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European Stocks Dump, Reverse Gains; Demand Moar From Draghi
For a few brief minutes this morning, the world celebrated Mario Draghi's 'surprise' rate cut as just the medicine that an all-time high stock market needs to go even higher. European stocks popped champagne-like (with Italy and Spain jumping 2 to 2.5% on the news), EUR collapsing, and peripheral bond spreads dropping notably. However, as he began to speak and it was clear that growth is not there, deflation is a real risk, and - most importantly - there will be no LTRO anytime soon, market reversed and did not look back. It seems, as JPM warns, an LTRO is no longer likely early next year, and the market appears to be disappointed by that. Of course a few more down 2% days (4% drop from highs) and we are sure Draghi will find a way to unleash more...
And EURUSD retraced Fob 61.8% of its Draghi losses...
As JPMorgan notes,
We also think that an LTRO is no longer likely early next year, given that the full allotment has been extended to mid-2015. More likely is that the ECB will, at some point, enhance this by offering a few 6-9 month LTROs to ease the transition from the three-year operations.
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2%-3% drop will be all it takes for Draghi to 'do whatever it takes' tomorrow to lift stawks back up.
Europe is in deep shite. And we are next in line behind them and Japan. The alert among us will finish preparing in the interim.
During the Great Depression, European banks were the first to fail. How's your boat doing, Chen?
I believe the collapse was traced to a.....tada!... Austrian bank run!
Trying to link the mismanagement of one Austrian bank to try and discredit the entire School of Austrian Economic thought is really lame . . .
-30-
I certainly wouldn't be putting money (not even fiat) on who is the shiniest turd in the pile, and I suspect the UK miracle "recovery" and recent housing "bubble" is a smoke screen for an early ramping up of interest rates. Financial repression is a bitch isn't it.
Anyone in the UK who really believes inflation is running at 2.7% must be either brain dead or washed.
75 oz Ag, 0.5 oz Ag
Socialize losses and privatize profits is still valid no matter what happens.
Ole!!!!!!!
Shot the fucking zombie and it just keeps coming!
Soar on rate cut, fall on sell the news and Twitter euphoria / exhaustion, now US markets start the miracle recovery with Europe closed.
And as the roller-coaster rides on, gold stays down, under Ben's thumb ...
Tyler,
speaking of going crazy, how come you haven't covered Rand Paul's meltdown and complete mishandling of the plagiarism charges?? Blowing up at your hometown press is very presidential.... Not.
http://www.politico.com/story/2013/11/rachel-maddow-rand-paul-plagiarism-accusations-99516.html?ml=tb
--------
In other news ---Rand Paul wrote a "new" book----it's title-----COPYRIGHT SHRUGGED
(Admittedly stolen from elsewhere but too good not to pass on)
HuffPo site is open, Flak.
You haven't been missedd here, so why not go back home.
Awww....
Sorry you can't handle anything but an echo chamber....
Just not interested in playing two party politics.
They are the same Statist party if you hadn't noticed.
Do a little research on it, you think you're good at that, though its doubtfull
from your opinions.
I may be guilty of many things but the inablility to make an argument without relying on a strawmen ain't one of them...
Rand Paul showed that he doesn't have the right stuff... very simple...
Now crawl back into your little bubble and deal with it....
when the prez is a lying thief who murders and spys on everything nobody gives a shit a t didnt get crossed
So did you feel the same way about Bush?
Or just the colored fellah?
Be truthful...
Whatever Wall Street wants they will get.
Central Banks will just take from the taxpayers.
Socialize losses and privative profits is alive and well.
I think it was more a knee jerk reaction to the antics of the S&P. The UK and Europe are always paranoid that the US markets will tank when UK/Europe has closed. In fact I always thought you Mercans were taking the piss by selling off at market open and then buying back bigtime once the UK market was closed.
meanwhile in Scamerica, the /ES going straight up since 11:30am. Some things never change.
0.25% rate cut should translate into what, at least 20% more bank loans to eager and qualified small business applicants in Greece, Spain and the rest of the Socialist democracies. This is great news...for EU bank bonuses.
I thought raising rates meant an economy was doing better.
So the European recovery is "in" but Draghi is lowering rates?
Why doesn't the FED just set the prime rate at a healthy 5% and end QE?
If "markets" aren't dependent upon central bank interventions why are central banks still intervening?
Hmm...
The economy is indeed recovering, but the ongoing recovery must be carefully managed and assisted ;-)
Draghi, fuck you! Listen, it does not take a genius with a masters in shitnomics to understand that Draghi would LOWER interest rates today. I am "boots on the ground" and am witnessing the great depression first hand. This central ass banker WILL lower interest rates in March 2014 and why? There are a few countries coming out of the "Troika" bailout program and they will need MOAR free cash thrown there way. This drop in interest rates manifested itself as expected because Ireland is to "exit" (LOL) the bailout program in December (LOL to infinity with this one). Next is Portugal in 2014. We have a full out deflationary cycle in Europe and I can say with certainty/belief that Draghi WILL throw negative interest rates by March 2014. Euro banks are broken, period. There is absolutely no doubt that there WILL be some bank failure and when that happens it will be a domino effect. NO, this is not fear mongering.
Hedge accordingly ... with the shiny yellow stuff ;)
I've got a possible Slovenian bank failure on the radar. They've just had DieselBoom there performin' a new round of new and improved stress tests, results of which were kept private. That, I guess, could be the first domino.
Who will be next???? The race is on now...I bet Japan announces a few more trillion now...its working for Toyota..why not Yen when you can Yen...what say Yuan????
What a prick he is - the entire European economy, the entire manufacturing base, the homes, the infrastructure, the schools, roads, cars, I don't think it would be stretching it to say the existence of Europe, maybe even the physical earth it rests on, depends on him to say the right thing, and he just can't do it. Fuck him, maybe it's time to get a more powerful central banker - one who's up to the responsibility.
Market reaction is just insane.
These people would walk down the street and if they hear someone yell "call the police" and another person say, "they're on their way", they would be as happy as pigs in shit because the police are on their way. They never even think about why the police were needed.
Germany, the driver of growth in the EU (supposedly);
Commerzbank on the rollback of German labour market reforms?
"With a minimum wage and more regulation of
temporary work, Germany should continue to roll back the Agenda reforms. This per se
lowers the long-term growth prospects of the German economy."
Deutsche Bank on the Minimum Wage.
"The current negotiations between CDU/CSU and SPD towards forming a gov-ernment point to the implementation, for the first time, of a country-wide mini-mum wage of EUR 8.50 per hour. We estimate the subsequent employment losses at between 450,000 and 1 m. Quite paradoxically, given the proponents’ intentions, aggregate wage income could actually decline, since the net destruc-tion in jobs could more than offset the increase in wages per head."
Rent Control
Chancellor Angela Merkel’s conservative CDU party and the left-of-centre SPD are working on a coalition agreement following the September general election, with the aim of forming a ‘grand coalition’ government before Christmas. The parties this week agreed on a plan to limit rents on new lettings in tight German housing markets to 10% above comparable local rents (Mietpreisbremse)
But a new study on the German property market by the IW Institute in Cologne warned that caps may end up aggravating the supply-and-demand imbalance by curbing investor appetite for real estate, and slowing the construction of new apartment buildings.
"International experience shows that the withdrawal of investors from the market for rental apartments can have negative consequences for renters," the institute said.
The message echoed that of the German central bank, which in a separate report released on Monday said housing prices in some cities looked overvalued but cautioned against trying to contain this development with rent controls.
"The Bundesbank is opposed to restricting the amount by which rents can be increased," it said. "Further robust growth in the construction of multiple-family dwellings can only be expected for as long as investors continue to see enough yield potential in the buy-to-let market." (Bundesbank).
http://www.safehaven.com/article/31717/the-ecbs-tough-balancing-act-bubbles-vs-deflation
Today, a small group of central bank chiefs can meet in private and wield unprecedented power over global markets, economies, and wealth distribution. They are held accountable to the ruling politicians that in most cases have no respect for the principle of sound money. Instead, in Europe, the UK, Japan, the US, and elsewhere, central bankers have become intricately linked to monetizing government debts, and financing the expansion of the welfare state. As such, disciplined and independent central banking, a cornerstone to any hope for sound money and credit, has been relegated to the dustbin of history.
Central banking, - ostensibly designed to combat high levels of inflation and promote economic growth, while overseeing the stability of the banking industry, has instead, morphed into technocratic planning boards that are constantly involved in rigging the value of the financial markets. Their principal modus of operandi is to encourage risk taking in the local stock markets, through massive injections of ultra-cheap liquidity. However, the result isn't better economic conditions, but rather the expansion of massive bubbles in various financial markets. In turn, central bankers have widened the wealth gap between the owners of equities, and the rest of the struggling population whose wages are sliding backwards, and is increasingly seeking out assistance through welfare programs.
Historically, the value of the stock market reflected the dynamics of the local economy, and would influence the social mood of the populace. A stock market that is booming would signal an up-and-coming economy that would be followed by increased business investment and the creation of good paying jobs. Rising share prices boost the fortunes of about 10% of households in the country, and triggers a greater propensity to spend for goods and services - otherwise known as the "trickle down" effect. Therefore, keeping a constant vigil on the behavior of the stock market, - has become the raison d'être of central banks.
In earlier times, stocks traded on the local stock exchange used to track or even anticipate the nation's business cycle. But that reliable role as a leading indicator began to seriously break down after the financial crisis of 2008. Since then, because of the hallucinogenic effects of "quantitative easing" (QE), - stock markets are no longer reflections of the health of the local economies or forecasting mechanisms of the business cycles. Instead, they are just slices of ownership in specific companies that are unreliable gauges of anything but the underlying strength of the companies they represent, their dividend payments and buybacks, and the schizophrenic mind-set of the traders who buy and sell the shares.