With only 3 of 70 economists surveyed by Bloomberg expecting a rate cut at tomorrow's ECB press conference, Credit Agricole's Frederik Ducorzet suggests seven signals to watch for from Draghi that could signal ECB easing ahead. Crucially, as BofAML puts it, "further euro appreciation is a problem, particularly for the periphery," and with empirical Phillips curves in hand, there is little room for further compensation via wage reduction. In other words, if Draghi stands pat (or doesn't offer up some sacrificial forward guidance hint of easing being likely), the drumbeat of social unrest in the periphery will grow ever louder.
"Just When Consensus Thinks Europe Is Exiting The Crisis" Or Why You Can't Handle The Truth About EuropeSubmitted by Tyler Durden on 11/04/2013 18:55 -0400
... but for those who can, and wish to see beyond the propaganda of the Eurozone's unelected leaders, here is Natixis with a candid, honest summary of Europe's sad, "unsustainable" predicament.
The German election is over and the confrontation over the US debt ceiling has ended, so event risk should be minimal, right? Not so fast, UBS' Mike Schumacher warns - plenty of pitfalls could trip markets. Forward-looking measures of 'risk' are beginning to show some signs of less-than-exuberance reflected in all-time-highs across all US equity indices and if previous episodes of 'low-vol' are any guide, the current complacency is long in the tooth... no matter how 'top-heavy' stocks become; bloated by the flow of heads-bulls-win-tails-bears-lose ambivalence...
The two leading economic of the developed world are now engaged in an open pissing contest. Will anyone win, or will everyone lose? And will Germany offer Edward Snowden asylum as a result? Can US foreign policy be even more screwed up? Find out inside.
Europe Stuns With "Surprising" Record High Unemployment Print, Inflation At 4 Year Low; Euro TumblesSubmitted by Tyler Durden on 10/31/2013 06:35 -0400
Those following the Euro FX pairs saw a plunge at 6 am Eastern, when Eurostat released the latest Eurozone unemployment and inflation statistics. They were, in a word, abysmal. After the August unemployment data finally saw a modest drop forcing many to announce the end of the European depression, not only did the the September number revise the August print from 12.0% to 12.2%, a new record high as 73,000 thousand people became unemployed, but more importantly made the September unemployment rate 12.2% as well following another 60,000 Eurozoneans losing their jobs, effectively meaning that for all the talk of a European recovery, its unemployment rate keeps hitting new all time record highs every single month.
Why China DOESN'T WANT the Yuan to Become the Reserve Currency
We recently noted that, despite all the hot money flows and self-congratulatory extrapolation, European macro data is collapsing (as opposed to supporting ideas of recovery). In fact, it is falling at the fastest pace in over a year as the prospect of the euro area falling into deflation may be increasing; as Bloomberg's Niraj Shah notes the single currency rises, growth loses momentum, money-supply expansion slows and bank lending stagnates. As Shah fears, that may push the region into a debt spiral as the real value of debt increases, marking a new phase in the crisis.
As frequent readers will recall, one of our favorite series of posts describing the "Walking Dead" monetary zombie-infested continent that is Europe is the one showing the abysmal state Europe's credit creation machinery, operated by none other than the Bank of Italy's, Goldman's ECB's Mario Draghi, finds itself in. As a reminder, it was as recently as September when we found that "Mario Draghi's Nightmare Gets Worse" because "European Loans Declined At Record Rate." To our complete lack of surprise, when a few hours ago the ECB released the latest monetary and credit creation update for the month of September, it showed... no change. Or rather, while loans to the private sector are at all time record lows, that other metric which Draghi at least has some direct control over (since he obviously can't control the amount of confidence in the system aside from threats of brute force), M3, just had its lowest pace of increase since January 2012.
But I never thought it wise to sell it, because for central banks this is a reserve of safety, it’s viewed by the country as such. In the case of non-dollar countries it gives you a value-protection against fluctuations against the dollar, so there are several reasons, risk diversification and so on.
Stunning Facts that Your History, Economics and Business Teachers Never Learned ...
While all eyes are on 'pretty woman' at the head of the Fed, things are taking a turn for the worse on the European continent.
Berlusconi's bye-bye (and hope from Draghi) seems to have trumped all else as European macro data continues to slide but stocks and sovereign bonds surge higher amid the US turbulence. EUR jumped 0.65% on the week as it seems anxiety sent hot money into the highest beta muppetry in Europe. Greek stocks +3.6% on the week, Italian stocks +3.7%, Spain +2%... Germany -0.6%. Bunds bid - outperforming Treasuries by 4bps on the week but the "safe havens" of Portugal (-50bps - the 3rd best week of the year), Spain (-21bps), and Italy (-20bps) saw heavy bids. Amid all this exuberance, Europe's VIX rose 16% to 19.6%.
With the government shutdown stretching into an improbable 4th day (and with every additional day added on, the likelihood that the impasse continues even longer and hit the debt ceiling X-Date of October 17 becomes greater), today's monthly Non-Farm Payroll data has quickly become No-Farm Payroll. However, just like on day when Europe is closed we still get a ramp into the European close, expect at least several vacuum tube algos to jump the gun at 8:29:59:999 and try to generate some upward momentum ignition in stocks and downward momentum in gold. In addition to no economic data released in the US, President Obama announced last night he has cancelled his trip to Bali, Indonesia, to attend the APEC conference and instead to focus on budget negotiations back at home - which is ironic because his latest story is that he will not negotiate, so why not just not negotiate from Asia? Ah, the optics of shutdown.
Youth unemployment around the world is dreadfully high and rising. An entire generation is now coming of age without being able to leave the nest or have any prospect of earning a decent wage in their home country. Young people in particular get the sharp end of the stick - they’re the last to be hired, the first to be fired, the first to be sent off to fight and die in foreign lands, and the first to have their benefits cut; and if they’re ever lucky enough to find meaningful employment, they can count on working their entire lives to pay down the debts of previous generations through higher and higher taxes. But when it comes time to collect... finally... those benefits won’t be there for them. Case in point: the British government has just announced a new push to eliminate benefits for young people. And this is just step 1.
Reader's Digest wanted to know how honest world cities are, so it “lost” 192 wallets in 16 cities - that’s 12 wallets in each city - to see how many would be returned. Each wallet contained $50 equivalent of local currency, as well as a name, phone number, family photo, coupons, and business cards. The results, as IBTimes' Lisa Mahapatra illustrates are perhaps surprising. The US ranked well (with 8/12 wallets returned) but the troubled regions of Europe (Spain and Portugal) came a dismal last with only 2 and 1 wallets returned respectively.