Bank of England

It wouldn't be Europe if the insolvent continent did not announce, to much pomp and circumstance, another final rescue for a broke country which was nothing but a short-termist can kicking exercise. It also wouldn't be Europe if the leaders did not do much if any math when coming up with said "rescue", and it certainly wouldn't be Europe if the initial EURphoria following such an announcement was not promptly faded. Sure enough, all three have now occurred with the EURUSD soaring to over 1.3000 in the moments after last night's soon to be obsolete announcement, only to see a gradual and consistent sell off over the next several hours, dropping to a week low of just under 1.2940 as details emerged that... there were not details. To wit, as Market News reported:

• EU COMMISSION: FUNDING FOR GREECE DEBT BUYBACK NOT WORKED OUT YET

In other words, the use of funds for the third Greek bailout has been more than detailed. The only tiny outstanding issue - the source of funds.

There are so many "meta" things going on in here, we wouldn't even know where to start, so we will simply present Goldman's just released analysis of the implications of Carney's "surprise" appointment to the head of the BOE as is, in all its faux "shock" glory.

It is truly amazing to what lengths the mainstream media will go to avoid talking about what really got Goldman's former head of the Canadian Central Bank the role of Goldman's current head of the Bank of England. But it could be worse: a word search for Goldman in the BBC's just released profile of Mark Carney shows one instance of said word, and as a parenthetical at that. Hey, it could have been zero...

Back on July 3, we made an explicit and very simple prediction: "now that the natural succession path at the BOE has been terminally derailed, it brings up those two other gentlemen already brought up previously as potential future heads of the BOE, both of whom just happened to work, or still do, at... Goldman Sachs:  Canada's Mark Carney or Goldman's Jim O'Neil. Granted both have denied press speculation they will replace Mervyn King, but it's not like it would be the first time a banker lied to anyone now, would it (and makes one wonder if this whole affair was not merely orchestrated by the Squid from the get go... but no, that would be a 'conspiracy theory'.)" We are, once again, 100% correct, and have beaten all the bookie odds which had Tucker as a favorite and Mark Carney as along odds outsider. Pity: all one needs to realize and remember how the events in the world play out is to remember one simple thing: GOLDMAN SACHS RUNS IT. Everything else is secondary.

An initial lower open in major European cash bourses has been pared despite concern over Greek and a lack of any progress in agreement between Eurozone officials and the IMF. Source comments early on in European trade helped provide renewed optimism that a plan for Greece is edging closer after it was reported that the German Chancellor Merkel told lawmakers Greece's financing hole through 2016 can be filled with combination of lower rates and increased EFSF. The FTSE is under-performing its European peers at the mid-point of trade today as several large cap stocks go ex-dividend, although strength has been seen following the latest Bank of England minutes which showed a less dovish than expected 8-1 vote split to hold fire on QE between the MPC meetings. Following the release of the minutes, a now reduced expectation for asset buys at the December meeting saw upside in GBP/USD in a move away from the 1.5900 handle, and Gilt under pressure, although short-sterling shrugged off the comment that the central bank is unlikely to cut bank rate in foreseeable future.

• Israel Ready to Invade Gaza If Cease-Fire Efforts Fail (Bloomberg)
• Petraeus: A Phony Hero for a Phony War (NYT)
• IMF'S Lagarde says Greek deal should be "rooted in reality" (Reuters) "rooted" or "roofied"? And where was it until now?
• ECB's Asmussen says Greece to need aid beyond 2014 (AP)
• EU makes budget plans without (FT)
• Japanese Poll Shows LDP Advantage Ahead of Election (WSJ)
• Shanghai Composite Dips Below, Regains 2,000 Level (Bloomberg)
• Bond investor takes big punt on Ireland (FT)
• Noda defends BoJ’s independence (FT) Indewhatnow?
• Inaba Says BOJ Could Ease More If Government Reins in Debt (Bloomberg) Actually it's the other way around
• Miles Says Bank of England Can Do More If U.K. Slump Persists (Bloomberg) So much for the end of QE
• US tax breaks worth $150bn face axe (FT)

"Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion. We believe that war is an inevitable consequence of the current global economic situation."

You've probably noticed the cookie-cutter format of most financial media "news": a few key "buzz words" (fiscal cliff, Bush tax cuts, etc.) are inserted into conventional contexts, and this is passed off as either "reporting" or "commentary" depending on the number of pundits sourced. Correspondent Frank M. kindly passed along a template that is "officially deny its existence" secret within the mainstream media. With this template, you could launch your own financial media channel, ready to compete with the big boys. Heck, you could hire some cheap overseas labor to make a few Skype calls to "the usual suspects," for-hire academics, hedge fund gurus, etc. and actually attribute the fluff to a real person.

• Wal-Mart misses topline expectations: Revenue $113.93bn, Exp $114.89bn, Sees full year EPS $4.88-$4.93, Exp. $4.94, Unveils new FCPA allegations; Stock down nearly 4%
• China chooses conservative new leaders (FT)
• Eurozone falls back into recession (FT)
• Moody’s to Assess U.K.’s Aaa Rating in 2013 Amid Slowing Economy (Bloomberg)
• Another bailout is imminent: FHA Nears Need for Taxpayer Funds (WSJ)
• Hamas chief vows to keep up "resistance" after Jaabari killed (Reuters)
• Obama calls for rich to pay more, keep middle-class cuts (Reuters)
• Obama Undecided on FBI's Petraeus Probe (WSJ)
• Battle lines drawn over “growth revenue” in fiscal cliff talks (Reuters)
• Rajoy’s Path to Bailout Clears as EU Endorses Austerity (Bloomberg)
• Zhou Seen Leaving PBOC as China Picks New Economic Chiefs (Bloomberg)
• Russia warns of tough response to U.S. human rights bill (Reuters)
• Japan Opposition Leader Ups Pressure on Central Bank (WSJ)
• Zhou Seen Leaving PBOC as China Picks New Economic Chiefs (Bloomberg)

The overnight session has so far been marked with one after another economic debacle out of Asia. First Japan announced that its Q3 GDP fell an annualized 3.5% in Q3, more than the 3.4% expected, the worst decline since last year's earthquake. The drivers were sliding exports and a collapse in consumer spending. The announcement brought on a barrage of platitudes by various Japanese officials who are shocked, shocked, that 32 years of Keynesian miracles have resulted in this horrifying outcome. Of course, everyone knows 33 years is the charm for Keynesian miracles. So much for the boosts from Japan's QE 8 aad QE 9: bring on QE 10. The pundits appear surprised now that Japan is back in a solid recession, which to us is quite surprising as well - does this mean that Japan ever exited the depression? Then China came out with an announcement that its credit growth plunged in October with Chinese banks extended CNY 505bn new yuan loans in October, down from CNY 623bn in September and less than the CNY 590 expected. The trifecta of bad news was rounded off by India, whose Industrial Production joined the rest of the world in global recession, when it dropped 0.4% in September on expectations of a 2.8% rise, even as Consumer prices rose 9.75% Y/Y - the global stagflation wave has arrived... For all those wondering why futures have managed to eek out a modest overnight ramp.

"Recently, Johnson Matthey have put 172 “bad delivery” U.S. Assay Office bars into good delivery form for account of the Deutsche Bundesbank. These bars formed part of recent shipments by the Federal Reserve Bank to provide gold in London in repayment of swaps with the Bundesbank. The out-turn of the re-melting showed a loss in fine ounces terms four times greater than the gross weight loss... No indication should, of course, be given to the Bundesbank, or any other central bank holder of U.S. bars, as to the refiner’s views on them."

May 1968

• Greek Aid Payment Call Won’t Be Made Next Week, EU Official (Bloomberg)
• Eurozone faces brinkmanship on Greece (FT)
• Pressure Rises on Fiscal Crisis (WSJ)
• The JC Penney massacre continues (BBG) - In other news, any minute now Bill Ackman will get that 15x return...
• SEC left computers vulnerable to cyber attacks (Reuters) cue "back door Trojan" jokes
• Former Goldman trader accused of fraud (FT)
• Elizabeth Warren's Inadvertent Best Friends: Wall Street and Republicans (BusinessWeek)
• Zurbruegg Says Managing SNB Currency Reserves Is Major Challenge (BBG)
• Obama ally leads push on fiscal cliff (FT)
• Britain threatens to block banking union (FT)
• PBOC’s Zhou Says China’s Economy Improving as Data Due (Bloomberg)
• China slaps duties on steel tube imports (FT)
• Obama to Make Statement on Economic Growth, Cutting Deficit (Bloomberg)

Today’s AM fix was USD 1,715.00, EUR 1,347.42, and 1,075.84 GBP per ounce. 
Yesterday’s AM fix was USD 1,730.50, EUR 1,345.86, and GBP 1,080.75 per ounce.

Silver is trading at $31.85/oz, €25.10/oz and £20.00/oz. Platinum is trading at $1,546.75/oz, palladium at $607.30/oz and rhodium at $1,100/oz.

Gold rose $2.10 or 0.12% in New York yesterday and closed at $1,718.30. Silver hit a low of $31.209 then recovered in late trade but still finished with a loss of 0.56%.

European equities have made tentative progress this morning, led by the technology and basic materials sectors. The European morning was relatively peaceful until a flurry of activity on the back of European sources commenting that Spain are unlikely to seek ESM aid until the end of the year, and the ECB are not in a rush to commence bond-buying using their OMT facility. The delay of expectations of purchases has taken its toll on the Spanish debt markets which, despite completing their 2012 issuance smoothly today, show signs of strain as the 10yr yield breaches 5.81%, and the yield spread approaches 450bps against the German benchmark – the level at which LCH begin to review margin requirements. The pain in Spain has also impacted the EUR currency, with the major EUR/USD pair printing a two-month low of 1.2720 this morning.