headlines

• Market talk of a French sovereign downgrade continues to do the rounds – Unconfirmed
• German Unemployment Change (000's) (Dec) M/M -22K vs. Exp. -10K (Prev. -20K, Rev. to -23K)
• EU says the commission and member states have submitted amendments for new EU treaty

One of the biggest headlines that floated under the radar late last week was the announcement by Spain that its budget deficit would soar well higher than the expected 6% of economic output and instead be at 8% of GDP, which while ignored by the broader media was certainly noted by the EURUSD which tumbled on the news. Probably the most humorous response came from the neo-feudal viceroy of the PIIGS Olli Rehn who was displeased. From Reuters: "The European Commission regretted missed fiscal targets announced in Spain on Friday, but hailed the government's announcement of an austerity plan intended to slash the Spanish public deficit. "I regret the sizable fiscal slippage" to a deficit of 8.0 percent of GDP instead of 6.0 percent initially targeted, Economic Affairs Commissioner Olli Rehn said, while welcoming the new measures announced from Madrid." We in turn regret that a year after adopting so-called austerity, Spain still has not understood that it means cutting the deficit, not blowing it up. Because just like in Greece, sooner or later the Germans will come knocking and demanding every last shred of sovereign independence from its bevy of debt/bailout slaves. Unfortunately today's news will not help: in another piece of news that many hope slip under the low volume radar, the government just said that the revised number could well be re-revised even worse as soon as a few days later.

Continuing our tradition of listing what according to Zero Hedge readers were the key news events of the year for the third year in a row (2009 and 2010 can be found here and here), we present, as is now customary, the most popular posts of the year as determined by the number of page views, or said otherwise - by the readers themselves. So without further ado, here are this year's top 20.

China cut rates yesterday potentially as part of a globally co-ordinated central bank plan or co-incidentally because their economy was losing steam or both. I would bet there was communication and that may have impacted timing but with the weak PMI number China did what was necessary for China - as they always do. Much was made of the globally co-ordinated rate cut on USD swap lines. Any swap requires a minimum of 2 counter parties and since this plan had been globally "re-instated" or "re-affirmed" in September the market may be making too big of a deal of this global coordination.  This was largely cutting the cost of an existing series of global swap lines by 50 bps. It did not change the liquidity available to banks, just the cost. Currently it seems that only $2.4 billion is being used. It is not a bad step but no new liquidity is added (through I work under the assumption they will increase availability if needed) and it is impossible to cut unilaterally and would be pointless since as recently as September there was global agreement. Rumors that a bank was on the verge of failure seems overdone and changing this fee by 50 bps does nothing for that. Sadly, since the Fed is both independent and unaccountable there may be additional activities behind the scenes that we don't know about that may be supporting strong price action. More people feel forced to follow market moves based on the assumption that some people may actually KNOW something about future policy moves or existing but undisclosed actions. It is a rational reaction but does tend to exaggerate the moves and lead to quick reversals when no one actually KNEW anything.

This will probably piss off everybody in big banking, mainstream media and inter-marital analyst relations. I still want to be invited to ALL of the Wall Street Christmas parties, though :-)

It is completely irrelevant since nobody cares about economic data anymore, but it deserves a mention: today we get the CPI, industrial production and homebuilder sentiment.

Here is the latest installment in the tragicomedic drama that just. won't. end

• PAPANDREOU TO STEP ASIDE AS PRIME MINISTER; NEW PREMIER MONDAY
• GREEK PRESIDENCY STATEMENT SAYS PAPANDREOU WON'T LEAD GOVT
• GREEK PARTIES AGREE TO FORM UNITY GOVERNMENT, PRESIDENT SAYS

Lastly, why decide today, what you can put off until indefinitely:

• GREEK PRESIDENT TO CHAIR MEETING OF PARTY LEADERS TOMORROW

Most likely the outcome will be that predicted by To Vima hours ago, with PASOK's L-Pap in charge, and a New Democracy vice premier. In other words: meet the new boss - same as the old boss, only this time with the Fed's blessing.

Starting to feel lost in what is an interminable and constant barrage of rumors, lies, insinuations, speculation, and just broadly, headlines? Fear not: here is Reuters with what may be the most useful invention of the EMU collapse era: the intraday visual headline tracker.

While as usual only headlines will be market moving, today we get the always completely irrelevant and very much worthless October ADP report, followed by the FOMC statement and press conference this afternoon.

Nothing really new per se, just G-Pap reiterating, now that his meeting is finally over at about 2 am local, that the referendum will proceed as noted earlier, probably some time in January, and Europe will like it or leave it.

• GREEKS TO VOTE ON EURO MEMBERSHIP IN REFERENDUM: PAPANDREOU - BBG
• GREEK PM SAYS PARTNERS WILL RESPECT AND SUPPORT GREECE'S EFFORTS -RTRS

What? Or Else? And how does this mesh with the following headline from Bloomberg:

• Netherlands Will Try to Get Greek Referendum Canceled, PM Says

At what point do the crazy pills run out already?

It begins:

• EURO ZONE PLANS TO LEVERAGE EFSF BAILOUT FUND "SEVERAL FOLD", FINANCE MINISTERS TO DECIDE DETAILS IN NOVEMBER -- DRAFT EURO ZONE SUMMIT STATEMENT
• DRAFT EURO ZONE STATEMENT MAKES NO MENTION AT THIS STAGE OF ITALY'S REQUIRED BUDGET STEPS
• NO AMOUNTS SET FOR BANK RECAPITALIZATIONS

In other news, there will be absolutely nothing actionable following today's "ground-breaking" summit. There will also be nothing at all after the Cannes statement. Or any time after. Why? Simple - there is nothing that Europe can propose in a universe in which 2+2=4 that resolves its problems.

The market is shocked, shocked, that the "groundbreaking" resolution (in Barroso's words) due for today is now nothing but a mirage:

• EU Official Says Bank Heads Won’t Be at Summit Table Tonight
  
• EU leaders may frame agenda for more bank talks on bondholder losses in 2nd bailout
  pkg for Greece.                     
  
• Says IIF doesn’t entirely represent private banks

And the kicker:

• Says Greek debt swap would take several weeks

EURUSD now at the lows; its second derivative - stocks - will soon likely follow.

Over the next 24 hours expect many post of this nature:

• DE JAGER SAYS ITALY NEEDS TO TAKE EXTRA GOVERNANCE MEASURES
  
• GREEK BONDHOLDER LOSS WILL BE 60%, ANA CITES VERHOFSTADT SAYING

Liesman spin on how 60% losses is not a CDS trigger event coming in 10 minutes.

Time for European headlines. Because we haven't had any in about 3 minutes or so. Courtesy of Bloomberg, here is Angela Merkel doing her best channeling of Hank Paulson.

• MERKEL SPEAKS AT TRICHET FAREWELL IN FRANKFURT
  
• MERKEL SAYS EURO IS STABLE, HAS PROVED ITSELF IN TURBULENT TIME
• MERKEL SAYS IF THE EURO FAILS, EUROPE FAILS
• MERKEL SAYS 'WE SHALL NOT ALLOW' EURO TO FAIL
• MERKEL SAYS NEXT EU SUMMIT IS `NOT THE END POINT' FOR CRISIS

And most importantly...

• MERKEL SAYS NO 'MAGIC WAND' TO SOLVE EURO DEBT CRISIS
• MERKEL SAYS PAST ERRORS WILL NOT BE SOLVED IN ONE STROKE

True, many, many strokes will be needed. But what about the market which has already priced in not only the Magic Wand but the Quidditch match victory over Slitherin. What now?

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.