 -0500
Italy oil producer Eni SpA, which also happens to be the largest foreign oil producer in Libya, plunged over 5% on concerns the company's output will be crippled, after the company announced it is following BP in relocating all non-essential (for now) personnel away from Libya. Per Bloomberg: "Eni, which produced 244,000 barrels of oil equivalent a day in Libya in 2009, fell as much as 5 percent, the most since May. The company said in a statement that production is continuing as normal. BP has no producing assets in Libya and is evacuating families and non-essential staff, said David Nicholas, a spokesman for Europe’s second-largest oil company." As we have reported on numerous occasions in the past, unlike Egypt Libya has a substantial amount of oil reserves: in fact, it holds the largest crude reserves on the entire continent, and Europe, particularly Italy and Spain are primary beneficiaries, which explains the plunge in those two stock markets.
In the meantime, for those who remember what happened to Romania in 1989, get ready to for a Bucharest rerun in Cairo. CL is very cheap here as the march to the presidential palace begins.
What are the chances of another banking crisis, this time emanating from Europe? Let me count the ways, but not using Goldman's math of course.
- In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion (WSJ)
- The FT just a few months behind Zero hedge: Fed passes China in Treasury holdings (FT)
- Cyclone Yasi Nears Coast of Australia Packing Winds Stronger Than Katrina (Bloomberg)
- China's Wen vows to control inflation in new year (Reuters)
- Germany Rules Out Bond Buybacks by Bailout Fund, Official Says (Bloomberg)
- Bank of Japan's Kamezaki Says Economic Slowdown Is Temporary (Bloomberg)
- Florida governor may stall Obama healthcare law (Reuters)
- Much of nation's recent growth may have been a mirage (WaPo)
They call it "Doctor Copper" because copper pricing is a pretty good indicator of economic health. It's more of a demand metal than gold or silver and hard to fake and there aren't any silly ETFs stockpiling it although China has socked away a full-year's supply, which has given copper a very false sense of demand...
After all, if the Fed DOES announce such a program, then we are undoubtedly heading into outright trade wars, tariffs, and even MORE currency intervention.True, Bernanke has ultimately got his sights set on destroying the US Dollar. But with global tensions growing, he’s got to walk a fine line between saving Wall Street and pissing off the US’s biggest creditor (and the only country that still owns more US debt than the Fed).