Nikkei

That the German vote to pass the second Greek bailout package would be problematic is an understatement. Even as German parliamentarians are expected to pass the latest (but certainly not last as the G-20 meeting over the weekend demonstrated) hurdle to fund the Greek rescue, new revelations out of Greece have come to light exposing the true degree of capital flight out of the country, spearheaded by none other than the country's own corrupt politicians. Kathimerini reports: "As a political outcry grew on Friday over the revelation that an MP had transferred 1 million euros out of the country in May when authorities were struggling to appease Greek citizens’ fears of the repercussions of a possible default on their savings, Finance Minister Evangelos Venizelos told Parliament that a significant number of lawmakers had moved sums in excess of 100,000 euros out of the country. Earlier, addressing a cabinet meeting, Venizelos had told fellow ministers that there are several public figures among the Greeks who transferred a total of 16 billion euros abroad over the last two years. According to research conducted by the Finance Ministry’s information systems department, 9 percent of this money ended up in Swiss bank accounts." As such, it is obvious why German popular tabloid Bild has called for German lawmakers to reject the Greek bailout: at this point the farce is arguably too much for everyone, and the situation is playing out just as predicted here back in July. Merkel is due to address the Bundestag at 3 pm local time, or in just over an hour. Those curious about the blow by blow, can follow the developments out of Germany at the following live blog by Bild.

While the bulk of tangential themes in Albert Edwards' latest letter to clients "The Ice Age only ends when the market loses hope: there is still too much hope" is in line with what we have been discussing recently: myopic markets focused on momentum not fundamentals ("It's amazing though how the market can get itself all bulled up and becomes convinced that we are the start of a self-sustaining recovery. And funnily enough there's nothing more likely to get investors bullish than a rising market"), short-termism ("One thing you can say for the market is that it has an extremely short memory"), and that so far 2012 is a carbon copy of 2011 ("One thing you can say for the market is that it has an extremely short memory. Let us not forget that the performance of the equity market so far this year is almost exactly the same as we saw at the start of 2011 (in fact the performance has been similar for the last 5 months"), his prevailing topic is one of hope. Or rather the lack thereof, and how it has to be totally and utterly crushed before there is any hope of a true bull market. And just to make sure there is no confusion, unlike that other flip flopper, Edwards makes it all too clear that he is as bearish as ever. Which only makes sense: regardless of what the market does, which merely shows that inflation, read liquidity, is appearing in the most unexpected of places (read Edwards' colleague Grice must read piece on why CPI is the worst indicator of asset price inflation when everyone goes CTRL+P), the reality is that had it not been for another $2 trillion liquidity injection in the past 4-6 months by global central banks, the floor would have fallen out of the market, and thus the global economy. In fact, how the hell can one be bullish when the only exponential chart out there is that of global central bank assets proving beyond a doubt that every risk indicator is fake???

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Riskier assets advanced today, as market participants reacted to yesterday’s FOMC statement, as well as reports that Greece is making progress in talks for a debt-swap deal. However despite a solid performance by EU stocks, German Bunds remain in positive territory on the back of reports that the ECB has ruled out taking voluntary losses on its Greek bond holdings but is now debating how it would handle any forced losses and whether to explore legal options to avoid such a hit according to sources. As such, should talks between private creditors and other governing bodies stall again, there is a risk that Greece may not be able to meet its looming financial obligations. Of note, Portuguese/German government bond yield spreads continued to widen today, especially in the shorter end of the curve.

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Just as certain as death and taxes, fading Goldman's FX "Strategist" has once again made everyone rich. Back on January 6 when the 0.000-batting FX guru said "With considerable downside risk in the short term, within our regular 3-month forecasting horizon, the key questions are about the speed and magnitude of the initial sell-off. If we had to publish forecasts on a 1- and 2-month horizon, we could see EUR/$ reach 1.20. In other words, we expect the EUR/$ sell-off to continue for now as risk premia have to rise initially." To which our response, naturally was: "In yet other words, if there is a clearer signal to go tactically long the EURUSD we do not know what it may be. We would set the initial target at 1.30 on the pair." Needless to say, following Stolper's recommendation, the EUR barely dipped further, and as of this morning has soared above 1.3000, helped not least of all by the record EUR IMM shorts we have been highlighting for weeks. With this, we now close our latest fade-Stolper trade at a profit of 317 pips. This is the 8th out of 8 closed and profitable "anti-Stolper" trades posted on Zero Hedge.

Macro news from Europe has refuted claims made last week that the ESM fund would be doubled to EUR 1tln, with a German spokesman commenting that the country is not of mind that ESM resources should be increased to that level. Discussions concerning the management of the EFSF and the ESM from German members of parliament have spurred talks that the funds could be run in parallel and even together in an emergency scenario. The ECB’s Weidmann has commented on his confidence in the Eurozone and the German economy, stating that current stagnation is temporary and that we should see a recovery in the Eurozone during 2012. Financial stocks have shown volatility this morning following comments from French and German Finance Ministers that banking regulations may be relaxed under the Basel III agreement, however this was later denied by the German Finance Minister.

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• Greece Running Out of Time as Debt Talks Stumble (Bloomberg)
• China Economic Growth Slows, May Prompt Wen to Ease Policies (Bloomberg)
• Spain Clears Short Term Debt Test, Bigger Hurdle Looms (Reuters)
• U.S. Market Shrinks for First Time Since 2009 (Bloomberg)
• IMF, EU May Need to Give E. Europe More Help (Bloomberg)
• Securities Regulator to Relax Rules on Listing (China Daily)
• Monti Seeks German Help on Borrowing (FT)
• Draghi Questions Role of Ratings Companies After Downgrades (Bloomberg)

UPDATE: ES leaking lower as Packers fans sell (and China's Shanghai Composite -0.8% at open and Hang Seng -1%)

Following EURUSD's modestly weak opening (though managing to hold above Friday's lows and inching higher), EURJPY has pushed to fresh new 11-year lows (and JGB yields at one-year lows). Asian equities are trading notably lower with Japan's Nikkei down 1.6% in early going (coming back a little now) and South Korea's Kospi down 1.1% so far. ES (the e-mini S&P 500 futures contract) opened lower, tried to get back up to Friday's close, failed and is now down around 6pts (at 1285) - still shy of where broad risk assets (CONTEXT) would expect - around 1280 for now - though AUD weakness (housing data bad not totally dire though carry being lifted), JPY strength (government comments on the flatness expected in Japan's recovery and safety flow) and Treasuries not open is undermining support for stock futures so far. The economically-sensitive commodities are leaking lower with Silver having given back its earlier gains and Copper down 0.75%, Oil is holding near $99 and Gold is down a smidge (and more stable than the rest) at -0.23% ($1635). The market's message is risk-off for now and we would expect Bunds to benefit (as JGBs are for now while corporate credit leaks wider) as without Treasuries open, where is risk capital going to flow.