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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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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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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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A bailout with a side of bank-run

Good morning, due to new commitments Death Star Economics gets up early now.

After Cyprus exploded in such an unexpected fashion on Monday, followed by the revision of the bank account levy proposal assigning a 15% tax on deposits above €500,000 and a closing of all banks until Thursday [making ZeroHedge wonder which Thursday…], which was then followed by the Cypriot parliament rejecting the proposal altogether. In the background, Russia has appeared on a white horse, sending Gazprom to offer to bail the country out for nothing butaccess to its natural resources [and money laundering facilities]. Cyprus’ Finance Minister is currently in Moscow.

In the background, the EU reached a provisional deal on the ECB’s role as single bank supervisor in the Union. Once in place, the reformed central bank could bail out European banks directly. read article

It’s budget day in the UK today, and once again it won’t be pretty. Expected are 2% spendingcuts, totalling £2.5bn. Also, inflation sits at 2.8% in February and in-coming Bank of England Governor Mark Carney wants to focus on more indicators than just getting that number down. There is the possibility that the budget will steer the BoE bank onto the 2% inflation target courseread article

BlackRock, the largest asset manager in the world, is set to restructure the firm and fire 300 people, about 3% of its global workforce. read article

In regulatory news, Citigroup has to pay $730m in settlement fees for misleading investors in mortgage-related (read “-backed”) securities between 2006 and 2008. Crisis-era legal case #765.read article

UBS decided to leave the panel that sets the Euribor benchmark rate. Previously, Rabobank, Raiffeisen Bank, Bayrische Landesbank and Citi had left the panel. read article

Have a good day.

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“Biopolar enthusiasm” and the fiscal cliff

The Daily News Brief is going on Christmas holiday for a while and will be back in the new year.

The general consensus says we are making progress to make an outline to make a plan to move away from the fiscal cliff. Today even more so than yesterday. After Boehner’s proposal yesterday (look he has a chart), Obama came back suggesting tax increases for those with $400,000+ annual income, but apparently that is not his last offer. Then why even bother analyzing it? Reuters says, the mad velocity by which the negotiations are taking shape, “put[s] a deal realistically within reach.” read article

ZeroHedge sums it up:

By this point it has become clear to everyone that all fact-based news can be safely ignored […] it is clear that following yesterday’s detailed disclosure, the market is convinced, that a deal is virtually assured. This is a start contrast to 48 hours ago, when it thought the opposite. […] the latest bubble of bipolar enthusiasm which has now shifted to euphoric for the time being.

Also in the US. the Massachusetts Security Division of the SEC is kicking of the year in review part of 2012, reminding us just how much was blaming and blogging [about the blaming] was going on around the Facebook IPO, the company’s valuation and the decline of its stocks. Seven months later, almost to the date, Morgan Stanley was fined $5m for having failed to supervise its staff during the time of the IPO, i.e. for trying to influence research analysts right before the offering. Morgan Stanley paid up without denying or admitting to anything. Citigroup has already been fined $2m for “improper disclosures” and both Goldman Sachs and J.P. Morgan have been subpoenaedread article

J.P. Morgan is also being sued by the US Credit Union for Bear Stearn’s creation of mortgages worth $3.6bn that were distributed to clients under false information and later blew up in their faces. J.P. Morgan acquired Bear Stearns in 2008. read article

Meanwhile, Europe is entirely out of office now – the biggest news are that Germany‘s Bundesbank is expected negative GDP growth in Q4, while the European Commission gave the okay for the €3.9bn bailout of Monte dei Paschi di Siena, Italy’s third largest bank. Monti’s candidacy for the 2013 Italian election circus will stay up for discussion until Friday morning, so most Italian news will continue to be dominated by Berlusconi’s upcoming wedding. Brussels also filed a report regarding Spain‘s public debt, which is likely to keep rising if the country fails to reform its pensions system. According to the report, Spanish pensions will exceed the average EU spend until 2060. The other nation at risk, in part due to its pension spending, appears to be Cyprus which received aid from Brussels in June. read article

So much from me, happy holidays!

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US corporate tax up for discussion, BoE changes course (towards Canada)

There won’t be a News Brief tomorrow, Thursday, December 13, 2012.

There are actual news regarding the fiscal cliff, with President Obama and House Speaker John Boehner putting corporate tax up for discussion. Reforming the corporate tax rate, currently between 15% and 35% depending on the state, would be part of a policy package that could yield $1.4bn in new revenues, as opposed to $1.6bn as proposed earlier. Some sources say that an overhaul of the current corporate tax regime could reduce the maximum rate from 35% to 28%. Obama’s current proposal also includes lifting the debt-ceiling and increasing infrastructure spendingread article

Germany has gently (read harshly) reminded Silvio Berlusconi to leave blaming Germany for Italy’s economic policies out of his election campaign. Berlusconi said that Monti’s government had employed German-centric policies and Berlin had used the spread between German and Italian bond yields to cause his last cabinet to collapse. read article

Meanwhile in the UK, i.e. New Canada, Mark Carney has had the entire BoE‘s senior management stumble as he announced the central bank needed more radical measures, steady rates, numerical unemployment targets and maybe consider leaving inflation alone for now and replacing it with nominal GDP targeting. Mervyn King is real happy about his successor right now. read article

Today also marks the day when the libor scandal creeps back onto the front pages. A former trader for Citigroup and UBS and two employees of interdealer broker RP Martin were arrested and questioned regarding the rate-rigging that was uncovered in Spring 2012. Barclays paid $450m in settlement charges in June in connection to the scandal. read article

So long.

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Berlusconi creeps back, Citi cuts 11,000 jobs

This morning, Italy’s government was shaking once again, when the Italian upper house voted on Monti’s economic growth package. But Mario Monti prevailed despite Berlusconi’s People of Freedom party walking out on the vote. Italy’s next election is scheduled for March, and Berlusconi has suggested his return again and again. read article

After yesterday’s Autumn Statement, which can probably be summarized as pushing around money in little proactive fashion, the UK’s credit rating is in more danger than it was before. In March, Fitch had put the country on ‘negative outlook‘. But when George Osborne neither announced substantial tax increases nor spending cuts yesterday, the agency concluded that Britain’s way of dealing with its public finances was reason to worry – more. read article

Speaking of rating issues: after Greece announced to buy €10bn of its debt back (estimated to be 32-34 cent on the euro), S&P has reduced the country’s credit grade to ‘stubborn selective default‘.

When Vikram Pandit left his position as CEO of Citigroup, everybody denied that there had been tensions in the bank’s senior management. The 180-degree-turn of the company’s strategy says something quite opposite. Last week, there was the modest announcement that 150 jobs would be cut. Last night, the number of overall job cuts within the company rose to 11,000, more than double of what Pandit had had in mind. According to Fortune Magazine, Citi employed 266,000 people this year. read article

Other news are almost exclusively legal issues: HSBC’s fine for that Mexican money laundering incident could rise to up to $1.8bn, while Standard Chartered has to pay an additional $330m for breaching Iranian sanctions. The bank has already paid $340m in August.

But the gossip of the day comes from Deutsche Bank, which failed to, or chose not, or accidentally didn’t report losses of up to $12bn between 2007 and 2009. So far, it seems like that might have been a good thing. Thanks to Deutsche’s ‘don’t ask don’t tell’ policy, the bank may have avoided a government bailout. Suspiciously, the whistle-blowers are three former employees of the company, and if 2012 has taught us anything it is to take those things with a bucket of salt. read article

So long.

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China’s new lead, Europe’s new fall, BP’s new fine

China has completed its government reshuffle and named the new members of the Politburo Standing Committee, decreasing the number of members to seven and making Xi Jinping China’s new president. He will take over from Hu Jintao in March. But hopes of a reformed and more open China in the future, were diminished by the conservative selection of PSC members. The two contesters for positions in the PSC with the strongest background in political and economic reforms, were not elected; coincidentally, two positions on the committee disappeared… read article  Bloomberg’s guide to the PSC

Meanwhile, Europe, or at least the eurozone, is officially back in recession. With both France and Germany “growing” a grand total of 0.2% in the year’s third quarter, Europe’s German engine may be heading for contraction by year-end. That’s not rock bottom of course. After all, Germany could collapse, default on its debt or implode, but it may be one of the lowest points for Europe from an economic point of view. One of them. read article

Unfortunately, the corporate world doesn’t really look any better.

BP is about the receive the largest penalty the US Department of Justice has ever filed over criminal charges for the environmental disaster triggered by the Deepwater Horizon oil spill in 2010. The fine is so large, in fact, that the number has not been disclosed yet. To date, the prize for the biggest fine goes to Pfizer, sentenced to pay $1.2bn in 2009, after illegally promoting the anti-inflammatory drug Bextra. BP put $2bn aside for legal charges; rumor has it, it will have to pay up to $1.5bn, or if you want to believe the BBC between $3bn and $5bnread article

Over at Citigroup, shareholders have submitted an official proposal for the bank’s board to consider abreakup of its retail and investment banking divisions. Citigroup’s creation in 1998 went hand-in-hand with the creation of the Glass-Steagall act, making the merging of different banking operations possible.Sandy Weill, formerly Citi’s chairman, called for a repeal of the legislation in July, fueling debates about the bank’s future. Here’s some more firewood.

So long.

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Election prep and Darwinian finance

With the US presidential election on the agenda for next week Tuesday, this weekend is used by all news outlets of the world and really anybody with a n opinion (thanks, internet…) to publish op-eds on said matter. So here we go.

– The Economist endorsed Obama as indirectly as possible (of course they did), read article

– The Washington Post’s Wonkbook looks at campaign expenditure, concluding that this election is the most expensive on record, read article

– Pimco’s Bill Gross is disgruntled about America and rewrites the Pledge of Allegianceread article

– The FT’s data blog looks at the importance of economic issues in the election read article

– Mayor Bloomberg, who is not member of any party, also endorsed Obama, saying that “Hurricane Sandy had reshaped his thinking, read article

Today’s US employment figures show that 3.57 million people are currently out of work in America as opposed to 4.11 million last year. Yet, the unemployment rate increased from September, amounting to 7.9%, exceeding the rate of January 2009. Estimates had seen 125,000 jobs added; the number was beaten by 46,000 new employees. read article

Commerzbank, Dexia and Lloyds TSB were removed from the list of G-SIFIs (global systemically important financial institutions) or G-SIBs (global systemically important banks) or “the world’s most dangerous banks” like the German FT calls it, due to diminishing “global systemic importance”. Ouch. That’s a weird insult, but an insult nontheless. After all, having the “evil” stipped off of them by a couple fo Swiss regulators, pushes them towards irrelevance, if you will. CitigroupDeutsche BankHSBC and JP Morgan are the four giants at the top of the list, required to hold an additional 2.5% in common equity to meet requirements set out by risk-management regulation Basel III. The general requirement amounts to 7% equity holdings as a percentage of risk-weighed assets. read article

The other big topic this week is the supposed end of investment banking as an industry/career/ethos. Triggered by UBS’ mass firing and essential termination of its fixed income unit on Tuesday, this a welcomed turn of events for those who either supported Occupy [insert location], or critically observed the developments in more stable housing. The WSJ bemoaned the death of fixed income, while the Economist compared core competencies. Gillian Tett wrote about a paper that examines the fluctuations in financial services as a career destination, and Harvard Business School announced that more of its graduates were now heading into consulting rather than investment banking. Because that’s what a world in shambles really need… more fucking consultants.

Election-unrelated weekend reading:

– Greece finds Medea: what happens when you talk about tax evasionread article

 Sandy and climate change on the cover of Businessweek, read article

– Felix Salmon‘s take on the above, read article

– Leaving China and going … where? read article

Have a good one.

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“Unlike cigarettes, banks don’t actually kill people”

Unlike cigarettes, banks don’t actually kill people.” That’s how Anthony Browne, new head of the BBA, the British Bankers Association, opened the organizations annual conference. The BBA is currently working on a proposal to have City bankers register with an independent organization, which can ban them from their profession in case of ethical or professional misconduct. A regulation like that would exceed the power of the FSA (Financial Services Authority), which only extends to senior-level management and traders. read article

In other banking news, Credit Agricole is getting closer to selling its Greek operations Emporiki to Alpha Bank, after looking to strike a deal for months. Alpha Bank is Greece’ second largest bank and if you’re thinking “where in god’s name did they get the money from?”, just bear with me. The total price will amount to €1, a joke, an insult, a token fee. Overall, Credit Agricole will lose around €2bn on the entire operation (including transaction fees of more than €300m), as the Wall Street Journal reports.

As part of the deal, Credit Agricole will need to inject an additional €550 million into Emporiki before the sale, which it hopes to complete by year-end. It will also need to maintain a €1.4 billion credit line to Emporiki that the Greek bank would repay in three installments over the next two yearts.

Yesterday’s big news came in right after lunch, with Citigroup’s CEO Vikram Pandit resigning after five years of service. Pandit had been with Morgan Stanley for ages, then left Wall Street to start his own hedge fund, Old Lane, which was then bought by Citigroup, who promoted Pandit in practically no-time. Rumor has it that Pandit may have resigned over disagreements with the chairmen of the board, but other sources say the parting had been on perfectly friendly terms. According to the FT:

Michael Corbat, the new chief executive, said he did not want “to alter the strategic direction” of Citi, with a continued concentration on increasing the size of its emerging markets business and the shedding of the remainder of Citi Holdings, the “bad bank” of non-core assets.

Corbat was formerly Citi’s head of international operations for EMEA. But despite the above statement, changes of direction due to new management are likely. Plus, all this is following Sandy Weill’s (ex-chairman) comment regarding the necessary separation of investment and retail banking, which had led to the initial formation of Citigroup in 1998.

Also in the US (and also yesterday, sorry about that), a more acceptable presidential debate took place between Barack Obama and Mitt Romney. Obama was more on his A-game than last time, but it appears that the jury is still out on who won. The Washington Post has put another 2-minute summary video together. So is anyone going to turn this into a rap battle a la Keynes vs Hayek or what?!

Otherwise, happy news for the UK, with employment number rising and jobless benefit claims falling between August and September. The unemployment rate beat expectations by 0.3% and the overall number of working people rose to the highest level ever recorded (i.e. since Q1 1971, when ‘records began’). read article

Yesterday (jesus…) was a historic day for Cuba: the country abolished its travel restrictions and announced that its citizens will be able to leave the country for up to 24 months starting on January 14, 2013. A Cuban blogger responded saying the island would be empty come January. read article

So long.

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