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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

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 ready to cut social security for budget deal

Yesterday…
it was all about central banks: the Bank of Japan expanded its asset purchasing program to JPY7tn per month, which will increase the Japanese monetary base to JPY270tn – double – by early 2014. read article

Both the Bank of England and the ECB left their policies alone. Mario Draghi shared mixed views of the European economy, saying it was to benefit from improving financial markets sometime soon, while bank lending was negative and needed encouraging. Interest rate cuts are possible again.

This morning…
we’re waiting for US non-farm payrolls, expected to show 190,000-200,000 jobs added in March (according to Bloomberg and Dow Jones respectively), as opposed to 236,000 in February, with a steady unemployment rate of 7.7. read article

President Obama is willing to cut social security spending to finally get a budget deal together, the White House announced this morning. The new proposal would see cuts worth $1.8tn over the next decade and will piss off a lot of Democrats and unions. read article

Weekend reading…
women and Wall Street (again) read article
– why the French are an un’appy folk, read article
– the deal with interest rates, read article

Have a good weekend.

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Cypriot banks re-open, German unemployment higher

Yesterday…
word got out that UK banks Lloyds and Royal Bank of Scotland, both backed by tax money, needed to raise an additional £9bn in correspondence to capital requirements set by international banking regulators. The additional cash needs to be on the balance sheets (£3bn for Lloyds, £6bn for RBS) by the end of this year. read article

This morning…
Cyprus is making history by being the first EU country to impose restrictions on capital flows, “with limits on credit card transactions, daily withdrawals, money transfers abroad and the cashing of cheques.” The withdrawal limit seems to be €300 per day, while transfers of more than €5,000 will require central bank approval. read article

German unemployment rose by 13,000 people, as opposed to an expected drop, while German 10-year bunds dropped to their lowest yield since early August 2012 (1.255%).

Meanwhile in Asia, the Bank of Japan has already exceeded its self-imposed limit on asset purchasing limit (well done) and South Korea cut its 2013 growth forecast from 3% to 2.3%.

Easter reading… – a list of people who are investigating JP Morgan, read article
– what extremely successful people were doing in their 20s, read article
– greatness of nations: India vs China, read article

Happy Easter, have a good one.

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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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BoJ to buy derivatives; US unemployment down to 7.7%

Haruhiko Kuroda, who is likely to be confirmed as the next governor of the Bank of Japan soon enough, declared that he will look into buying derivatives to send a strong message regarding the BoJ’s willingness to continue stimulating the economy. Kuroda, unlike many economists, doesn’t think the 2% inflation target would be at risk following this move. The last time a central bank engaged in derivatives purchases as part of their monetary policy was in 2008, as part of the Federal Reserve’s rescue program of Bear Stearns. read article 

Meanwhile, Japanese manufacturing isn’t doing so well, with machinery order having dropped 13.1% between December and January, showing that the economy is slow to respond to the new government and its actions. According to the WSJ, the median estimate had only been -1.4%. read article 

Over the weekend, there was a bunch of economic data from China giving mixed indications for 2013:

The short version is that some growth indicators were significantly weaker than expected, but others beat consensus forecasts – and consumer inflation appears to be on the rise again, even when the new year effect is discounted. This comes after strong export growth and weak import data surprised everyone late last week.

And right before the weekend, the US jobs report came in quite positive, cutting the unemployment rate to 7.7%, a number last achieved in 2008. read article

After much clamoring over financial regulation from Brussels, the UK’s Parliamentary Commission on Banking Standards has now deemed the British government’s own regulatory proposal too weak, back-stabbingly risking tighter rules for City banks than elsewhere on the continent… or so the FT writes. All in all, it remains to be said that there will be regulation – and everyone knows that – the degree of which may be a lot less important than whether or not it is sensible and appropriate. To be continued.

On that note, a [last] defense of banker bonuses, conveniently summarized in an RSA-like cartoon drawing (including some critical notes from Alphaville). read article 

Otherwise, Intrade has put its website services on hold due to an investigation into possible “financial irregularities”. read article

As for the rest of the week, there will be industrial production data from all around Europe, as well as unemployment and inflation numbers on Friday.

Have a good week.

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Central Bank Center Stage: UK prepares for future easing

Today’s central bank action shows the Bank of England and the Bank of Japan leaving things as they were. In the UK, the budget, to be announced on March 20th, will give the BoE more leeway in reaching the 2% inflation target. In other words, it will be a Go! sign for the printers and for new governor Mark Carney to save the day. As for Japan, this was the final monetary policy meeting for current governor Masaaki Shirakawa. Whether his successor will employ this new found conservatism is uncertain. Meanwhile in Brussels, the ECB‘s policy meeting has begun; no changes are expected.

In the US, the Fed’s beige book survey showed moderate economic growth and easing employment conditions. At the same time, the FT (and Bloomberg) is running an article about the 750,000 people who could be out of work by the end of the year if the sequester doesn’t get amended.

A reduction of 750,000 jobs translates into about 0.4 percentage points higher on the unemployment rate. That, in turn, could mean it takes at least six months longer to reach the US Federal Reserve’s threshold of 6.5 per cent for a first rise in interest rates.

Meanwhile, the House of Representatives voted in favor of a last-minute legislation that gives greater flexibility to government agencies that are subject to the spending cuts mentioned above, avoiding a government shutdown on March 27th. Next up: the [delayed] budget. read article

Time Warner is going to spin their Time Inc and IPC (publishing the likes of InStyle, Wallpaper* and NME) magazine arms off by the end of 2013 valuing the new public company at $2.4-3bn, after sales talks with publishing group Meredith had failed. In recent years, Time Warner also got rid of AOL and Time Warner Cable, all in the name of “strategic clarity”. read article

KPMG might lose its $81m auditing contract with HSBC, because the bank is considering a new pair of eyes for their books after 22 years. Hello there, regulatory pressureread article

Finally, France reached an unemployment rate of 10.6% in Q4 of 2012, representing the highest rate since 1999 and an increase for a sixth consecutive quarter. read article

So long.

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Italy at the polls; UK loses triple-A rating

Over the weekend, the UK lost its triple-A rating, with Moody’s downgrading the country to Aa1. The pound is weak and nobody is surprised. But Moody’s also cut the rating of the Bank of England, which is confusing, considering the outrageously unlikely event of a central bank default. In other words:

The question then is: what exactly does a rating mean for a sovereign which borrows in its own currency? Right now, it seems little bar political pain.

Responding to said political pain, George Osborne said he wouldn’t bow under pressure from the opposition and have Britain stick to the course of austerityread article
 
The first exit polls for the Italian election will be coming in at 2pm GMT today, when voting stations close. So far the election has seen topless feminists screaming for the end of Berlusconi’s rule over Italy (…), and a 55.2% voter turnout, 7.3% less than last year. read article
 
In Cyprus, Nicos Anastasiades’ center-right party has won the election with a 57.5% majority, leaving the country’s bailout to be finalized by the new government and the EU. Anastasiades, however, likes to think of himself as not just another sheep-like follower of the regime of international lenders, and wants to reach a deal that doesn’t include privatizations, which are believed to raise up to €2bn. read article 
 
Meanwhile in the US, only four days are left to steer the country away from the sequester. So far neither side of the table seems to a have an idea how, despite Obama’s begging for compromise. read article
 
In other news, the Deepwater Horizon trial begins today and Japan‘s Prime Minister Shinzo Abe is looking to nominate a new governor for the country’s central bank. So far, possible choices, which include the current President of the Asian Development Bank, are all pro-stimulusread article
 
Have a good week.

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EU strikes deal on budget rules; Japan continues to confuse

In an effort to mask eurobonds as something less repulsive to German chancellor Angela Merkel, the EU has set up a working group to do a feasibility study for a European debt redemption fund. This is part of a deal on budget rules, which includes the Commission’s insight into national budget proposals before those are voted on in national parliaments. read article 

Meanwhile in China, the PBOC withdrew CNY30bn ($4.81bn) from the banking system to ease inflationary pressures that had flared up following the continuous influx of fresh cash into the economy to reduce borrowing costs. read article

News out of Japan continue to surround monetary policy, with PM Abe saying the governing laws of the Bank of Japancould be conditional to changes if the 2% inflation target isn’t reached. Abe also said that buying foreign bonds existed as an option to exercise monetary policy if BOJ results should disappoint. This was disputed by Finance Minister Taro Aso today, who said Japan had no intentions to buy foreign bonds through a designated BOJ fund. It’s always nice to see consensus in an administration.

In other news, the German ZEW survey exceeded expectations by a ridiculous extent, rising to 48.2. The last time the survey reached that level of confidence was April 2010 (right before Greece started to disintegrate). Now it’s just a matter of time until expectations will probably adjust to the real world. read article

Finally, BP has admitted not to have reached a settlement ahead of the Deepwater Horizon trial, more or less because the company is convinced that the total fines would be much lower than the $20bn that have been estimated by some in the run-up for the court case. read article

So long. 

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Currency wars – on land and on Twitter

There won’t be an update until Friday, 15 February 2013.

Today, there is a lot of opinion and analysis on North Korea’s third nuclear test; even China has joined in with the rest of the world in condemning the tests. 

The G7 have issued a statement telling the world they have not and will not target exchange rates as instruments to meet national fiscal targets, because they realize the negative impact it could have on economic stability. Assorted comments from across the globe loosely translated to a “well done on monetary policy, Japan,” sending the yen even lower, as Japanese official Haruhiko Kuroda, who could be in the running for the governor post at the Bank of Japan, said there could be more easing in 2013.

From a rather upset ZeroHedge:

In other words, let the FX wars continue and may the biggest balance sheet win, all the while everyone pretends nothing is happening.

Barclays has presented its restructuring plan “Project Transform” (seriously) this morning, cutting 3,700 jobs and £1.7bn in annual costs in a final effort to lift the bank out of crisis. read article

In the US, Twitter and American Express have launched a new service allowing Amex holders to buy products by sending a tweetTechCrunch explains:

Payments are made by tweeting a purchase hashtag, and retweeting the confirmation tweet from Amex within 15 minutes of receiving it. The product will be shipped to the account billing address synced with Twitter, and payment taken from your synced Amex account.

Hello 21st century. 

Elsewhere, Colgate-Palmolive will lose $120m (post-tax) as a direct result of Venezuela’s currency devaluation and the French company EDF Energy has knocked on the UK Treasury‘s door to guarantee [part of] the payment of three planned nuclear power stations across Britain, reviving a debate about the country’s future energy supply.

So long.

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Politics is about expectations: a referendum, taxes and inflation

Brace yourselves, it’s a Europe-heavy news day.

The big news of today is David Cameron’s EU speech, announcing a UK membership referendum sometime between now and 2017. Britons are applauding, while the rest of the EU is in a state of frustration. With the words of Laurent Fabius, Foreign Minister of tax hell France: “If you join a football club, you can’t say you want to play rugby.” Well, no. But was that what he was doing? Not really. Good analogy nonetheless. It set the tone for European politics this yearread article 

Eleven European countries (Germany, France, Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia) have proceeded to drafting legislation for a financial transaction tax on the trading of stocks, bonds and derivatives. That sounds specific, but really isn’t, as Brussels hasn’t decided on specifics at all. So one of the best reasons not to go on a rant of the ineffectiveness of the policy that is meant to generate €57bn for various rescue vehicles, is that it might be stuck in parliaments across the continent for a while, despite its scheduled implementation of January 2014read article

In Israel, Benjamin Netanyahu has been re-elected, though not exactly by a landslide. In the sobering words of the BBC:

It was relief more than real jubilation. The simple truth was that the combined list of candidates headed by Prime Minister Benjamin Netanyahu had performed disappointingly. But politics is about expectations.

More analysis from Israel, here: read article

In Davos, where the World Economic Forum [attended by both Merkel and Cameron – awkward] has begun, Russian Deputy Prime Minister Arkady Dvorkovich has admitted that Russia’s perception abroad is bad for foreign investments and is holding the country back. watch video

Overseas news bring us the policy decision of the Bank of Japan, which is braced to do what new PM Abe talked about all January: pump money in the economy to meet the 2% inflation target. In fact, Japan has never had a firm inflation target like that, so you’d expect it to be big news. Yet, nobody, from analysts to the IMF’s Christine Lagarde, seems overly impressedread article

In the background, Deutsche Bank has to simulate a breakup of its consumer and investment banking units. read article

So long.

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