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Key Market Events In The Coming Week: More Promises, Headlines And Rumors; And A Very Critical Vote In Slovakia
Despite a violent round trip during the week, most assets finished last Friday (October 7) at levels that were quite close to those seen at the end of the previous week. In fact, the DXY managed to change less than 0.1% from one Friday's close to the next. Positioning indicators suggest speculative exposure remains virtually unchanged as well, and still stretched long USD. Outside G10 currencies, some very strong rallies have been recorded in EM space, with Latam currencies leading the pack.
During the week, the BOE surprised with more QE than expected, whereas the ECB delivered the strict minimum relative to market expectations – no rate cut, but a dovish assessment of the economic outlook, which opens the door for rate cuts before the end of the year. This came together with two new LTRO operations and a smallish covered bond purchase program. Markets were initially disappointed by the ECB action but the knee-jerk sell-off in risky assets and the Euro quickly reversed.
Last week's macro data was generally close to low expectations or slightly better. Most of all, the payrolls and the non-manufacturing ISM in the US suggested that economic momentum has now clearly stabilised at low levels.
Key this week will be the final missing EFSF votes, in particular Slovakia. The latest headlines over the weekend suggest the governing coalition has still not found a compromise and will meet on Monday again. The votes of 22 MPs for the SaS party in the 150-member Slovakian government are now the main stumbling block to bringing the effective EFSF lending capacity to EUR440bn and to increase the EFSF’s flexibility. The parliamentary EFSF vote is scheduled for Tuesday. On Monday, the second-to-last vote on the EFSF will be held in Malta.
Still linked to the Eurozone crisis, President Sarkozy and Chancellor Merkel agreed over the weekend on the need for bank recapitalisations and the need to find a “durable” solution for Greece. There has also been talk about a “vision” for the Eurozone and a promise for a plan by the November 3 G20 summit. Markets will likely focus on any additional details regarding the bank recapitalisation plan. Of course, Greek issues will remain important as well, in particular after Troika officials have been quoted in the media as criticizing the Greek Government’s determination to implement structural reforms. The results from the Italian bond auction on Thursday may increase the pressure on the Italian government to undertake more growth-enhancing structural reforms, as again demanded over the weekend from the next ECB President Draghi.
On the macro side, the second week of the month is typically quiet with US retails sales, the US trade balance and early reading of U Michigan consumer sentiment. In Europe we get more IP numbers.
Monday 10th
- Malta EFSF Vote
- Slovakia governing coalition meeting to find a compromise on the EFSF
Tuesday 11th
- UK Aug IP (consensus -0.2%mom, after 0.2% in Jul)
- Slovakia EFSF vote. This is the final of 17 necessary national votes to implement the EFSF changes
Wednesday 12th
- Eurozone Aug IP (consensus: 0.7%mom, after 1% in Jul)
- Japan Aug Machine Orders (consensus: 3.9%mom, after -8.2% in Jul)
- FOMC Minutes
Thursday 13th
- Italy Bond Auction
- US Jobless Claims (consensus 405k after 401k)
- US Trade Balance (consensus -$46bn after -$44.8bn)
Friday 14th
- Eurozone Sep CPI (will the preliminary reading of 3% be confirmed?)
- U Michigan Oct Consumer Confidence (consensus: 60, after 59.4 in Sep)
- US Sep Retail Sales (consensus: 0.6%mom, after 0 in Aug)
Source: Goldman Sachs
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Please find some balls Slovakia and say no...Actually do it... Say no!
Sadly a new vacation home and a promise of a lucrative lobbying position after you get thrown out of office can easily swing the number of votes needed to pass this thing. I'll be surprised if it doesn't "somehow" find enough votes, very pleasantly surprised but still surprised,
So true.....Im so sick of this shit... Fucking die already instead of this constant hopium for all.. My Financial puts for December and January are getting killed... Kick the can, kick the can, kick the fucking can....
I read Michael Lewis new book, Boomerang.
It'd be naive to believe you can mold the heterogenuous Southern EZ nations to the German model. There's simply too much of a cultural divide, and the Greek civil service is run like a mafia organization. A leverage EFSF will not solve the trade imbalances. Unless, Merkel announces a fiscal union, run from Berlin, I don't see how the imbalances will be fixed.
And if the EZ is effectively run out of Berlin, how will the EZ feel about a new Germanic overlord coordinating fical policies for their countries. Seems like a ripe ground for resentment @ German exceptionalism. Germans would be sowing the seeds of their own destruction. It'd be wiser to just leave the EZ.
"As he presided over the Maastricht treaty, that created the euro, the French president François Mitterrand is rumored to have said, privately, that yoking Germany to the rest of Europe in this way was sure to lead to imbalances, and the imbalances were certain to lead to some crisis, but by the time the crisis struck he’d be dead and gone—and others would sort it out. " -Michael Lewis, Boomering
< http://www.bloomberg.com/news/2011-10-09/bnp-socgen-may-seek-to-raise-fu...
< http://www.bloomberg.com/news/2011-10-09/bnp-paribas-denies-newspaper-re...
quick poll..
Don't mess with Slovakia.
Bitchez.
22 people about to become proud recipients of a boatload of (fiat) Euros. Or lose a loved one. Choice will be easy, unfortunately.
If Slovakia doesn't pass this it means that someone with even more power is moving for a crisis. Don't assume that the EZ leaders and bankers are the only players with skin in this game.
The Benefits of European Union
The new revenue cannidate will be welcomed to the community. New membership yields transfer of income to pay off delinquent EU country clubs members.
Slovakia will cave and the ponzi will continue.
I get worried when I hear the term "vision". It's a term used by management; they think it implies some sort of leadership, blissfully unaware that it indicates their hallucinatory break from reality.
On the menu for the G20 summit will be "a boil'd salad". You will find that all of the participants "ate plentifully of it".
http://en.wikipedia.org/wiki/Jimsonweed
SARK & MERK'S CHECKLIST::
*Enhanced Declaration of Vision and Shared Values
*New, Improved Mission(ary Position) Statement
*New Inspirational Logo
*Cart with wheels and Bright Red Velvet Drape to pull back
*Buxom generic European Babe to pull the Velvet Drape off
*Recorded tape of gasps and "ooooohs" from the "audience" to be played over loudspeakers at appropriate moment
*Checkbook (don't forget the checkbook)
Did I forget anything for the unveiling/rollout of the New Europe?
That should fix her!
Looks like Slovakia will be made to be the scape goat. I can hear it now:
GERMANY: Not our fault...
FRANCE: Not our fault...
Briliant.
Looks like just another week. its seems like every week is critical now a days.