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Complete Summary Of What To Expect From Europe This Week

Tyler Durden's picture




 

While the short answer is "nothing", for those who wish to sound sophisticated in high society or while being interviewed on TV, here is the full breakdown of what to expect from Europe as we head into the latest European "end all, be all....forget all" summit this Friday, as well as the ECB's announcement on Thursday where consensus is for the adoption of dramatic monetary slash and burn practices. In summary from Bank of America: "Overall, because these meetings could fall short of making more concrete steps towards closer integration, they are unlikely to deliver more than a short term rally for markets, in our view, assuming communication is focused on delivering points for integration. Against this backdrop, we are concerned that markets may be somewhat disappointed though expectations may not be very high." Then again, disappointing is the new black, which also happens to be the new Christmas rally.

Firs, here is the definitive summary to keep through Friday, then to be promptly discarded:

Next, here is BofA's summary of the key European events toward the end of the week:

ECB 8th Dec meeting and around: from liquidity to bond purchases

There are three options the markets appear to be expecting: interest rates, bank funding and support to bond markets. We think the ECB meeting will focus on two sets of decisions only: interest rates and banking support, which could disappoint. Whereas interest rates decisions are necessarily discussed during a monthly ECB governing Council, liquidity operations and associated  collateral requirements may be decided outside of the interest rate meeting.

  • We expect interest rates to be cut by 25bp at this meeting, on the back of revised projections that would potentially include a recession or very low growth at least. We expect inflation projections to be shaved as well. This will likely open the door to further rate cuts and we are projecting rates to go down to 0.50% by the February meeting, in 25bp increment. As a risk, we see an increasing risk of a 50bp cut.
  • We expect an extension of the long-term liquidity operations as well as a relaxation of collateral requirements along the lines of the 2008/09 ECB actions to “restore bank funding so that they can proceed with their lending role”
  • We do not expect a strong announcement of full fledged QE with a nominal value target as was the case for the UK and the US. However, ahead of the EU Council and on the back of the Eurogroup (which the ECB President usually attends) there could be some hints at stepping up the SMP if necessary, in order to “restore transmission mechanisms of monetary policy” (see ECB QE piece). That said, provided EU Heads of State reach an agreement on and enhanced budgetary  framework at the 9 December meeting, the ECB could increase significantly its SMP, with a view of providing stronger support to the sovereign bond markets. In  our view, repetitive weekly purchase of about EUR20bn would send a strong supportive signal.

EU 9th December heads of state meeting

The agenda for this meeting bears a lot of anticipation but we are concerned it might fail to meet expectations, along the lines we described in the introduction. There are three key issues to be debated: strengthened fiscal framework, six-pack and governance. Financial markets expect fiscal centralisation at minimum, steps towards integration and Eurobonds, as a concrete expression of Euro area governments to the union. We believe there should be an agreement on fiscal  centralisation, but only a rather vague agreement on proceeding with Eurobonds in the future.

Euro area authorities have to deliver swift budgetary procedure reforms suggesting some form of integration while not necessarily requiring Treaty changes that need extensive national ratification procedures. These are incompatible objectives. Integration requires transfers of sovereignty and therefore important Treaty changes. Given the current economic school of thought across the Euro area, we think an agreement will be achieved on a minimum common factor, which will fall short of such federalist progress. We believe it is only in the future and after several years of progressive steps that a Eurobond could come into force. Decisions are likely to focus on:

  • More power to the European Commission for supervising national budgets. The Commission should be put in a position where it can deliver an assessment over all Euro area countries’ budgets, ahead of presentations to national parliaments. The Council, for opposing a Commission’s decision will have to vote with qualified majority. As well, some countries would like an ultimate sanction through the European Court of Justice in case of noncompliance with the Commission recommendations. This whole process would require minimum Treaty changes. However, they could disappoint markets through their lack of breadth.
  • There will also be some discussion on including structural reforms in the surveillance procedure, the so-called six-pack package, which again is unlikely to trigger a sharp market reaction, in our view, as structural reforms do address the Euro growth problem but in the medium term only
  • More concrete steps towards fiscal integration and a Eurobond are unlikely in our view for the moment. At most, we should get some talks about the above procedures paving the way for enhanced cooperation and maybe Eurobond down the road, but over the longer term and not as immediate response. This could  disappoint markets as it fails to provide concrete elements about a long term end-game vision.

Overall, because these meetings could fall short of making more concrete steps towards closer integration, they are unlikely to deliver more than a short term rally for markets, in our view, assuming communication is focused on delivering points for integration. Against this backdrop, we are concerned that markets may be somewhat disappointed though expectations may not be very high.

 

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Mon, 12/05/2011 - 09:37 | 1946222 Oh regional Indian
Oh regional Indian's picture

Complete summary: Mooooooooooooooooore Bullshit!

Good summary, I do believe. but this 9th, then the 16th, 19th, 21st, 25th... all charged dates this year. Slippery slopes. 

ORI

/the-plan/

 

Mon, 12/05/2011 - 10:08 | 1946282 TruthInSunshine
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I'm no prophet, but I do like profit, and there are three nations who have not been often (relatively speaking) mentioned in the Main Lame Ass Stream Media that warrant far more discussion because they either have some of the highest real debt to GDP/GNP levels of any nations AND/OR have some of the largest aggregate toxic debts outstanding emanating from government banks (i.e. nationalized zombies) and private or quasi-private banks in the world AND/OR have some of the highest levels of misallocated capital investment and dislocated markets that go along with such gross misallocations of capital.

Two of the three are in Europe:

1) The U.K. certainly meets the first two criteria above, with the highest % of debt to GDP of any nation, as even stated OFFICIALLY (1000% to GDP) AND toxic loans galore, with many more going south as their housing bubble has yet to pop in earnest as of yet - but it will;

2) France, which like the UK, has a massive debt to GDP ratio as stated in OFFICIAL terms (and what they're not disclosing officially is truly frightening, much like the U.S.), along with the epic levels of toxic loans still just floating out in animated suspension, like Wile E. Coyote who ran off the cliff - legs still moving furiously, catching air; and

3) China, which Bangs Dae-Ho on the 2nd and 3rd criteria above, and hard. We're seeing a genuine slowdown in Chinese manufacturing, caused by the delerium tremors in the U.S. and EU, which is now starting to cannibalize their domestic property market and float to the water's surface all the HAZMAT level loans on regional Chinese bank and PBOC balance sheets, caused by a central planning wet dream party that went on for the last 10 years, where trade surpluses were shoveled into the most inefficient and bizarre domestic stimulus that even Fellini would have imaginative difficulty in besting (after dropping acid).

Mon, 12/05/2011 - 10:23 | 1946346 Vergeltung
Vergeltung's picture

+1 for the Dae-Ho referrence alone!

Mon, 12/05/2011 - 09:35 | 1946224 wolfnipplechips
wolfnipplechips's picture

Going down, Bitchez!

Mon, 12/05/2011 - 09:41 | 1946225 bob_dabolina
bob_dabolina's picture

Someone needs to tell Europe that the way out of this debt problem is to double down with more debt. And eat your peas.

-Obama

...the good news about that plan is that the unemployment rate goes down. The bad news is that there won't be a labor force.

Mon, 12/05/2011 - 10:03 | 1946264 SheepDog-One
SheepDog-One's picture

And also to start lying better about unemployment, GDP, etc...its ALL GOOD in the age of the Maniacal Monetizers.

Mon, 12/05/2011 - 09:39 | 1946226 lizzy36
lizzy36's picture

Equity markets are dumb. 

Shanghai dropped over 1% again last night. It is about 30 points off its YTD lows.

But #btfd as apparently Santa's workshop is providing lots of toys (don't worry if 50% of them end up on the island of misfit toys).

Mon, 12/05/2011 - 09:42 | 1946233 firstdivision
firstdivision's picture

Sadly, the market will not wake up until Europe admits failure or when Q4 results are released.  While traffic as stores will be up, most of the sales were on items that the store lost money on.  Retail sales will be flat YOY at best.

 

 

Mon, 12/05/2011 - 10:10 | 1946293 SheepDog-One
SheepDog-One's picture

Even sadder, theyll pull the rug out from equities or 'wake up' when they decide it serves them best, and it will probably be on a big up day too.

Mon, 12/05/2011 - 09:42 | 1946232 NEOSERF
NEOSERF's picture

More of the same but the market has already started rewarding them...short of an October downdraft, the Europeans have been masterful in headline misdirection and I expect more of the same...Dow 13K by January...

Mon, 12/05/2011 - 09:58 | 1946235 firstdivision
firstdivision's picture

OT: This was an LOL article. http://www.bloomberg.com/news/2011-12-05/no-lost-decade-for-s-p-500-as-market-value-bias-masks-66-rally-since-2000.html

Take inflation into account and it was quite a pitiful decade.

WTI/Brent are looking forward to massive sanctions against the 4th largest crude producer.  This is bullish for the consumer.  I have noticed that gas prices haven't seemed to keep pace with crude prices in my area. 

Mon, 12/05/2011 - 10:01 | 1946258 AngryGerman
AngryGerman's picture

what a piece of BS!!

this sums it up: "“It was only a lost decade if you anchored on equities as your core holding and you relied on cap-weighting [..] It was a lost decade for most investors, but it didn’t have to be."

bb has one of the most ignorant team of "journalists" out there. why do they even bother writing such pieces. what a bunch of shitheads...

everybody who can read a normal chart understand that the last 10 years where completely lost for the public. and if you go back to 1998, there you have it.

CONVERT ALL WEALTH INTO BONUSES BITHEZ! MAKE BANKSTERS RULE THE WORLD!!

 

Mon, 12/05/2011 - 09:43 | 1946236 Ramboy
Ramboy's picture

This is a european jackson hole 2010 and subsequent QE.  Only masochists short

Mon, 12/05/2011 - 09:44 | 1946237 bob_dabolina
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MetLife: Exposure To Greece $377M, 'A Very Manageable Number' [Dow Jones]

uh huh...100% writedown on $377M is, uh, $377M. Very manageable indeed.

Mon, 12/05/2011 - 10:04 | 1946266 GMadScientist
GMadScientist's picture

It's easy when the $377M is other people's money (be they depositors or taxpayers).

Mon, 12/05/2011 - 09:45 | 1946238 fonzanoon
fonzanoon's picture

What the hell is going on in India with the Rupee?

Mon, 12/05/2011 - 10:11 | 1946294 Oh regional Indian
Oh regional Indian's picture

Those software companies, paying those bloated salaries need one of two things to survive. Weak Rupee or Strong Dollar.

Dollar is still refusing to show it's hand re. the final swan dive before the plunge.

So the rupee is kept weak, weak protestations from Central Bank notwithstanding.

ORI

Mon, 12/05/2011 - 09:48 | 1946240 pmcgoohan
pmcgoohan's picture

Both Bulls and Bears now seem to be expecting a santa rally off the back of Euro optimism.

It's beginning to look a bit too obvious to be true.

Mon, 12/05/2011 - 09:51 | 1946244 Sudden Debt
Sudden Debt's picture

Name 1 EU meeting where they constructively solved a problem... any problem.... don't worry... I've got time....

 

Mon, 12/05/2011 - 09:57 | 1946255 bob_dabolina
bob_dabolina's picture

The reason Merkel's diet wasn't working was solved by Sarko in the 14th crisis summit I believe

"says she is on a diet and then helps herself to a second helping of cheese."

http://www.npr.org/2011/10/29/141823116/pass-the-cheese-hold-the-leader-appearance-jokes

That's all I can think of.

Mon, 12/05/2011 - 10:05 | 1946270 GMadScientist
GMadScientist's picture

Yalta.

Mon, 12/05/2011 - 09:53 | 1946246 I am Jobe
I am Jobe's picture

woof woof, going nowhere. Just floating in shit. Can we have hot babe pictures instead. This Euro crap is getting tooooooo fucking old.

Mon, 12/05/2011 - 09:55 | 1946250 Tsar Pointless
Tsar Pointless's picture

"Are there any adults left in the room?"

I know we've all seen somebody make that comment before online, but to be blunt, why should there be any adults left in the room if there are barely any adults left in the world?

I was watching our local Pittsburgh CBS station this morning, and upon completion of the sports segment - in which we giddily learned for the 1,000th time that the Steelers beat the Cincinnati Bengals yesterday - the weather forecaster came on and gleefully spouted that seeing those highlights must surely put a spring (or a hop or something or another) in our steps this morning.

Yes, glorious day indeed!

Very few adults, just many large children.

Mon, 12/05/2011 - 09:57 | 1946254 Jim in MN
Jim in MN's picture

Cue 'I've Got You, Babe'

Mon, 12/05/2011 - 09:56 | 1946252 Jim in MN
Jim in MN's picture

A key insight from this morning's business radio 'Euro crisis roundup':  There appears to be NO signature musical theme for Belgium.  But, I made up a rumor that this musical deficit crisis will be addressed at this week's critical meeting/summit/weinerfest.

Allah be praised, Europe is saved!  Er, wait, that cheer is still kinda 'up and coming' isn't it....Hoorah for the diverse and happy peoples of the EuroGroan!  Um, we'll get back to you on the cheer. 

Just STFU and BTFD.

Mon, 12/05/2011 - 10:02 | 1946260 AngryGerman
AngryGerman's picture

why no jingle for belgium? pedobear has his day off

Mon, 12/05/2011 - 10:08 | 1946285 GMadScientist
GMadScientist's picture

The Caliphate thanks you for your business.

Mon, 12/05/2011 - 10:07 | 1946277 SheepDog-One
SheepDog-One's picture

Perfectly good reason to pre-pump ES...there will be NEWS Friday! 

Mon, 12/05/2011 - 10:16 | 1946328 Everybodys All ...
Everybodys All American's picture

Hey, believe it or not Jon Corzine's Italian debt trade is now working. That in essence says it all. The stock market has become so untrustworthy even the most insane trade works out.

Mon, 12/05/2011 - 11:44 | 1946642 Odin
Odin's picture

I really don't see Europeans giving up their sovereignty without a fight...

Thu, 12/29/2011 - 08:09 | 2018615 sampak101
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I really like your way of expressing the opinions and sharing the information. It is good to move as chance bring new things in life, paves the way for advancement, etc.
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