Pre-NFP Party Spoiled By Reality, Bundesbank And Another Japanese Earthquake
In a day in which it was all supposed to be about today's far weaker (because there is a perfectly good alibi in the face of Hurricane Sandy) Nonfarm payroll report, expected to print at 85,000, due out in 2 hours, once again it is the the "rest of the world" that stole the scene, starting with a reality slam out of Germany whose Bundesbank came out with revised forecast for German economic growth, which collapsed projected 2013 growth from 1.6% to a tiny 0.4%, adding that there are "growth projections risks to the downside" in effect all but sealing Germany's recessionary fate in the coming year, and send the EURUSD to overnight lows.
Specifically, the Bundesbank sees:
- German 2012 real GDP at 0.7%%, was 1.0%, and 2013 at 0.4%, down from 1.6%.
- German 2012 inflation 2.1% (2.1%), 2013 1.5% (1.6%)
- German 2012 unempl rate 6.8% (6.7%), 2013 7.2% (6.5%)
- Drop in germany economic activity possible in 4q 2012,1q 2013
- See German 2014 GDP +1.9%, infl +1.6%, unemployment 7.0%
- Bundesbank Weidmann: underlyng german econ health suggests fast recov
- EMU crisis, global slowdown main drags on german growth
- Risks to Germany growth projections to the downside
Sure enough, as if to confirm this forecast, moments ago German Industrial Production in October tumbled -2.6%, on expectations of an unchanged print. None of this should come as a surprise to our readers whom we have been warning for weeks and months that the European economic malaise is spreading closer to the core with each passing day.
What this means is that as we have been saying for months, slowly but surely the narrative that the ongoing German bailout of Greece is crushing the AAA-rated economy will become louder and louder until it is the German people themselves who demand a severing of all ties with Greece.
And speaking of Greece, there are simply no words to explain the stupidity of what may be happening there. Perhaps the following Bloomberg headline captures it best: Greece to Buy Debt It Already Owns to Reach Target. While this in itself is idiotically absurd, what it does mean, is that the debt buyback is going not quite as well as expected and hedge funds will likely demand even higher conversion prices. And who can blame them: the Eurozone rolled over and died the second someone demanded beneficial terms for hedgies, who are the only beneficiaries from the "third Greek bailout." And since all of this is orchestrated and funded indirectly by the ECB, another BBG headline that is not at all surprising is that "Draghi’s Go-to ECB Seen Risking Credibility Through Overload." What is amazing is that the ECB still has any credibility left.
There was more bad news out of Europe (NetherlAAAnds industrial production which also missed,
Elsewhere, a major driver of macroeconomic risk was a large Japanese 7.8 Magnitude earthquake hitting the northeast coast, and producing a moderate contained tsunami, although nothing like that from March 2011. The initial response sent the JPY higher briefly but since normalized after the quake was seen as being nowhere near as destructive as the last one. What it did, however, remind us is that despite any and all promises of imminent inflationary nirvana by incoming PM Shinjiro Abe, Japan's fate may be far more acutely determined by mother nature first and foremost. But at least the Shanghai Composite is still going through the phases of the latest dead cat bounce, rising 1.6% to close at 2062, well above the 4 year lows seen earlier this week.
But not all was bad news as Icelandic Q3 GDP rose Q/Q by 3.5%. And so the country that escape the Keynesian black hole tractor beam continues to grow by leaps and bounds as the rest of the insolvent world continues to stick its head in the rehypothecated sand.
And now, lean back, grab your popcorn, and wait as the media spin tsunami washes over everyone and proves how a sub 100K increase in November jobs is actually a good thing in a country which needs to grow by nearly 200K/month to offset the effect of 5 years of ongoing depression.