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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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An attempt at revival

This week…

Things in Turkey continued to be messy, as Erdogan’s stern view of protesters continues to spark new anger among the masses and sent the Turkish Lira falling. read Bloomberg
On Thursday, Erdogan re-iterated that he was losing patience with the protestors. Today, the government and its counter movement reached an agreement, while Germany delayed further EU accession talks with Turkey. read WSJ

In Greece, the doors of Hellenic Broadcasting Corp closed, sending 2,500 former employees out onto the streets. It is meant to be relaunched later this year in a slimmed-down version. read WSJ

In the UK, jobless claims dropped, suggesting that the recovery is well on its way (remember how we’ve been here roughly 700 hundred times now..?). read Bloomberg

And then there was Wednesday, when literally everyone with an audience called the bond bubble, for example Jim O’Neill (formerly of Goldman Sachs) and Bill Gross (Pimco)

Around the same time, Iraqi officials said the country was looking to increase its oil production by 29% in 2014 and 159% by 2020, showing that a) they can and b) they have buyers. read Emerging Frontiers

Then there was a new price fixing scandal [yes, there are still some products left]; this time in FX. read Felix Salmon

Meanwhile on Wall Street, notes on correlations with Japan: read WSJ

In Brussels, important issues like the size and curviture of bananas and cucumbers has been pushed aside as Washington’s lobbyists walked in to ensure EU privacy regulations wouldn’t get so strict that they could hurt US investigations overseas. read FT

Rupert Murdoch is divorcing Wendy Deng, could this be the actual reason for splitting News Corp? read New Yorker

The week ahead…

The G8 meet on the outskirts of London on Monday and Tuesday; anti-globalization protesters will ironically stick to central London, where they will follow a scavenger hunt-like course through the West end, mapped out here. Please refrain from buying condiments at Fortnum & Mason until the weekend, as you may otherwise be questioned about the social legitimacy of your job.

Otherwise, it’s going to be a Bernanke-dominated week – again – as the Fed is meeting and press conferencing. Although Bernanke tried to nullify the comments about an end of easing, saying that it would take “considerable” time until that would happen, everybody seems to think the US is going to turn the money tap off. read WSJ

Have a good one.

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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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Eurozone recession here to stay, UK gets ready for exit

Yesterday…
David Cameron and his comrades of the Conservative Party published a policy draft for a referendum for a possible EU-exit of the UK. The draft says the referendum has to be completed by December 2017, given the Tories win the 2015 elections. I think the campaigning just began. read BBC

While the global “recovery” continues to force deficits to skyrocket and imports to slump, India has managed to become the outlier in the trend on Monday afternoon. Taking advantage of the low gold price, imports rose 138% since April 2012 to $7.5bn, or 18% of all imports, while the trade deficit hit 17.8bn. read Zerohedge

And of course the drama over Bloomberg‘s use of user data continued… read FT Alphaville

This morning…
there was a flood of data, with the German economy growing 0.1% from 4Q12 to the first quarter of 2013, undercutting the depressing estimate of 0.3% growth. The French economy contracted by 0.2% over the same period of time. read Bloomberg
Franco-German relations haven’t been great since Hollande got into office, but this morning’s result may just worsen the atmosphere of any policy discussion. The eurozone as such, contracted 0.2% in 1Q13. The recession continues…

Simultaneously, Mervyn “it’s-almost-his-last-day” King of the Bank of England raised the outlook for the UK economy [with lower inflation] and raised his eyebrows at eurozone performance, as well as the continental Financial Transaction Tax. read Guardian

Meanwhile, the US is preparing to become the model student again. The Congressional Budget Office is forecasting the deficit to fall as far as $378bn by 2015, much faster than anticipated. The 2013 forecast was cut by $203bn to an overall $642bn. read Reuters
And that is not all: Formerly the largest corporate debt market in the world, providing ample opportunity for the Michael Milken followers of the world to make money, China is going to take that spot within the next two years, according to S&P. Soon America will be debt and deficit free and flow with milk and vodka (we’re all grown-ups here). read Financial Times

In the kerfuffle over whether Jamie Dimon is allowed to stay in in his double-role as chairman and CEO of JPMorgan seems to be blowing over (much like Lloyd Blankfein expected), as fewer shareholders than expected are looking to back the leadership reform. Another bullet dodged for the industry. read Financial Times

And in case you’ve been in a good mood this morning, have a look at this: 10 Scenes from the ongoing global economic collapse (Zerohedge)

So long.

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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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US budget deficit decreases; ECB rate cut likely

Yesterday…
The IMF warned of the Asian bubble, saying too much FDI was leading to explosive credit growth and property prices, and it was to get even worse if Japan’s monetary policy was to have the intended effect on the Japanese economy (hold your horses, Christine). read FT

Deutsche Bank is issuing €2.8bn of new stock to improve its capital base. According to WSJ, Deutsche Bank has one of the lowest capital ratios among European banks. read WSJ

This morning…
The Dutch Queen Beatrix abdicated, to be replaced by her son Willem-Alexander. She will be demoted to Princess Beatrix. read BBC

The US Treasury is expecting the first lowering of the budget deficit since 2007 between April and June 2013, when it is looking to repay $35bn, against the February estimate of shouldering another $103bn in debt. The deficit cut is due to tax increases, spending cuts and tax revenues recoveries. read FT

There was a whole flood of data out of Europe this morning: both Eurozone and German inflation came in at 1.2%, lower than expected, making a rate cut by the ECB on Thursday more likely. German unemployment added to its rise in March, but the adjusted rate is still only marginally above the two-decade low of 6.8%. Eurozone unemployment climbed to 12.1%. No surprise there, when has it not been rising… read Alphaville

Spain reported GDP growth for the first quarter – keyword ‘growth’ – at -0.5%, leading the Bank of Spain to lower it 2013 growth expectations from -0.5% to -1.3%. read CNBC

So long.

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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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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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Japan’s recursive debt dilemma; Papandreou’s mother evaded taxes on €550m

The morning news sang the song of positive Chinese manufacturing data as the savior of the world economy. Quietly, in the background, the CEO of the Bank of Tokyo pointed at the systemic risk deriving from government debt exposure of Japanese banks. According to the Bank of International Settlements, Japan’s lenders hold 900% of their tier 1 capital in Japanese government bonds. For comparison: since 2002, the equities to tier 1 ratio is capped at 100%.

As usual, things are messier in Europe, where Moody’s downgraded the credit worthiness of the ESM super-duper rescue fund over the weekend, while Greece announced its intention to buy €10bn in debt back.

Angela Merkel said in a weekend interview that she was willing to consider a Greek debt haircut in a possible world in which Greece got its finances back under control and doesn’t require additional debt. In other words, she isn’t really.

In other Greece news, Margaret Papandreou, the former prime minister’s 89 year-old mother is the beneficiary of an HSBC account worth €550m in Geneva. Oh well that is awkward. Switzerland has loosened its privacy laws on bank accounts to give the troika a better look at Greek tax evasionread article

In an embarrassing attempt to market Paris as a location, Christian Noyer of the Banque de France as argued that it was intolerable for the eurozone to have its financial center, i.e. London, outside the monetary union. Under normal circumstances, one should laugh at Noyer for being French […] and ridiculous [……..], but he has influence in the ECB, which will be have power over all European banks as soon as the banking union is agreed upon. read article

In the world of aviation, Delta, the world’s second largest airline after United Continental, is considering buying the 49% stake in Richard Branson’s Virgin Atlantic that is currently held by Singapore Airlines. In 1999, the stake was wrth £600m. If the deal goes through, Delta’s partners in crime Air France-KLM could acquire part of Branson’s 51%. Delta’s motivation for buying into the airline is (surprisingly) not the midnight ice cream-trolley on 34,000 feet, but Virgin’s slots at Heathrow, where it is ranked third in terms of take-offs and landings per week. read article

No room for news from the fiscal cliff, in a word: deadlockread article

So long.

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Splitting up – Barclays reconsiders investment bank, Catalonia favors seperatism

Barclays may have to follow the seemingly unavoidable path of European banks and split. The bank’s shareholders have demanded that new CEO Antony Jenkins should let go of investment banking operations, along the lines of UBS‘ shut down of its fixed income business last month that eliminated 10,000 jobs. The Swiss bank was fined £30m by the British FSA in connection to the $2.3bn insider trading loss that Kweku Adoboli got seven years for. Of course, axing the division would help Barlcays get around ringfencing investment banking and retail operations and may therefore be desirable from a regulatory point of view. read article

All of this coincided with Qatar Holdings selling a pile of Barclays shares this morning. read article

Yesterday, Spainish region Catalonia held elections, which saw a slight reduction of seats of CiU (Convergencia i Union), the party that demands a referendum. But those seats lost, were picked up by ERC (Esquerra Republicana di Catalunya), which demands independence from Spain without a referendum and as soon as possible. Four parties in favor of separating from Spain, holding 87 of 135 seats, are now present in the Catalan parliament. Gaining independence from the Spanish mothership would neither be simple nor quick. Catalonia is contributing 7-8% of its output to the central government in Madrid, and could cause an overhaul of Spain’s fiscal politicsread article

In terms of reforms, there is a new idea from Germany’s Finance Minister, who wants to force banks to write a restructuring manual for a bankruptcy scenario. Lawyers and advisory firms just collectively ordered new cars.

Otherwise, it is Cyber Monday, which is estimated to be the biggest online shopping day of the year for the third time in a row, says the Associated Press.

In Brussels, the “Eurogroup meets for third go at kicking can down the road” and to assess Angela Merkel’s campaign strategy in conjunction with Christine Lagarde’s hopes and dreams of a Greek debt haircut.

In the week to come, we’ll get the new governor of the Bank of England (330 pm today), updated US GDP, the Spanish budget, Chinese manufacturing and all unemployment number of the rainbow, with France on Tuesday, Germany on Thursday and eurozone on Friday.

So long.

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