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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

OMG, Japan is actually growing

Yesterday…
US jobless claims came in higher than expected and housing data disappointed as well, raining on the American recovery 2013 parade and adding to the uncertainty over the future of the Fed‘s asset purchasing program. read New York Times
At the same time, those with disposable income seem to be working on a new housing bubble of sorts. read Bloomberg

Japan reported its economy grew in the first quarter of the year, leading to a 3.5% annualized growth leap and supporting Shinzo Abe’s approach since his inauguration in September. Most of the growth is attributed to private consumption. read Bloomberg

Meanwhile, Japanese companies prefer to look for opportunities elsewhere, for example the US, where a handful of corporates bought into the US shale gas market for several billion dollar. read Financial Times

Following the Bloomberg user data debacle, Citigroup has banned its fixed income traders from participating in Bloomberg chat groups to shield the banks from any security breaches. read Financial Times

This morning…
Lloyds Banking Group might just be short of fully returning into private sector hands, as the bank’s shares rose higher than the government’s cut-off point for a sale of 61.2 pence per share. Over the past weeks, David Cameron had reiterated that bailed out and partly nationalized institution shouldn’t stay government owned for longer than needed. read Reuters

Word got out that Qatar spent up to $3bn on supporting the Syrian opposition since 2011, the same year in which Libya’s rebels also received support, fueling rivalry over political influence between Arab countries. read Financial Times

Other than that, there is not much going on, time to get on the below.

Weekend reading…

Bangladesh, globalization and the price of your t-shirts, read New York Times
– from pork bellies to ruling the world – a brief history of the Chicago Mercantile Exchange, read Economist
gold bulls vs bears, read Alphaville
– Super Abe and the fight for a prosperous Japan, read Economist leader
– on the uselessness of asset management, read Harvard Business Review

Have a good one.

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Slovenia slides down the bailout slope

Yesterday

The Fed is considering tougher capital requirements over worries that banks could be playing the [Basel III] system. Currently, the international agreement sees equity capital at only 3%. Basel brought that up significantly, but also gave the parties involved more room for… creative accounting. Give a bank a loophole. read FT

Moody’s downgraded Slovenia to junk with negative outlook (ouch), which is unfortunate, because the country was planning to auction off some debt. read FT
And now the pathway to an EU bailout: (read Bloomberg)

Rising loan losses resulting from a housing bust and a second recession in two years have left a hole of about 7.5 billion euros ($9.9 billion) at Slovenia-based lenders, investment bank Keefe Bruyette & Woods estimates. That’s a lot for a 35 billion-euro economy: A bank bailout would push government debt above 70 percent of economic output.

Apple issued $17bn in debt – the largest corporate debt offering ever – in six tranches to return money to shareholders and avoid repatriation taxes on overseas funds. read WSJ

In New York, the Empire State Building was lit up in FT-pink to celebrate the 125th anniversary of the newspaper.

This morning…
is quiet due to Labor Day in vast parts of the world.

Later on, we’ll get some data from the US, including the ADP employment report, ISM manufacturing data and the post-FOMC meeting statement from the Fed (ex Bernanke press conference). The ISM is expected to drop below 50, as it last did in November of last year and several months in 2009.

So long.

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Portugal could need second bailout (to pay for the first)

This morning…

the Eurogroup is meeting in Dublin; on the menu: stop messing around with bank stress tests (i.e. tighten measures) and the bailout schemes of Portugal and Ireland. Some say even if Portugal was granted an extension of its bailout repayment, it could potentially face a second collapse and thus a second bailout. Ireland is looking in the same gloomy direction. According to the FT:

Lisbon’s bailout is due to come to an end in July 2014 and the extension of maturities of its bailout loans is intended to smooth its full return to markets. But it has to raise €14,1bn next year and €15bn in 2015, whereas before the crisis it was typically raising €10-€12bn a year. Ireland is also facing a big financing challenge. It needs to refinance €20bn per year from 2016-20, which is about 12 per cent of the country’s projected economic output for this year.

Thus, the world is quiet in anticipation of next week’s news country of choice. It might be early days for Slovenia, so maybe it’ll drift back to Cyprus or Italy.

Meanwhile, Japan will officially enter the Asia-Pacific trade talks this summer, which are currently held between Canada, Mexico, Australia, Chile, Peru, Singapore, Malaysia, Vietnam, Brunei and the US. read article

Weekend reading…
– The Economist on Margaret Thatcher‘s legacy, read article

– William Cohan on the revolving door between Wall Street and the White House, read article

Climate change may double turbulence on transatlantic flights, read article

– The Winklevoss twins are all over bitcoin, read article

JPMorgan explains why you should avoid investment banks, read article

Have a good one.

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Cyprus to sell €400m in gold; bailout to total €23bn

Yesterday…
Barack Obama submitted a budget proposal to Congress, totalling $3.77tn and including policies to curb social security and medicare expenses. The proposal foresees a $744bn deficit for 2014. read article

While the minutes from the latest Federal Open Market Committee meeting were expected today, they were accidentally sent out early to lobbyists, Citigroup and Goldman Sachs. Oops. The notes supported the thesis that the Fed’s QE program could end by year-end 2014, given improvements in the job market. read article

This morning…
Over in Cyprus, €400m worth of gold are up for sale, as the country has to up its contributions to the bailout program that so far consists of €9bn from European institutions and €1bn from the IMF. Another €10.9bn will free up in the winding down of Laiki Bank. And yes, all that money, €23bn, will be needed to just keep the country afloat until the beginning of 2016. read article

China has seen a massive influx of foreign capital. In Q1 of this year, the country’s forex reserves exploded to $3.44tn from only $130bn in the previous quarter. New financing grew by 58% from the same period last year. read article

Next door in Japan, central bank governor Kuroda said the BoJ had done all it could at this point, and the asset purchasing program wouldn’t be expanded any further any time soon. read article

So long.

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Obama to unveil $3.77tn budget

Yesterday…Slovenia‘s new Prime Minister Alenka Bratusek said the country didn’t require any help to deal with its banking crisis that the OECD seems to consider as serious but not urgent. Many Slovenian banks are already owned by the state; the OECD has recommended stress tests and the potential recapitalization or closure of failing institutions, but Bratusek is having none of it, saying the bad bank that will be set up until early summer will be able to take the toxic assets. read article

This morning…
EU is considering extending the bailout programs for Ireland and Portugal. According to Reuters, where this story came from, this will be discussed at the Eurogroup meeting on Friday.

To make everything worse, the ECB’s [first ever] Household Finance and Consumption Survey found that the average Cypriot is richer than the average German (by median net wealth). Even though the classic North-South divide re-appears in the median gross income figures, that won’t go down too well. read article

China reported its first trade deficit in over a year for March 2013, again it could be another hangover from the Lunar New Year holiday, leading to increased imports, while exports grew less. read article

Meanwhile in the US, President Obama will unveil a $3.77tn budget plan at 11am EST today, when he will speak from the White House. read article

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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Portugal is this week’s Cyprus

Over the weekend…the collective attention was brought back to Portugal, where the country’s highest court ruled that spending cuts in public sector salaries as well as state pensions were unconstitutional. Sounds like a bit like something Greece would do. Needless to say those cuts weren’t just for fun and games, but indeed to keep Portugal out of the EU’s dog house and on track for its €78bn bailout package.

Luxembourg‘s Finance Minister Luc Frieden said that the country would stop opposing the sharing of banking data within the EU, going along with the trend of increasing transparency in [former?] tax havens. read article

This morning…
there is the weakening JPY reacting to Tokyo’s new harder better faster stronger QE measures that will increase monthly asset purchases to JPY7.5tn. In fact, then yen hasn’t been this weak since May 2009. read article

While Japan’s 2% inflation target until 2015 seems a bit fishy to some [most recently China], following the above, Christine Lagarde of the IMF is a big fan. According to her, it will improve global demand, and the inertial upswing in the US economy was proof enough of that. read article

As for the rest of the week, the Fed’s Open Market Committee is meeting on Wednesday, continuing the discussion regarding when and how America’s money tap can be turned off. Otherwise, there will be industrial and trade data from China and various European countries, as well as a review of bailout programs in Portugal and Ireland. in other words, Portugal is this week’s Cyprus.

Have a good week.

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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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US housing improving, Europe worsening as a whole

Over the long weekend…Starting positive, the US saw the release of some positive housing data, the “highest level of home building in more than four years”, while factory activity declined. read article

In Europe on the other hand, manufacturing went down down down across the board, yes, even Germany. According to Reuters, Cyprus is not the culprit. Maybe March was an outlier and the global recovery is still going strong *cough*. Other European data showed a steady 12% seasonally adjusted unemployment rate for the eurozone in Feburary. For the entire union, this number increased by 0.1% to 10.9%.

It’s only been a week and Cyprus, clearly coached by Greece, has already managed to have its bailout terms eased. The Wall Street Journal got hold of a document showing that the country will have until 2017 ( as opposed to 2016) to reach a 4% budget surplus. As for the capital controls put in place to prevent a bank run after tellers were open for business again on Thursday, may last for more than a week, according to Cyprus central bank governor Panicos Demetriades (see below).

Another country shifting around on the brink of collapse, Argentina, is trying to impress (read distract) its loyal (read angry) bondholders with a new deal: instead of discussing the repayment of old bonds per se, new bonds (different for retail and institutional investors) could be issued and paid off in about 25 years. Where do I sign, that sounds like a great idea. read article

This morning…
The week ahead looks quiet yet depressing, at least if you’re in Europe, but I will spend as much time as possible laughing about Demetriades first name PANICos.

On Thursday will be central banking day, with the Bank of Japan, Bank of England and European Central Bank holding their policy meetings.

Finally, today marks the death of the FSA as we know it and the advent of the Financial Conduct Authority and the Prudential Regulation Authority. The former is an independent shop supervising more or less everybody in financial services (brokers, traders, secretaries, markets…), while the latter is part of the bank of England and will focus on 1,700 banks, insurers and investment firms. read article

Have a good week.

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Cypriot capital controls, EU templates and Japanese QE

Yesterday…
Cyprus‘ President Nicos Anastasiades announced that the country’s banks are going to stay closed until Thursday (again: which Thursday…) and that capital controls will be put in place until it all blows over. read article

The new head of the Eurogroup, Dutch Finance Minister Jeroen Dijsselbloem, threw everyone for a loop by saying the private sector contribution in Cyprus (i.e. the haircuts) would lead future EU bailouts by example. He retracted the comment later on. Thanks for that.

The MSCI Emerging Markets Index has had the worst first quarter since 2008, lagging behind industrial economies most since 1998. Ongoing QE programs (see below for Japan) are cited as a reason in favor of developed markets. read article

Presumably not for the same reason, the BRICS nations are planning their own version of the World Bank. read article

Meanwhile, China is finding itself in a public health crisis, with rotten ducks floating down rivers in the southwestern Sichuan province and 11,000 dead pigs being fished out of Shanghai’s water supply system. read article

Otherwise, a 17 year-old British kid has sold its bedroom-developed app Summly to Yahoo for $30m. read article

This morning…
there’s not a whole lot going on except digesting overnight news, because most people, including myself, got nothing but chocolate eggs on their minds.

New Bank of Japan Governor Haruhiko Kuroda is already warming up the printers, saying the BoJ will consider buying five-year+ bonds. The next policy meeting is next week, April 3-4.

So long.

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