Key Events In The Coming Week

Tyler Durden's picture

In addition to telling everyone to short the euro and go long the dollar (wink) Goldman Sachs is kind enough to summarize what the recurring Eurocentric rumor-based headlines of the coming week will be.

From Goldman Sachs

This past week brought a powerful reminder to the markets of just how dovish key players at the Fed remain, with the FOMC statement essentially doubling the conditional commitment period for the Fed Funds target range and Chairman Bernanke sounding quite open to further unconventional policies if the recovery remains weak. The advanced Q4 GDP print on Friday played into a weak recovery, with a strong contribution to growth from inventories casting doubt over the strength of growth in Q1.

With the Fed once again signaling its dovish stance, and with overall FX positioning remaining very close to max long USD on our metrics, the dominant theme for the week continued to be a recovery in high-beta currencies against USD, a theme that has prevailed since the start of the year (Figure 1). Even with the recent rebound in high-beta FX, many of these currencies remain significantly weaker than their mid-2011 levels (Figure 2), so that there is certainly plenty of room for the recent rally to continue. In the wake of the FOMC, and with relatively positive developments in Europe ahead of this Monday's EU Heads of State summit, we are very much in this camp, and recommended three tactical USD shorts this week against EUR, CAD, and MXN.

The week ahead starts with the EU Heads of State Summit, where discussions will be focused on finalizing negotiations around the fiscal compact, where we think important progress has been made, not least by allowing individual countries to police each other's budget policies. Attention will also be squarely focused on Greece, where negotiations over PSI continue, in addition to negotiations between the Troika and the government. The IMF mission is scheduled to remain in Athens at least through Friday. The week also brings important bond auctions, starting with Italy on Monday (at 5- and 10-year tenors), followed by France and Spain on Thursday. Outside of Europe, key data include the slew of global PMI's on Wednesday. Consensus sees China's PMI slipping below the 50 threshold in January. We are slightly more cautious than consensus on the ISM, expecting an essentially unchanged reading. The week ends with the all-important nonfarm payroll release. We think nonfarm payroll growth probably slowed somewhat in January given less of a boost from favorable weather and seasonal factors. However, we think the pace of employment growth, combined with weak labor force participation, may still be enough to pull the unemployment rate down a touch.

Monday Jan 30th

Philippines GDP (Q4). We expect the Philippines’ Q42011 real GDP to grow 4.0% yoy, compared to 3.2% yoy growth in the previous quarter. Weak exports continue to weigh on growth, while resilient domestic consumption provides some buffer. Consensus expectations stand at 3.8% yoy.

EU Heads of State Summit

Italy bond auction

US Core PCE Price Index (Dec). We expect the year-over-year rate of core PCE growth to peak at 1.8% in this report, just below the Fed’s formal target for (headline) PCE inflation. Consensus expects an unchanged reading of 1.7% yoy.

Tuesday Jan 31st

Taiwan GDP (Q4). We expect Taiwan’s Q42011 real GDP growth to slow to 3.0% yoy, down from 3.4% yoy in Q32011 on the back of weak exports. Consensus is for 2.8% yoy growth.

Korea Industrial Production (Dec). We expect industrial production to rebound given the strong exports in December. Flash GDP data for Q42011, however, suggests that services output was weak. Consensus expects 4.1% yoy growth, down from 5.6% yoy in November.

Malaysia Central Bank Meeting. We expect Bank Negara Malaysia to keep the policy rate on hold at 3.00%. The Bloomberg consensus expectation is also for the policy rate to stay at 3.00%.

US Chicago PMI (Jan). We expect a reading of 61.0, below consensus of 63.0 and down from December (62.2).

Wednesday Feb 1st

Korea CPI (Jan) We expect headline CPI inflation to rise sequentially on the Lunar New Year effect and increases in medical insurance fees, but to grow less than in January 2011. We expect inflation to decline below 4.0% yoy in January from 4.2% yoy in December. Consensus expects a reading of 3.6%.

Korea Trade Balance (Jan) We expect January exports growth to slow to high-single digit compared to a year ago, given the weak 20-day exports data and the Lunar New Year effects. We also expect the trade balance to be in deficit on weak exports and seasonally-strong energy imports. Consensus expects export growth to slow to 1.2% yoy in January, down from a revised 10.8% in December.

Global PMI's (Jan) Consensus expects China's official PMI to dip back below 50 in January, to a reading of 49.6 from a December reading of 50.3. Consensus for the final Euro zone PMI is for an unchanged reading of 48.7 from the flash release for January.

US ISM (Jan) We expect the ISM manufacturing and nonmanufacturing indices to be roughly stable in January, reflecting ongoing moderate growth in economic activity. Our forecast is for 54.0 from 53.9 in December. Consensus expects 54.5.

Thursday Feb 2nd

France and Spain bond auctions

US initial claims (Jan 28) Consensus expects a reading of 370k, against the previous reading of 377k.
Bernanke testifies before House Budget Committee

Friday Feb 3rd

US Nonfarm Payrolls (Jan) We expect a reading of 125k, below consensus which is at 150k, and down from 200k in December. We expect the unemployment rate to remain unchanged at 8.5%, in line with consensus

US ISM Non-manufacturing (Jan) We expect a reading of 53.0, below consensus of 53.3 but up from the December reading of 52.6.

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Cult_of_Reason's picture

Greece Plans Orderly Exit of the Eurozone

Greece plans an orderly exit out of the Eurozone according to two sources close to Mr. Papademos, Greek Prime Minister, who spoke on condition of anonymity earlier today.

The sources confirmed that plans are ready to return to a legacy currency given the current circumstances and that such exit would be dealt with, quote “in as orderly a fashion as possible” unquote...

A Greek exit strategy will probably not be announced officially until early March when the EU finance ministers meet.

Ahmeexnal's picture

Key global event not mentioned:  MARGIN HIKE on PM markets.  Could happen as early as tomorrow.

Caviar Emptor's picture

could. But they like to remain smug that gold won't go higher until it does and then they panic

JPM Hater001's picture

So one time in college I had a nasty cold that morphed into a sinus infection and then eventually took over my chest.  I felt so bad I thought I would smoke some pot to feel better...

I was just sick and stoned.

That is Greece.

Manthong's picture

I think Italy has 33 billion to roll this week.. not exactly a stop at the convenient store for a carton of milk.

rocker's picture

Why don't they do margin hikes on Oil.  Oh Yeah, JPM and other banksters bought tankers of it and are holding offshore. Hmmmm.

disabledvet's picture

Here's another "Fleckenstein vs Gensler" that came out from my secret sources "at the Underground Fight Club scene."'s a little tough to watch:
word is "silver is still the winner here...

kaiserhoff's picture

All well and good for Papademos, but what does Mamademos have to say?;)

moonstears's picture

She's saying, loosely translated "better listen to the masters and make sure we retain our aristocracy, or no more sweet cootchie lovin' down by the Med for you!" I'd guess. (p.s. according to Wiki, Papademos attended know they'll fuckin' get a dollar pegged Drachma going)

prains's picture

Greek......orderly.......... equals oxymoron

dwdollar's picture

Why would Greece willingly leave the Euro? They get free money with little risk of inflation. It's a win-win for the Greek oligarchy. A new Drachma would hyper-inflate at the rate they spend.

Cult_of_Reason's picture

Why would Greece willingly leave the Euro?


Maybe because there is no political support for another Greek bailout in Germany anymore, and Germany now demands Greece surrenders its sovereignty?

Also, Greece is not getting any "free money" -- Greek bailout is new additional debt (not "free money").

CrashisOptimistic's picture

Well, that's true.  There is no support for that.

But Greece leaving the Euro is of no help to them.  In fact, if an attempt is made to boot them out, they could decide that the ECB bond holdings and the IMF bond holdings will move to the front of the default line, and the PSI holdings get their interest payments made.

Default is a powerful weapon in the world of swaps, so maybe the PSI holdings might be analyzed to maximize swap damage.

Then Greece can start asking for grants, not loans.

Greece is not without leverage here, no pun intended.


Caviar Emptor's picture

Think you're missing the point that they would make 1 Euro = 100,000 Drachma. 

CrashisOptimistic's picture

To whom?  No bond holder will allow redomination to drachmas.

It accomplishes nothing.  They owe XXX billion Euros now, and they would still owe XXX billion Euros regardless of creation of drachmas.


Cult_of_Reason's picture

No bond holder will allow redomination to drachmas.

Don't worry about that, the Eurocrats will make a "voluntary" redenomination offer that the bondholders cannot refuse.

CrashisOptimistic's picture

You do realize that the ECB and IMF are the primary bondholders?

Cult_of_Reason's picture

A lot of Greek debt is held by Greek banks and Greek pension funds. This domestically held debt will be converted to drachmas.

Private foreign holders will get ~70-80% haircuts (PSI + CAC clauses will be changed to force the reluctant hedge funds).

As far as ECB and IMF, Greece will try to get some debt forgiveness, and shorter-term will be converted into longer-term debt.

dwdollar's picture

They might if they're desperate.

There is really no incentive for any of the PIIGS to leave. There isn't much incentive for Germany to leave either. Germany is the "Top Dog" and the Euro gives them tremendous political leverage over Europe. It seems the biggest advantage is with countries like Finland or Austria. They pay out to the PIIGS but their political leverage is modest.

Cult_of_Reason's picture

The best option for Greece is to follow in Argentina's footsteps.

1. Default

2. Leave the euro back to the drachma, convert debt into drachmas, and print.

CrashisOptimistic's picture

Oil is life.  No one will sell them oil for drachmas.  Without oil, food doesn't get to shelves.  They starve.

There is no default in the new normal.  There is no international bankruptcy court to expunge debt.  Greece could declare default, and the bond holders can ignore them and keep sending them bills, AND refuse to lend any more.

Their deficit goes to zero instantly, and they can't pay for oil.  Starvation again arrives.

People have to learn that there ARE problems with no solution.  This is one of them.  Either they get bailed out WITH A GIFT (not a loan), or it's forever, in a country of 11.5 million people that burns 400,000 barrels of imported oil/day.

That's 44.4 million euros/day for oil.  16.3 billion/year.  5% of present GDP.

Cult_of_Reason's picture

Lessons From Argentina

 After the default and the January 2002 devaluation, Argentina's economy continued to contract for only one more quarter. By the second quarter of 2002, Argentina's economy began to grow and did not stop until 2009, when the global financial crisis made its impact felt there. The doom and gloom predictions of what would happen after default never materialized. Furthermore, after defaulting, Argentina no longer needed to access international capital markets, eliminating their stronghold on Argentine economic policy.

Cult_of_Reason's picture

As far as oil, Wiki cites different numbers for Greece.

Greece has 10 million barrels of proved oil reserves as of 1 January 2011. Hellenic Petroleum is the country's largest oil company, followed by Motor Oil Hellas. Greece's oil production stands at 7,946 barrels per day (bbl/d), ranked 90th, while it exports 181,600 bbl/d (57th) and imports 496,600 bbl/d (25th). In 2011 the Greek government approved the start of oil exploration and drilling in three locations within Greece, with an estimated output of 250 to 300 million barrels over the next 15 to 20 years. The estimated output in Euros of the three deposits is €25 billion over a 15-year period, of which €13–€14 billion will enter state coffers.

moonstears's picture

Cult, and peg to what currency, like Argentina did? (ding ding ding,... why the old USD of course!)

Cult_of_Reason's picture

Peg to USD would be ideal; but EUR peg is also possible if EUR survives (examples of EUR peg: Poland and Hungary)

disabledvet's picture

I'm sorry...did you say Hungary?

Cult_of_Reason's picture

Yes, Hungary pegged the forint to the euro in January 2000. Though, it abandoned the peg in 2008.

If you need another example that has not abandoned the EUR peg yet, use Denmark.

Nussi34's picture

There is no point for Greece to stay in the Euro. Eventually the Euro will dissolve with or without Greece.

fall's picture

That is exactly true. Because Greece would never leave the eurozone by itself and other countries can't force Greece to get out, they would just keep borrowing and borrowing (and obviously everyone knows that by 'borrowing' they really meant 'never paying back') and there was no problem. Thus other countries had to come up with a solution. Especially Germany is now starting to make more and more impossible demands. This way they can still borrow money but they'd lose more sovereignty every time. It would not be worth the trouble and they'd be forced to 'voluntary' leave the eurozone.

Of course this isn't realy a solution. It's marely choosing between the lesser of two evils. But hey, if they would have wanted a real solution, they should have started many years ago. It's too late for that now.

Ahmeexnal's picture

Greece is the oldest democracy in the continent.  Hell, they invented that racket.  Point is, they know going back to their own coin will be devastating.  But it will be A WHOLE LOT WORSE to stay put in a fascist feudal imperialistic pipedream (aka eurozone).

History will prove Greece right.  Once more.

disabledvet's picture

I agree. Which is why i recommend the American fascism instead. If its available of course. "No euro, no drachma." Period. And yes..."it is the only way." Cruise lines included please.

moonstears's picture

'Cause they've spent the cheapo Euros, and can't get more without pain. The "free money" of which you speak is gone.

edit: I see cult of reason answered a while ago, my bad

TorchFire's picture

MAYBE... in the end, the countries with the worst economies such as Greece (the ones that are cut loose and allowed to cruimble) will rise again as prosperous sovereign nations.  The cathartic result of being cast into the crucible of failure?  Reality revealed. Consequences which breed ingenuity, risk taking, and a business ecosystem unrestrained by suffocating regulations imposed by an overbearing state.  Should we wish for the "fall" of the U.S.? Perhaps freedom is waiting to be (re-) crowned.

Barry Lincoln's picture

Also, Facebook IPO announcement! Who else is excited? I'll be in at the top

pmm009's picture

Portugal 2 & 10 year rates are at the 15% plus range and they raise money on the first of February in a large Bill offering.  Why is Greece needing another $200 billion or so not killing the markets when the US cannot find that kind of financial support for its own economic purposes?

The FED would not have lent the ECB 99 billion without some understanding of what will be done going forward.  Clearly, equity investors believe that all this german bluster is just that, and that the ECB will continue to provide QE either through the front door or the back. 

Ireland has made fiscal progress, so whether Greece & Portugal stay or go it doesn't really matter.  The Germans will continue to hammer them until they get in line or leave.  The shit eating grin on J. Akermann's face all week at Davos makes it clear that the Germans & ECB are going to support the banks in core Europe come what may from a Greek and or Portugal exit.

CrashisOptimistic's picture

Greece exiting Euro is strongly bullish for Euro.

It is not clear, however, how he thinks this will help.  Why would his creditors let him redenominate his debt into drachmas?  They can just say no to that and the maneuver accomplishes nothing.

In fact, if Greece is no longer in the EU, there would be no bailout mechanism to stop the swap contagion.

This rumor is either bogus or someone musing.  It solves nothing.

ekm's picture

Stupid idiots we are.

Who cares about the events. Market is inexistent. Just the trading desks of primary dealers = plunge protection team. Once they run out of money market will go down.

Zgangsta's picture

The economy doesn't matter!  Newt Gingrich is promosing us the moon!

Rogue Trooper's picture

The Newt camp have already released a viral vid on you tube with what the space station and technology could conceivably look like,  Short on detail but the CGI is just unbelievable.  Who would have thought....

ekm's picture

ES is -62 right now. I think Plunge protection team has run out of money.

I'll be proven correct or incorrect tomorrow morning. They usually start at 4am.

michaelsmith_9's picture

Risk-on is likely to continue, although there is plenty of wood to chop for equities to get to higher levels.  There are multiple markets confirming the risk-on trend, which may last several months possibly.  Here is a look at the DX, SPX, CL, AUDUSD, and EURNZD.

ekm's picture

Sir, any risk on requires cash, cash, cash. Where is the cash coming from and who are the suckers to dump to?

All big trading desks are cutting down. Suckers have already put the money in savings accounts.

SchroedingersCat's picture

Meanwhile on the other side of the atlantic:

Switzerland's oldest bank ... Wegelin RIP. The US Fraud Factory is outta control. America's banks are the worst criminal organizations on the planet - they should get their own house in order. Disgusting !

disabledvet's picture

BIG story. Look forward to your continued reporting on the subject.

JPM Hater001's picture

Remember when Buck Rogers came across the dude from a high gravity planet and got his ass kicked and the dude was all like "on my planet I would be a librarian..."

Thats the world right now.  Forgetting that all gravity is relative.  From these heights the fall will kill anyone...and Greece is on the ledge.

moonstears's picture

So they'll peg this neo drachma to...the Yuan? The Pound? The Reale? The Dong or the mighty dollah? I think I know which. And Timmy can say he's "supporting the strong dollar policy". Buy the Au downtick with both hands, Zhers. JMHO.