Risk averse sentiment dominate the session, as market participants looked forward to the latest European finance ministers meeting who are due to discuss Spain’s finances, as well as Greece, which is yet to formalise spending cuts in order to receive the next aid tranche. Reports that China's economic growth is expected to have slowed to 7.5% in Q3 from 7.6% in Q2 weighed on basic materials and industrials stocks. The World Bank cut its 2012 GDP forecast for China to 7.7% from 8.2%; 2013 to 8.1% from 8.6%. Uncertainty surrounding the never-ending sovereign debt crisis in Europe weighed on financials, and in turn translated into lower 3m EURUSD cross currency basis. Peripheral bond yields rose, with Italy underperforming, ahead of the supply later on in the week. Going forward, given the Columbus Day holiday across the pond, trade volumes are expected to be below the average.
- Italy rejects need for EU control (FT)
- ‘Worst US quarterly earnings since 2009’ (FT)
- Chinese firm helps Iran spy on citizens (Reuters)
- World Bank cuts East Asia GDP outlook, flags China risks (Reuters)
- Foxconn factory rolls on in spite of strike (China Daily)
- Economic recovery ‘on the ropes’ (FT)
- Japan Tries Cars That Make the Mini Look Maxi (Businessweek)
- Euro Finance Chiefs to Give Positive Greece Statement, Rehn Says (Bloomberg)
- Romney attacks drones policy (FT)
- Euro zone mulls 20 billion euro separate budget (Reuters)
- Hong Kong’s Leung Seeks Turnaround With Economy Focus (Bloomberg)
- RBA Keeps Some Documents Private in Securency Bribe Probe (Bloomberg)
- India Inflation to Remain at 7.5%-8% Till Early 2013 (WSJ)
Usually on semi-US holidays such as today, when bonds are closed but equities left to the whims of vacuum tubes, equities do their mysterious ramp and never look back. So far today, however, this has failed to happen with futures at lows, driven by a noticeably weak EURUSD, which has traded down nearly 100 pips from the Friday late day ramp close, currently at 1.2940. It is unclear what has spooked the Euro so far, although all signs point to, as they did 2 months ago, the Spanish lack of willingness to throw in the towel and demand a bailout, thus easing conditions for everyone else if not for Spain PM Rajoy. Today's main event will be European finance ministers meeting in Luxembourg to discuss the recent Spanish economic transformation efforts as well as an attempt to accelerate banking cooperation and implement a banking regulator - something which is needed for the ESM to monetize bank debt, and something which Germany has been firmly against from day one. Additionally, a day ahead of Merkel's visit to German (where she will be protected by 6-7,000 cops), the ministers are likely to make a positive statement on Greece’s progress toward austerity targets, according to European viceroy Olli Rehn said. In other overnight news, German Industrial Production saw a -0.5% decline, which was modestly better than the -0.6% expected. Over in Asia, China reopened from its 1 week Golden Week hibernation with the SHCOMP down -0.56% to 20.76.42 following a small bounce in the China HSBC Services PMI to 54.3 from 52 in August, and with average house prices rising for a 4th month in a row, and even more repo operations by the PBOC, the result is that the market's ungrounded hopium for an immediate PBOC liquidity injection was taken away pushing regional markets lower.
New York Times Concedes that It Is Unknown Whether Syrian Artillery Came from Rebels or Government ... Ron Paul: Beware ...Submitted by George Washington on 10/07/2012 13:44 -0500
Weekend Mideast News Roundup
History has shown us countless times that centrally-?planned, command style economies do not produce long-?term economic growth. We’ve seen this will the Soviet Union, the UK, the US-?since the Tech Crash, and today in China.
As corn prices have rolled over and even the World Bank worries over the impact of financial crises and food prices, we present with little comment, one of the more staple sustenances - now trading at record high prices... transitory we presume?
In order to avoid social unrest and absorb the world's young people entering the global workforce, the World Bank Development Report states that 600 million jobs must be created from 2005 to 2020. As Bloomberg BusinessWeek reports, jobs should be at the top of governments' agendas or they could face further uprisings such as toppled leaders in Egypt and Tunisia. "Demographic shifts, technological progress, and the lasting effects of the international financial crisis are reshaping the employment landscape in countries around the world, and those that successfully adapt to these changes and meet their jobs challenges can achieve dramatic gains in living standards, productivity growth, and more cohesive societies." However, those countries that don't adapt, face the kind of social unrest we have warned of again and again - and are starting to see in more and more civilized Western nations. Their findings:- 90% of jobs are created in the private sector and so Governments must create an environment that encourages investment - especially in small- and medium-sized business. So - a mere 600 milion jobs and all is well - amazing!!!
- RBA Cuts Rate to 3.25% as Mining-Driven Growth Wanes (Reuters)
- Republicans Not Buying Bernanke’s QE3 Defense (WSJ)
- Spain ready for bailout, Germany signals "wait" (Reuters)
- EU says prop trading and investment banking should be separated from deposit taking (Reuters)
- Call for bank bonuses to be paid in debt (FT)
- Spanish Banks Need More Capital Than Tests Find, Moody’s Says (Bloomberg) ... as we explained on Friday
- "Fiscal cliff" to hit 90% of US families (FT)
- The casualties of Chesapeake's "land grab" across America (Reuters)
- U.K. Government Needs to Do More to Boost Weak Economy, BCC Says (Bloomberg)
- World Bank Sees Long Crisis Effect (WSJ)
- UBS Co-Worker Says He Used Adoboli’s Umbrella Account (Bloomberg)
- And more easing: South Korea central bank switches tack to encourage growth (Reuters)
The following is a comprehensive list of key events to watch over the next several weeks – events that could have very significant bearing on how the euro sovereign debt crisis evolves.
What Do the Experts Say? Are People Actually ACCEPTING Gold As Money?
Europe took August off. Today, it is America's turn, as the country celebrates Labor day, although judging by recent trends in the new 'Part-time" normal, a phenomenon we have been writing about for years, and which even the NYT has finally latched on to, it would appear the holiday should really be Labor Half-Day. After today the time for doing nothing is over, and with less than one month left in the quarter, and trading volumes running 30% below normal which would guarantee bank earnings in Q3 are absolutely abysmal, the financial system is in dire need of volume, i.e. volatility. Luckily, things are finally heating up as the newsflow (sorry but rumors, insinuations, innuendo, and empty promises will no longer cut it) out of various central banks soars, coupled with key elections first in the Netherlands and then of course, in the US, not to mention the whole debt-ceiling/ fiscal cliff 'thing' to follow before 2012 is over. So for those who still care about events and news, here is the most comprehensive summary of the key catalysts over the next week and month, which are merely an appetizer for even more volatile newsflow in October and into the end of the year.
We fear that the data given to us by Europe is erroneous. The resident institutions in the world where one thinks that accurate data may be found for Europe are Eurostat and the Bank for International Settlements. Spain and her official admission of "dynamic provisioning" has raised all kinds of questions in our mind and has unsettled our belief in the data provided by Europe. It is now quite apparent that the numbers for all of the Spanish banks, are inaccurate. It may well be that the EU or the ECB could bury what may be found but it would be awfully tough for the IMF to hide any material breaches. Even when considering the IMF however, certain questions are raised. Their projections for Europe and each and every country in Europe have been wrong, dead wrong and far too optimistic. This then would explain why Europe is in such trouble because if the data is not truthful then the truth, as most often happens, leaks out from underneath that which is hidden and provides the outcomes that the Europeans have tried so hard to avoid. Whatever the real numbers are, they are providing the consequences that result from their actuality.
The data out from Spain this morning should be one serious wake-up call for anyone exposed to Europe. The fourth largest economy in the Eurozone is getting hammered and for anyone that has doubted that they will need a full scale bailout; think again. The numbers are a disaster. One year ago the Central Bank of Spain was borrowing $71.53 billion from the European Central Bank. In the last figures available, July, the Central Bank of Spain was borrowing $530.8 billion (an increase of 86.5%) from the ECB either directly or through the Target2 funding which impacts the Bundesbank and Germany quite directly. In other words Germany is now at a huge risk which is not just their 22% ownership of the ECB but a direct and full risk of impairment or default by Spain in the Target2 funding provided by the Bundesbank.
It may come as a surprise to some of our younger readers, that the Eurozone, and its associated currency, is merely the latest in a long series of failed attempts to create a European currency union and a common currency. Three of the most notable predecessors to the EUR include the Hapsburg Empire, the Soviet Union, and Yugoslavia. Obviously, these no longer exist. Just as obvious, all of these unions, having spent time, energy, money, and effort to change the culture and traditions of member countries and to perpetuate said unions, had no desire, just like Brussels nowadays, to see these unions implode. The question then is: what happened after these multi-nation currency unions fails. VOX kindly answers: "they all ended with disastrous hyperinflation."