- Schäuble View on Eurozone at Odds With US (FT)
- Juncker: Euro zone leaders, ECB to act on Euro (Reuters)
- German Banks Cut Back Periphery Lending (FT)
- Monetary Policy Role in EU Debt Crisis Limited: Zoellick (CNBC)
- Bond Trading Loses Some Swagger Amid Upheaval (NYT)
- As first reported on ZH, Deflation Dismissed by Bond Measure Amid QE3 Anticipation (Bloomberg)
- Record Cash Collides With Yen as Topix Valuation Nearing Low (Bloomberg) - but, but, all the cash on the sidelines...
- Greek Leaders Agree Most Cuts, Lenders Stay On – Source (Reuters)
- Chinese Investment in US 'set for record year' (China Daily)
While it would appear that all news is good news; good news (or no news) is better news; and old-news is the best news; here is your one stop summary of all the notable bullish and bearish events in the past seven days.
European markets started off on a quiet note with thin volumes as equities drifted lower and fixed income gradually made gains, however newsflow rapidly picked up as commentary from the ECB President Draghi picked up wide attention. The ECB President was very upbeat on the Eurozone’s future, commenting that the bank will do whatever is needed to preserve the Euro, fuelling the asset classes with risk appetite across the board. European equities as well as the single currency erased all losses and the Bund moved solidly into negative territory. As such, EUR/USD is seen comfortably back above 1.2200, with both the core and peripheral bourses making progress. In the wake of the moves, attention is particularly being paid to Draghi’s comment that if monetary policy transmission is affected by government borrowing, it would come within the bank’s policy mandate. As such, much of the focus now lies firmly on next week’s policy decision from the ECB.
'Things' appear to be hotting up in a couple of places around the world. While the Middle East's incessant instability only grows worse; the following clip from Stratfor sheds light on the 'discussion' that is occurring in the middle of the Pacific with the Chinese and the Phillipines over potential energy rights. Nothing to see here, move along.
It’s funny, I was worried about my Second Amendment rights just a moment ago, but now that the Council On Foreign Relations, a global governance think tank and inbred cesspool of despotic elitism, has explained the situation to me, I suddenly feel at ease… In preparation for the fast approaching UN summit on “international conventional arms trade” in New York, the CFR has published yet another disinformation piece skewing the facts and twisting reality to lull Americans into a state of apathy. Am I surprised that the CFR would rehash the talking points of the UN and declare uninhibited support for their worldwide gun grabbing bid? Of course not. The CFR and the UN are part and parcel of the same nefarious sea monster; each tentacle does its duty to rend sovereign ships asunder. However, such propaganda articles from establishment organizations do give us an opportunity to dissect and annihilate a host of lies and misdirections in one fell swoop. There may not be much sport in pulling apart the CFR’s poorly composed arguments, but, it has to be done…
Risk-off trade is firmly dominating price action this morning in Europe, as weekend reports regarding Spanish regions garner focus, shaking investor sentiment towards the Mediterranean. The attitudes towards Spain are reflected in their 10yr government bond yield, printing Euro-era record highs of 7.565% earlier this morning and, interestingly, Spanish 2yr bill yields are approaching the levels seen in the bailed-out Portuguese equivalent. As such, the peripheral Spanish and Italian bourses are being heavily weighed upon, both lower by around 5% at the North American crossover.
It has been a tempestuous week where good is bad, worse is better, but European news is to be sold. Here is your one stop summary of all the notable bullish and bearish events in the past seven days.
Consumers are paying an easy $35 dollars per barrel over what they would otherwise dole out for a barrel of oil if fund managers didn`t use the benchmark futures contracts as their own personal ATMs.
The latest development in yesterday's Bulgarian bus bomb explosion, is the identification of the alleged bomber. According to Times of Israel he is Mehdi Ghezali, "reportedly a Swedish citizen, with Algerian and Finnish origins. He had been held at the US’s Guantanamo Bay detainment camp on Cuba from 2002 to 2004, having previously studied at a Muslim religious school and mosque in Britain, and traveled to Saudi Arabia, Afghanistan, and Pakistan. He was also reportedly among 12 foreigners captured trying to cross into Afghanistan in 2009."
The first on-the-record comments, regarding the bombing in Bulgaria, from Israel's Netanyahu are not the most politically correct. His ire with the world's ignorance of Iran's terrorist-fostering position is very clear as are his threats and promises for retribution. Not good. And sure enough, WTI crude is spiking on this news to $91.75 (18% higher than its EU-Summit lows) back to 2-mointh highs. Via Bloomberg,
- *NETANYAHU THANKS BULGARIA FOR AID TO VICTIMS OF TERROR ATTACK
- *ISRAEL'S NETANYAHU SAYS IRAN, HEZBOLLAH CARRY OUT GLOBAL TERROR
- *NETANYAHU SAYS ATTACKS WERE PLANNED IN INDIA, THAILAND
- *NETANYAHU SAYS HEZBOLLAH ACTED AT BEHEST OF IRAN
- *NETANYAHU SAYS TOO DANGEROUS TO LET IRAN HAVE NUCLEAR ARMS
- *NETANYAHU SAYS ISRAEL WILL PURSUE, PUNISH TERRORISTS WITH FORCE
- *NETANYAHU SAYS WORLD MUST RECOGNIZE IRAN AS TERROR THREAT
Meanwhile, as a reminder, a 4th carrier group is on its way to the Gulf...
The smoke from the exploded bus carrying Israeli tourists was still billowing and yet Israeli PM Netanyahu had already declared that "Iran is responsible for the terror attack in Bulgaria, we will have a strong response against Iranian terror." Perhaps that statement was a little premature: as footage released by Bulgarian police indicates, the suspected suicide bomber is Caucasian, and was in possession of a Michigan driver's license, supposedly a fake one, but why anyone in Bulgaria would be carrying a fake Michigan ID is just a little confusing.
A week ago we reported news that Middle East veteran aircraft carrier CVN-74 Stennis was ending its brief sabbatical prematurely, and far earlier than previously expected, and heading right back into the field, er sea, of action. As Kitsapsun reported, "Bremerton-based aircraft carrier USS John C. Stennis is returning to the Middle East much sooner than expected. The Navy hasn't officially announced the new deployment plan for the Stennis, said spokesman Lt. Cmdr. Zach Harrell." The ship came home to Naval Base Kitsap on March 2 after seven months of launching planes into Iraq and Afghanistan. Generally, it wouldn't go back to the Fifth Fleet area of responsibility for four to five years, after a deployment to the Western Pacific and a maintenance period. But with Iran making threats, crew members learned Saturday they'll be leaving again in late August for eight months." We concluded that shortly, Stennis will be the third carrier accompanying Lincoln and Enterprise. As it turns out, a third carrier was already en route, and as of today, CVN 69 Eisenhower is either at the opening of the Straits of Hormuz, or just past it. That makes 3 aircraft carriers in the middle east, 2 in the Gulf and the Arabian Sea and one just off the coast of Syria. And technically, the LHD 7 Iwo Jima Big Deck Amphibious ship, which is also just off the coast of Iran region, makes three and a half. Which means that a 5th one (rounded up) - Stennis - is coming in 1-2 months. Good luck Iran.
The number of casualties in the Bulgarian bus explosion (reported earlier) is not even known yet, but Israel already knows just who is behind it:
- ISRAELI PRIME MINISTER SAYS SIGNS THAT IRAN BEHIND BURGAS BOMBING -RTRS
- Prime Minister Benjamin Netanyahu: "Iran is responsible for the terror attack in Bulgaria, we will have a strong response against Iranian terror." - Haaretz
- CARNEY SAYS OBAMA BRIEFED ON BULGARIA BLAST THAT HIT ISRAELIS
- CARNEY SAYS US NOT IN POSITION TO SAY WHO IS RESPONSIBLE FOR THE BUS ATTACK
And here we were wondering why crude spiked above $90 for the first time in months earlier today.
Update: According to BurgasInfo.com not one but two buses were blown up. Unclear if the second one was also carrying Israeli tourists.
According to Bulgarian press Sega.bg, and confirmed by other wire sources, a bus with 40 Israeli tourists was "blown up" at 5:30 pm local time at the local airport of the seaside town of Bourgas. Sega says that according to BTV "it is an assassination attempt." The bomb was located in the trunk of a white bus with Israel tourists from Israel who were en route to the seaside town of Sunny Beach according to an airport source. The mayor of the city, Dimitar Nikolov confirmed the news according to Sega. Furthermore, according to the airport's website, an Air Via flight from Tel Aviv landed at 4:50 pm local time. The shock wave was so large it also exploded two neighboringing buses located in the arrival area of the airport. The number of casualties is currently unknown, but at least three people are dead according to the local police, with dozens wounded. Sega adds "the flames are huge with three firetrucks on the scene and seven ambulances driving out charred people."
The Fed is caught between a rock and a hard place. If they inflate, they risk the danger of initiating a damaging and deleterious trade war with creditors who do not want to take an inflationary haircut. If they don’t inflate, they remain stuck in a deleveraging trap resulting in weak fundamentals, and large increases in government debt, also rattling creditors. The likeliest route from here remains that the Fed will continue to baffle the Krugmanites by pursuing relatively restrained inflationism (i.e. Operation Twist, restrained QE, no NGDP targeting, no debt jubilee, etc) to keep the economy ticking along while minimising creditor irritation. The problem with this is that the economy remains caught in the deleveraging trap. And while the economy is depressed tax revenues remain depressed, meaning that deficits will grow, further irritating creditors (who unlike bond-flipping hedge funds must eat the very low yields instead of passing off treasuries to a greater fool for a profit), who may pursue trade war and currency war strategies and gradually (or suddenly) desert US treasuries and dollars. Geopolitical tension would spike commodity prices. And as more dollars end up back in the United States (there are currently $5+ trillion floating around Asia), there will be more inflation still. The reduced global demand for dollar-denominated assets would put pressure on the Fed to print to buy more treasuries.