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Jeffrey Osborne has left the building

This week…

Was mostly about Ben Bernanke and the path of macro conditions he chose for the coming month. So QE could be gone for good sometime next year, given supporting data, that we are now waiting for under sweat and tears. read Alphaville

In fact, Bernanke himself could be gone as well, as Obama indicated that the chairman could retire in the near future. read Financial Times

Economists polled by Bloomberg now suggest that the cutting will begin in September, to be finished by June 2014. A tight schedule considering when the rumors started. read Bloomberg

And if that’s not enough for you, there is always China and the fear of worse days ahead, pointing towards a credit squeeze. In short (by WSJ):

Early Friday, rates in China’s money markets fell sharply on rumors that Beijing had ordered its big banks to loosen up cash. Still, they remain more than double than average for the year, and the turbulence suggest continued uncertainty in the market in coming days.

Probably equally noteworthy was the G8 meeting in Northern Ireland, the possibly biggest take-away from which was that Barack Obama kept referring to George Osborne as “Jeffrey Osborne“. read Financial Times

Jeffrey Osborne himself, an American soul singer, proceeded to offer George a duet, which was turned down because the Chancellor neither laughs nor sings. read BBC

In Turkey, things are getting interesting for bankers, Erdogan‘s new found enemy. According to the prime minister, the recent crisis was due to the “interest-rates lobby” trying to push yields up. To put this in perspective, the words “blood-sucking” were used, although government officials refrained from sea food comparisons. read Bloomberg

Next week…

The US brings us June consumer confidence data (Tuesday), which is expected to have dropped from May, while consumer spending (Thursday) is meant to have increased slightly; the latest first quarter GDP reading will come in on Wednesday and is expected flat at 2.4%. Jobless claims are published on Thursday morning.

There is whole array of business climate and consumer confidence indicators as well as inflation data due in Europe, including Germany, France, Italy and the eurozone as such are, while the UK is also reporting first quarter GDP growth and the current account deficit.

Japan is due to report on unemployment and indeflation. On Wednesday, Japan reported higher May exports than expected, export value increased the most since 2010, indicating that Abenomics are working. And you say currency wars do no good. On that note, read Bloomberg

Have a good one.

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Libor 2.0 and a £10bn UK-US trade agreement

Over the weekend…
we saw the first proposal for a Libor reform from Martin Wheatley of the FCA (Financial Conduct Authority and successor of the FSA), who told the FT about the Libor 2.0, which could look something like this:

[…] a dual-track system with survey-based lending rates running alongside transaction-linked indices as soon as next year.

In the US however, Gary Gensler of the CFTC calls for an immediate switch to transaction-linked rates. read Financial Times

Meanwhile, the G7 met just outside London to talk about monetary policy and how much liquidity is too much with the conclusion that money is something you can never have enough of: Go ahead Japan, ease some more. read Businessweek

In the US, WSJ correspondent Jon Hilsenrath published two articles on the future of the Fed, both in terms of staffing and monetary policy. Until yesterday, Friday’s article (read ZeroHedge annotations) was pretty much the most talked about news of the weekend, discussing how the central bank will unwind its QE program that is worth $85bn a month. It was followed it up with a piece on Janet Yellen, [probably] the next Ben Bernanke. read Friday’s Wall Street Journal read Sunday’s Wall Street Journal

This morning…

David Cameron is meeting with Barack Obama on future trade agreements, something that is being interpreted as a potential first step for the UK to leave the EU. A free trade agreement between the new and old world could be worth up to £10bn for the British economy. read Bloomberg

The Eurogroup is kicking of with both Cyprus and Greece on the agenda. Cyprus is seeking approval of the first chunk of its bailout program, worth €3bn, while Greece is set to receive €7.5bn in the latest bailout payment. read BBC read comment on Reuters MacroScope

As for the rest of the week, we’ll get all kinds of data from the US, including industrial production and inflation and housing. Same goes for the eurozone and Germany; the UK reports unemployment figures and Japan will give us preliminary Q1 GDP figures.

So long.

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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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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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Cyprus rejects Russia, EU deadline looming

Cyprus… failed to reach a deal with Russia, as reported very early on this morning, but is said to discuss an EU solution in parliament today. That would include a bailout program for Cypriot bank Laiki, splitting it into a ‘good’ and ‘bad bank’. Jobs would be saved and deposits under €100,000 would be guaranteed, the rest would go towards the bank’s dark side. Besides this proposal, the parliament has six others to discuss. read article

Yesterday…

The US House of Representatives voted to prevent the government from shutting down by the end of the month and supported Paul Ryan’s budget proposal. This means that both government agencies and programs will stay in place until the end of the fiscal year on September 30. Ryan’s budget on the other hands, cuts taxes, healthcare and social costs to lower the budget over the next decade. It is expected that the Democrats’ counter example of a plan will be passed in the Senate today. This has brought us nowhere. read article

In some last minute action, Blackstone, together with Southeastern Asset Management, is considering a bid for computer company Dell. Silver Lake Partners and founder Michael Dell have put in their bid in Feburary, but the official deadline is only todayread article

This morning…

German business confidence, measured by the IFO index, reported a slump after a 10-month high in February. Surprising or not, this is hardly a sign that even Germany is going under, and is following a lower manufacturing PMI as well. read article

Finally, family traits: Raj Rajaratnam’s brother has been accused for insider tradingread article

Weekend reading…

– how Obama is trying to solve the Israel-Palestine conflict, read article

– next up in Venezuelaread article

– Nicholas Sarkozy and elderly women, read article

– Cyprus cartoonsread article

Have a good one.

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The next thing – gold price fixing

Things to know today: The new pope is Argentinian (or Argentine if you will) and the first non-European in 1,272 years; the US continues to fail at making the budget happen; Libor, Euribor, now gold and silver, ALL PRICES ARE FIXED.

The US is seeing Republican and Democratic budget proposals this week, with the former having been released on Tuesday. So far so good, surely a compromise can be found, right? No. In an interview with ABC Obama admitted that the two proposals may be too different to be combined in any shape or form, particularly if the Republican idea only relies on cutting social security and healthcare benefits. read article

The Commodity Futures Trading Commission (CFTC) has begun an inquiry in the gold and silver market in London. Though not a ‘real’ investigation yet, the Commission is looking into price fixing, much as they did with Libor. The banks involved in gold price setting in London are BarclaysDeutsche BankHSBCBank of Nova Scotia and Societe Generaleread article

The troika, composed of the EU, ECB and IMF, has decided to delay the latest bailout tranche for Greece, worth €2.8bn, due to “outstanding issues”. One of these could be firing public servants:

Identifying redundant positions and putting in place a system that will lead to mandatory exits for about 150,000 civil servants by 2015 is a so-called milestone that will determine whether the country gets a 2.8 billion-euro aid instalment due this month.

Otherwise, Eurostat released a handful of data including rising Greek youth unemployment (record) and low overall European employment (lowest since 2006). In Brussels, the European leader summit has begun. Rumor has it that France, Spain and Portugal will get more time to shrink their deficitsread article

So long.

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Banker bonus debate: Why it’s always better to be Switzerland

After the EU’s policy proposal to cap banker bonuses last week, Switzerland voted in a referendum on a similar topic, regarding both [executive] salaries and bonuses. Surprisingly, the result leaned towards Brussels, with 68% voting in favor of new rules. On the one hand, that’s surprising because Switzerland is already losing business to places like Singapore that offer favorable tax rates to big multinationals like Trafigura, which could lead to a relocation of their headquarters. But on the other hand, the Swiss proposal gives more rights to shareholders and seems to encourage internal management of compensation as opposed to a blanket EU-one-will-fit-all-because-it-has-to policy (on the far side of the spectrum, Breakingviews suggests the introduction of tipping for services). read article 

On the same topic, George Osborne will launch a last lobbying effort on behalf of the City tomorrow, trying to mitigate the reach of the proposed rule to protect London’s financial district. Before that, the Eurogroup will begin meetings in Brussels today to discuss Cyprus’ bailout program.

Over in the USinvestors worry about the effect of new cuts and taxes on consumer spending, particularly in the light of a 3.6% slump in personal incomes in the beginning of the year weighing on household budgets. The government’s worries still lie with last week’s sequestationObama wants to get the issue resolved to move on to other policies, but Congress is currently just laughing in his faceread article

Elsewhere, China has pushed past the US and has become the world’s largest net oil importer, driven by America’s move into fracking and shale gas, as well as China’s rising demand for fuel. The analysis was derived from December data, when US net imports dropped to their lowest levels since 1992. read article

As for the week aheadJapan is poised to announce a current account deficit of JPY 768.5bn on Friday, according to ZeroHedge, which is the worst number ever recorded. Otherwise, all central banks of the rainbow are meeting this week, leaving plenty of room for statements on the currency wars.

Have a good week.

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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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Currency wars – silent edition

Over the weekend, the G20 did a great job in shattering trust in the system: after a week of publicly denouncing a currency war of easing until there’s nothing left to ease, while predominantly pointing the finger at Japan as the culprit, the outcome goes as follows. Everyone, including Japan, may do as they please as long as there is no public advocacy for devaluing currencies. So far, all that talking about it has done is making things worse. read article

In Spaintoxic assets on the books of the country’s banks have decreased by €24.1bn in December, after November had recorded the highest bad-loan ratio ever. And overall loans declined by around €80bn as well, as many underperforming ones have been poured into the ‘bad bank‘ the government set up in October, as a black hole for foreclosed assets and developer loans. From ZeroHedge:

[…] as El Pais reported yesterday, official Spanish debt (not counting the hundreds of billions in off balance sheet obligations), rose to €882 billion in 2012, a surge of €146 billion in one year, sending interest expense to an all time high €38.7 billion.

Elsewhere, Nicos Anastasiades, leader of the Cypriot conservative party, has one the first round of the presidential elections. Anastasiades is an austerity man, much like Merkel likes them, and his election would pretty much secure a bailout deal for Cyprus. read article

Meanwhile in Hong Kongbankruptcy filings have risen 62% from January 2012, measuring the highest rate in almost two years and highlighting Hong Kong’s weakened economy. read article 

Despite the US being closed for President’s day today, some important documents have leaked from the White House. Obama’s proposal for a reform of the immigration system would see illegal immigrants legally applying for US citizenship if they have been in the country for more than eight years. read article 

Have a good week.

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