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Is This Why Europe Is Rallying So Hard?
Spanish and Italian stocks are up 3% this week, European sovereign bond spreads are compressing like there's no tomorrow, and Europe's VIX is dropping rapidly. Why? Aside from being a 'Tuesday, we suspect two reasons. First, Hungary's decision to cut rates this morning is the 15th central bank rate cut in May so far which appears to be providing a very visible hand lift to risk assets globally (especially the most junky)' and second, Spain's deficit missed expectations this morning (surprise), worsening still from 2012 and looking set for a significant miss versus both EU expectations (and the phantasm of EU Treaty requirements). As the following chart shows, Spain is not Greece, it is considerably worse, and the worse it gets the closer the market believes we get to Draghi firing his albeit somewhat impotent OMT bazooka and reversing the ECB's balance sheet drag. Of course, direct monetization is all but present via the ECB collateral route and now the chatter is that ABS will see haircuts slashed to keep the spice flowing. What could possibly go wrong?
Equity markets are melting up...
The Hungarian National Bank became the 15th central bank to reduce the policy rate this month after Israel cut borrowing costs yesterday. Hungary cut the main rate by 25bps to 4.5%, having already lowered it by 100bps since the start of the year. As Bloomberg's Niraj Shah notes, the IMF has warned further cuts may weaken the forint and undermine financial stability.
Spanish Tax receipts and contributions to tax-funded welfare Social Security system through April fell 5.3%; and Interests paid by central govt to service debt rose 11.8% through April from year-earlier period. Spain may be the least likely of any EU country to bring its budget deficit below the region’s ceiling of 3 percent of GDP after the gap widened to 10.6 percent of GDP last year. The IMF forecasts the nation’s debt-to-GDP ratio will rise 7.6 percentage points this year and 5.8 points next year to 97.6 percent, the biggest increase in the euro area.
The European Commission may give Spain, Italy, France and Slovenia extra time to reduce their budget shortfalls tomorrow.
Charts: Bloomberg
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The bonfire of the fiat is accelerating... very simple explanation. Zimbabwe has been here before.
Almost forgot about that. There are some similarities.
Attempting to print out of debt leads to the same result. Debt saturation has arrived.
the whole world is up 1.5% today so it must be the macroeconomics / s
IBEX currently up 186 points, over 2.2% thats up 336 since Fridays low...incredible
A con market update!
Everyone can't wait to go all-in fully leveraged to get their hands on moar Clownbux!
that's an insult to clowns. they operate with far more integrity than benny. well, except for john wayne gacy and the murdering thing.
One thing this chart does point out, low business taxes doesn't create a thriving economy. Case study, Ireland.
Is anyone other than bankers and their government puppets employed in Ireland?
Apple, Google, Ford, etc., etc. employ lots of Irish lawyers and tax accountants to help them in their off-shoring endevors.
So, just more overpaid paper-pushers. Go long brewing companies and producers of distilled spirits then (actually one of the better performing parts of my portfolio).
Especially when there is no to little demand.
It just goes on and on. When the music stops. I already have my chair. Herding the sheeples to slaughter. Beyond words.
The whole situation reminds me of hotel guests constantly changing rooms in the hope of finding a better room. Little do they know that the hotel has been condemned and that they are in danger of being in the building when it collapses.
So all these fools are just trying to find a more comfortable spot on the Titanic as it is going down. Anyone collecting paper assets would be wise to keep rolling it into a spool. It will one day serve its purpose in the bathroom.
Please, just crash and get it over with.
DavidC
CNBC reporting 10% rise in home values. So did everyone's wages just go up? How is everyone paying for those expensive homes and the property taxes that will follow? Mark to fantasy lives on.
Keep kicking the can European Commission mofos.
Anyone suprised by this?
The lunacy never ends.
In the last days good will be called evil, and evil will be called good...
200 rate cuts later. . .so it is; so it shall forever be
You know, in Argentina they buy BMW's to store their wealth in as their currency devalues. The rest of the world parks their fiat in stocks.
What's so hard to understand about this? Conventional economic analysis went out the window a long time ago. Don't over-think it. It works until it doesn't.
last week when markets sold off at open, it quickly rebounded to green.
today markets surge at open and dont look back. only inching higher. when does this game end?
this economy is horrible, yet they keep pumping stocks so the everyday joe thinks the economy is doing well when they here dow 16000 and s&p 2000 all time high shit, etc.
its fucking bullshit
¨The European Commission may give Spain, Italy, France and Slovenia extra time to reduce their budget shortfalls tomorrow.¨
Realy, you think?
Thats like saying the Bernank MAY continue monetary easing QE!
Wow nothing but deficits throught the entire EU..... Where exactly is all this "austerity"?
I am sure you will see the austerity if you go to Greece!
it's going to be a long hot summer (even when it keeps raining)
Dijsselbloem just admitted the deteriorating economy in the Netherlands (now the middle to large corporations are in trouble) means the plan to pull everyone out of the muck by their own shoelaces has backfired. This because of the cuts, according to him. So the plan is to cut even more (of everything). What a smart plan. And in other news the banks are shrinking credit to corporations to an even lower amount..
That what this crisis was supposed to be, according to the geniusses, right? A liquidity crisis?
They chose the banks over the real economy and this is the result. 1+1=2
laughable