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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

All according to plan – US set to grow 3%; China’s slowdown on purpose

Over the weekend…
the UK lost its Fitch-assigned AAA rating on the back of the weak economy and poor outlook. Moody’s downgraded the country in February, but also assigned a negative outlook, while Fitch is optimistic that the UK will return to credit-worthy prosperity around 2014/2015. read article

In Italy, Giorgio Napolitano was re-elected President for the coming seven years on Saturday. The independent is expected to propose a bipartisan cabinet, considering that he was elected by both sides of the political spectrum to avoid another round of elections. Everybody except for Beppe Grillo seems happy; he had called Napolitano’s re-election a coup d’etat. read article

The G20 meeting ended with everyone promising to not engage in competitive devaluation of currencies, defending Japan’s monetary policy as appropriate and targeting domestic demand. read article

This morning…
word got out that the US will see 3% growth in July, due to a reform of the methodology behind government statistics. 21st century GDP also takes film royalties and R&D spending into account:

Billions of dollars of intangible assets will enter the gross domestic product of the world’s largest economy in a revision aimed at capturing the changing nature of US output.” read article

Meanwhile in China, central bank Governor Zhou Xiaochuan justified the country’s below-expectations growth rate of 7.7% in the first quarter of 2013, saying slow growth was necessary as structural reforms are being put into place. read article

Otherwise the counter-austerity voices are getting louder again, this time it’s Pimco’s Bill Gross (not that surprising) and Jose Manuel Barroso of all people, the President of the European Commission. Could this be the beginning of the end of Angela Austerity Merkel’s dominance in European policy? Probably not.

So long.

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China slows, Greece set to grow again

Over the weekend…
Venezuela has elected a new President, after re-elected Hugo Chavez died in early March after long illness. Nicolas Maduro is the man Chavez singled out as a worthy candidate himself, and the election result may have been driven my emotions more so than politics. read article

This morning…
China reported Q1 GDP growth, which came in lower than expected. Year-on-year, the country’s economy grew at a rate of 7.7% in the first three months of 2013. Prior estimates had suggested 8%; Q4 2012 came in at 7.9%. Again, we are facing a week of panic over the Chinese slowdown. read article

Otherwise, troika officials are arriving in Portugal today to assess the country’s austerity plans and post-bailout progress. Simultaneously, the body, composed of the EU, the ECB and the IMF, released a report claiming that Greece could return to growth next year. read article

The week ahead…
will bring us the first batch of earnings from New York-listed corporates, including a bunch of banks like Citigroup, Bank of America and Goldman Sachs, and tech companies Google, Microsoft and IBM.

The Italian parliament will try to elect a new President in the coming days. Officially, the process to find Giorgio Napolitano’s successor begins on Thursday, but it is expected to last a couple of days.

So long.

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A new benchmark fixing scandal!!

Yesterday…

former British Prime Minister Margaret Thatcher died of a stroke at the age of 87. Despite her polarizing character, there seems to be a consensus of her importance to the role of the UK on the global stage, both economically and politically. Finally, she also remains Britain’s only female PM. Most used terms: ‘liberalization’, ‘relentless’, ‘unforgiving’, ‘open markets’. read article

In the US, we see the beginning of a new benchmark fixing scandal: interdealer broker ICAP and some unnamed banks have been subpoenaed by the CFTC yesterday for potentially fixing the interest rate swap benchmark ISDAFIX. read article

Asset manager BlackRock has hit back at the Fed’s QE program, saying it distorted the markets. This is quite a change in BlackRock’s stance, as the company was all over government debt before until it started to nudge investors into less interest rate-sensitive products. read article

Following the court ruling that restricted Portugal‘s austerity measures last week, the country could see delays for future funds and no revision of the repayment schedule. According to the FT:

The court ruling means Lisbon will not receive the next €2bn installment of its €78bn bailout until it has convinced international lenders that fresh cuts in spending on health, education and social security will be sufficient to compensate for the rejected measures.

This morning…

we got CPI data from China, showing lower inflation at 2.1%, with food price inflation down from 6% in February (i.e. the Lunar New Year is a ripoff) to 2.7%.

In the UK factory output rose by 0.8% in February, more than the median estimate of 0.4% as according to Bloomberg, while German exports slumped in February, just to see imports decline by more than double the rate at -3.8%. read article

So long.

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IMF joins Cyprus creditors; Fannie Mae records first profits in 6 years

There won’t be an update tomorrow, Thursday April 4th.

Yesterday…In the US, people are getting more nervous about the Fed’s spending spree. Eyeing over to Japan, that might be fair. Once again, it’s Jeffrey Lacker, President of the Federal Reserve Bank of Richmond, who doesn’t beat around the bush when it comes to disliking monetary policy. read article

Fannie Mae, which received a total of $116.1bn in bailout finance from the US Treasury since the financial crisis, officially returned back to black. For the financial year 2012, the mortgage business recorded $17.2bn in profit. Finally. Although things are looking up, $84.7bn of its bailout package remain outstanding. read article

Speaking of earnings, the SEC has given companies the okay to announce earnings and other news via Facebook and Twitter, throwing off all those institutions (read banks) that blocked social networking sites for their employees. read article

Cyprus’ Minister of Finance resigned, saying he had done his deed in negotiating the bailout deal. In related news, the IMF stated today that it will pay €1bn of the total €10bn bailout package for Cyrpus, spread out over three years.

This morning…
there’s little to talk about. By 9.45am the most striking news were that Apple may release two new phones this year, and even that was a story from yesterday. read article

Spanish Prime Minister Mariano Rajoy is looking towards Brussels to get the growth in Europe going (good luck with that) and stop the austerity vise (even more luck for that), asking for countries in the position to do so to spend more to stimulate the economy. read article

So long.

Death Star Economics
ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

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The sequester is back, as is Europe’s political madness

In the US, the chaos that is the national budget and the cuts thereof is picking up in newsworthiness again. Yesterday, President Obama tried to guilt Republicans into agreeing with his proposal, which didn’t achieve all that much. New estimates say the sequester could chop 0.5% off this year’s GDP and destroy 700,000 jobs. Others say that besides the overall effect, the demand side won’t feel the $85bn spending cuts. read article

Something that won’t suffer cuts is medical research, generally a positive thing, with the billion dollar research project Brain Activity Map (BAM), the first neurological project of its kind, starting in a couple of weeks. read article

As of today, Bulgaria is without government, after the country protested against austerity measures, utility prices and corruption. In next steps, a caretaker government will be formed, before official elections sometime in Springread article

In other European news, Italy’s center-left Democrats are trying to build a coalition government with Mario Monti to fight the good fight against Berlusconi, while Mariano Rajoy of Spain said the Spanish economy was seeing “no green shots or recovery in any shape or form.

Also from Spain, the government is imposing a yield limit on regional government bonds to combat the country’s overall debt burden. The new limit will be set at 100 basis point above government debt, a benchmark that Catalonia has long passed. read article

In other news, Microsoft has abandoned Hotmail, phasing out the emailing service by this summer. All 350 million users (seriously, who still uses Hotmail??) will be moved to Outlook.com, which already has 60 million users of its own. read article

So long.

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Democracy (Obama), anarchy (Greece) and communism (China)

Well, at least we don’t have to worry about what crazy things Paul Ryan is capable of. Obama won the election and now has the luxury of another four years to finish what he started without having to start campaigning again two years down the line. With 303 versus 206 electoral votes, the result is much more saturated than anybody expected after the polls had put the candidates up for a close finish. The Republicans keep the House, the Democrats the Senate. Obama, as positive as ever, said “For the United States of America, the best is yet to come.

An extension of the Obama-Bernanke days, means that the US economy will continue to have access to funds to stimulate growth. In response, the dollar fell against every but one counterpart currencies.

But as the new old president is just waking up, the media has pasted his name into all those now-that-we-got-this-settled-lets-talk-about-the-fiscal-cliff-some-more articles. FT WSJ

Bloomberg Businessweek is making another point: see picture

Back in Europe, Greek drama is looming – again. On November 27, the nation is due another bailout payment, this time worth €31.3bn. But Brussels can delay the tranche again, as the policy disagreements that have delayed it to begin with are still not resolved. In Athens, politicians are voting on austerity measures tonight. They could include abolishing Christmas bonuses for public service workers and more cuts in welfare and pensions. read article

In the background David Cameron and Angela Merkel are clashing over the EU budget. Cameron wants to see cuts worth €1tn over the next seven years, while Merkel is pressing for a €100bn budget increase. Cameron is threatening to block the budget. Merkel is threatening to block the budget meetings in case of the UK exercising its threat. Good times. read article

Tomorrow, China’s Communist party is holding its 18th party congress. President Hu Jintao has only one week left in office, before Xi Jinping taken over. Time to revisit how China’s democratic ambitions are doing. read article

So long.

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Joining the dark side of the force: Disney buys Lucasfilm

After two days of storm, an exploding power plant, the shut down of three nuclear plants, almost 19,000 canceled flights, closure of public transport systems, 10,000 911-calls every 30 minutes in New York City and 14ft of water, America’s east coast is getting back on its feetWall Street will re-open, as well as airports and the rest of normal life.

But it won’t surprise you that the story on my mind today is Disney’s acquisition of Lucasfilm. For $4.05bn the Walt Disney empire bought 100% of George Lucas’ production company, which owns the Star Wars franchise. The deal marks the second biggest acquisition in Disney’s history, only exceeded by the $7.6bn takeover of Pixar. And really, this is like a family reunion. Pixar used to be a division of Lucasfilm, which was launched in 1979, but spun out of the parent company in 1986. George Lucas, the godfather of Star Wars, will get about $2bn in cash from the proceeds of the sale, adding to his net worth of $3.2bn. Disney announced that three new Star Wars movies will follow, starting in 2015read article

Google is joining Starbucks in facing a parliamentary tax inquiry in the UK. Google is channelling most of its corporate sales through its headquarters in Dublin, thereby avoiding UK taxes on it. According to Margaret Hodge, chairman of the committee the corporation will face:

Apple, Google, Facebook, eBay and Starbucks [i.e. all the poster children of globalization] have avoided nearly £900m.

It is estimated that the UK loses approximately £5bn annually due to tax avoidance.

In an attempt to buy more time, Greek policy makers have agreed to push spending cuts worth €13.5bn and reforms through parliament. Greece is once again in danger of running out of money within the coming month. Today, the Greek parliament will vote on a bill scrapping the obligation for the government to own a minimum stak in formerly state-owned companies, which is expected to set the tone for developments in the near future. On November 12, there will be an EU summit officially dedicated to the management of Greek debt. It’s getting boring and all seems like a replay of last year. Count the days until someone suggests to devalue parts of the Euro again… read article

In the background, eurozone unemployment rose yet once more in September, gaining 0.1% from August and amounting to 11.6% overall. That means that 18.5 million people are currently out of work in the European Monetary Union (hello, Spain). Austria is maintaining the lowest unemployment rate of 4.4%read article

So long.

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Globalization, vertical integration and buying commodity firms

Japan is edging towards more QE, as the country’s exports fell most since the earthquake in March 2011. Most of it is attributed to the general performance of the global economy, but also the dispute with China, causing Chinese demand for Japanese goods to fall and factories to close. According to JP Morgan, the dispute will shrink Japan’s Q4 GDP by 0.8%. Besides, the strong yen, makes Japanese goods unattractive for importers. read article

Angela Merkel is getting a taste of her own medicine. She’s having an argument about austerity measures with David Cameron. After Cameron stated that the UK will veto any EU budget proposal that sees spending increases in any shape or form, Merkel, being efficient, sees no point in holding the November budget meetings. The German take on the EU budget is to cap spending at 1% of GDP, around €900bn, for the years to come. read article

In other EU news, tomorrow, the proposal that would impose a 40% female quota in boards of European companies will fail. A number of predominantly liberal politicians have stated to vote against the regulation, 11 out of 27, enough to make it fall through. In the background, the European Parliament is trying to fill a position on the board of the ECB. Prime candidate Yves Mersch seems to bring one major disadvantage: being maleread article

But there really seems to be just one theme today, and that is buying commodities businesses.

In the UK, four of the largest private equity houses in the world, KKR, CVC Capital Partners, Apax and Carlyle are allegedly looking into buying Urenco, a British government-backed provider of nuclear fuel solutions. Urenco was founded by the British, Dutch and German government in the 70s; today, it’s largest shareholders are the British state and two German utility companies.

In AustraliaArcher Daniels Midland, one of the largest processors and traders of agricultural products, has bought 14.5% of GrainCorp, a logistics and storage company that deals with a third of Australia’s wheat grain production, for $2.8bn. According to the UN Food and Agriculture Organization, global agricultural output could grow by 50% until 2050.

Meanwhile, the Canadian government is set to block the acquisition of Progress Energy Resources, Calgary-based owner of gas fields in British Columbia and Alberta, by Petronas of Malasia. The acquisition would be valued at $5.3bn.

And finally, BP sold 12.84% of TNK-BP for $27bn to Rosneft, i.e. the Russian government.

It’s a trend. Clearly.

So long.

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China slows less badly, Russia gets even more say in oil

In all the mess, at least China seems to be doing betterAfter six quarters of downturn in the economy, the slowing continues in a much more positive fashion. Q3 GDP growth came in at 7.4%, as predicted by a Bloomberg poll, but lower than Q2 growth of 7.6%. Earlier this month, the World Bank cut its growth forecast for China from 8.2% to 7.7%. China’s national bureau of statistics expects full-year GDP growth to come in at 7.5%. But this wasn’t going to be just as bad, remember? Retail sales grew faster than ever (since March) and industrial production and fixed asset investments grew as well, both 0.3% from August. This is giving the PBOC some time to hold off on more QE.

Meanwhile in New York, someone tried to blow up the Fed with a 450kg car bomb. The bomb didn’t detonate, as its components were “never in working condition”. The FBI arrested a 21-year old man from Bangladesh, who had been in the US since the beginning of the year. The US Department of Justice stated that he will face charges over the attempted use of a weapon of mass destruction and providing information to al Quaeda. read article

After many rumors and much planning, BP is getting closer to completing the sale of its Russian oil business TNK. BP owns 50% of the shares in the company, which has been underperforming. The buyer, state-backed Russian oil company OAO Rosneft will pay $25m in cash and shares and create the largest publicly traded oil producer in the world. According to rumors, Rosneft is also looking to buy the remaining shares in the company for around $28m. read article

Back in the UKStarbucks is facing a parliamentary tax investigation. For all the revenue accumulated from your guilty-pleasure-purchases of super-diet-caramel-and-whipped-cream-non-fat-syrup-frappacinos in 2009, the coffee giant managed to avoid a tax bill totalling £1.2bn. And what was the master plan behind this scheme? As simple as this:

Starbucks had been telling investors its British unit was highly profitable while telling authorities the unit was loss-making, and thereby not liable for tax

Ha! MPs were not amused, as they fear public trust in the tax system (there is such a thing?) being undermined. read article

Otherwise, Greece has called for another 24-hour strike against austerity measures to commemorate the 700th EU summit for the saving of the union’s periphery that is taking place in Brussels today.

The same Greece which demands a 2 year, €30 billion extension from Europe to comply with reform, a move which Europe has not agreed to as while the core have said yes to more time, all have refused to fund Greece with any more money.

Hm. Awkward. More from that front tomorrow.

So long.

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The EU as a p(e)acemaker

One night after Christine Lagarde and Schaeuble fought about the necessity of austerity measures, the EU has been awarded the Nobel Peace Prize for “contributing to peace” in general. On first sight, that’s primarily one thing: incredibly confusing. It trumps Obama’s Prize in 2009. Why now, for crying out loud? But it does add another €8m to the EU’s budget/bailout funds/collateral. So thanks, Norway, for supporting the union that you continuously refuse to join to protect all the oil you’re sitting on. Barroso’s reaction: “When I woke up this morning, I did not expect it to be a good day.” Ha. Fair enough, we all know why.

But yes, fine, there’s another side to the story. Of course, this continent has seen a lot of wars in recent history and the EU has created a safety net for peace preservation and transnational cooperation. Say what you want, for example that the EU is a slow and overly bureaucratic construct, specialized in ineffective policy, but it has kept Europe at peace and let’s just admit that we haven’t exactly been good at that historically. read article

Meanwhile, Coca-Cola Hellenic Bottling, the company’s Greek division and second largest bottler in the world, is leaving Greece. Due to capital risks in its current location, the company will move its headquarters to Switzerland and re-list on the London Stock Exchangewiping out 1/5 of the Athens stock exchange. Despite being minority-owned by The Coca-Cola Company, the Greek company had its credit rating downgraded, which triggered the move. Most of its 2,000 production employees will stay [employed] in Greece. In July, Greece’ unemployment rate rose to 25.1%, marking the 35th consecutive month of increasing jobless rates.

Otherwise, the Chinese renminbi has hit the highest levels against the dollar in 19 years, reasons for which are thought to be a move against imported inflation brought about by US quantitative easing and an artificial calming of the market. Credit Agricole mentioned that this could also be China’s way of endorsing president Obama, who has continuously pushed for appreciation of the renminbi. read article

Speaking of which, yesterday’s vice-presidential debate didn’t yield a winner as clear as last week’s deeply upsetting Romney-Obama debate. Naturally, they disagreed on taxes and economic issues, Reuters has the key quotes, the Washington Post got a video with highlights.

Weekend reading

– a short history of debt crisesread article

– why the IMF gets to run the worldread article
– the world’s quest for socialist capitalismread article
– the first world victim: Michael Lewis gets a message from a Wall Street banker’s disgruntled sonread article
Have a good one.

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