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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

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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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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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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Budget cuts and peripheral misery

Today at midnight (Saturday morning in the old world), the US is facing the much discussed spending cuts, decreasing government spending by €85bn until the end of the federal budget year in September. Maybe it’s time to depart from discussing the sheer possibility of this scenario. If you believe Bernankethe pain will be close to intolerable, slowing the economy down by 1.5%. The Congressional Budget Office estimates a 0.6% decrease in GDP. If you believe Fortunecompany earnings are strong enough to allow ignoring the issue. Without a budget fix, the automatic cuts will continue in the following financial year. read article

And things aren’t pretty in Europe’s periphery either. First, numbers out of Spain showed that Spanish corporations faced the largest decrease in earnings ever recorded in Q4, including Bankia’s €19.2bn net loss. Meanwhile in ItalyBersani rejected all rumors regarding coalition talks with Berlusconi. Over in Greece, 2012 revenue targets were missed and the burden of unpaid taxes increased, causing skepticism in Brussels, where the next loan instalment, worth €2.8bn, can be withheld if Greece’ financial report is not satisfactory. At the same time, the IMF, usually in bed with the EU, was more positive, saying Greece had collected more taxes recently and could avoid a further reduction in government salaries.

We shouldn’t forget, however, that despite the mess that is Southern Europe (oh yes, I made that generalization), there are still countries out there that want to join the union and currency. Poland, for example, which originally wanted to have the euro by 2012, is now discussing meeting all criteria (the same criteria that Greece met once…) by 2015read article

In India, Q4 GDP growth dropped to 4.5%, as the government announced a more pro-business deficit-reducing budget for the coming year. read article

Otherwise, Andrew Mason removed from his position as CEO of discount firm Groupon, which recorded losses in the last two quarters of 2012. In his own words:

After four and a half intense and wonderful years as C.E.O. of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today. If you’re wondering why… you haven’t been paying attention.

Weekend reading

– The “Because I Can” attitude of senior managementread article

– Dear Banker, this is how we’ll pay you in the futureread article 1 read article 2

– the European Union and Ricardian equivalenceread article

Have a good one.

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Eurozone stuck in recession until 2014 (except for Germany, because they think positive)

It’s a Europe-centric Friday, with breaking news of poor performance all around Europe’s economies – we know, thanks for pointing it out again.

The Commission revised its growth expectation for the year, saying the eurozone’s economy will contract by 0.3% in 2013. Bye bye, 0.1% growth. Bye bye, post-recession world. It will be accompanied by an unemployment rate of 12.2% and inflation of 1.8%. At least there will be room for rate cuts. read article

In Spain, the budget deficit increased to 10.2% due to aid costs for the banking sector. The bailout package for Bankia alone added 3.2 percentage points to that. Incidentally, Bankia, which is reporting 2012 earnings next week, will report annual net losses worth €19bn+, the largest loss in Spanish corporate history. read article

The German Ifo business climate index came in higher than expected, because Germany is vehemently following its optimism strategy that includes ignoring any data or reality.

In good news, the ECB recorded a €1.1bn profit from interest payments on a €208bn debt portfolio of PIIGS bonds. Over the last year, income from sovereign bonds even amounted to €14bn. read article

Meanwhile, US consumer confidence is being rocked by rising prices on gas, which climbed 15% up to $3.75 per gallon last week. Car owners in Europe are weeping and cycle to the US embassy to apply for visas. read article

Over the weekend, we’ll see Italy’s general elections (24-25 Feb), aka the Silvio Berlusconi show. In case of a hung parliament, the election limbo would continue for months, and Italy would be stuck with a caretaker government that doesn’t want to implement policies. read article

Weekend reading:

– horsemeat economics, read article

– and then ‘cyberwarfare‘ became a thing, read article

– rethinking drug policiesread article

– in case you’ve read the Bloomberg editorial on $83bn annual bank subsidies, here’s a discussion of it read article

Have a good one.

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G20 and currencies: off the record, we’re not friends

The G20 are meeting today and the biggest topic on the agenda is currencies. Since the G7 issued a statement saying they would refrain from using currency targets to revive economic growth on Tuesday, the message has become less consistent by the day. Most politicians still stick to the chant that a race to debase is bad for everyone involved, and on the record nobody wants to point their finger at Japan. Well, until today. read article

In Europe, banker bonuses will be capped at 100% of fixed salary, unless approved by two-thirds of the institution’s shareholders. This decision came in yesterday, initially proposed by Ireland, which currently holds the Presidency of the Council of the European Union. Needless to say, the UK is opposing such plans, suggesting that there could be a different (but probably similar) set of rules for the City of London. read article

And in general, there was a lot of uninspiring news out of Europe yesterday, including eurozone GDP falling 0.6% in Q4, contracting economies in Italy (-0.9%), Portugal (-1.8%) and Germany (-0.6%), and Greek youth unemployment reaching 62%. Today, the UK reported poor January retail sales, down 0.6% from December, and blamed it on the Britain’s very own snow “disaster” earlier this year. read article

In other news, BlackBerry co-founder Jim Balsillie, who used to be co-CEO, sold his entire 5.1% stake in the firm yesterday. Seems like someone isn’t so keen on the Blackberry 10. Meanwhile, Airbus decided to stop using lithium-ion batteries in its jets to avoid the crisis that arose (I want to say ‘ignited’) at Boeing last month, and Warren Buffet partnered up with private equity firm 3G Capital Management [although he likes to publicly hate on said investors] to buy ketchup brand Heinz for $23bn.

In the background, negotiations on a US-EU transatlantic trade and investment partnership started. Such an agreement could add 0.6% to European GDP and 0.4% to American GDP by 2027. read article

Weekend reading
– the designated tumblr page for the FT’s 125 year anniversary

– The Sun‘s and the Oscar Pistorius story, read article

– the deal with off-shore tax havensread article

– the physics of mosh pitsread article 

Have a good one.

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Jobs Friday and Barclays latest disaster

Before 1.30pm (8.30am EST):

After Wednesday’s announcement of the shrinking US economy, today’s jobs report gained in importance. Forecasted is a flat unemployment rate at 7.8% with a 11,000 more jobs added than in December (166,000). As according to MarketBeat:

To get the rally back on track, the jobs figures might not only have to beat expectations, but beat them handily. […] On top of that the January jobs report, in particular, is typically difficult to read. The government updates its population estimates at the beginning of every year, which in the past has caused big movements in the survey figures compared to the December data.

After 1.30pm (830am EST):

Ouch. This didn’t work out at all, did it now… With jobs only up slightly from 155,000 to 157,000, the unemployment rate rose to 7.9%. But not all is bad, in hindsight both November and December were better months for the job market. read article

If there was a part of you hoping that an end would be in sight for this ubiquitous bailout hangover from the financial crisis, I’ve got bad news for you. Allegedly, Barclays lend money to the Qatari government, the go-to investor for all of London, to invest in the bank and avoid a bailout by the British government. Improper disclosure and dubious fees could deem this deal illegal. read article
 
In the background, Barclays CEO Antony Jenkins refused his 2012 bonus.

Otherwise, there’s not a whole lot going on. UK manufacturing picked up, as did consolidated eurozone manufacturing, and the Dutch government will fund a €14bn bailout of SNS Reaal, the countries fourth largest bank. 

Weekend reading:

– things economists worry about, by likelihood and impact, see graphic

– in defense of Europe’s financial transaction taxread article

– the life and death of moneyread article

– Berlusconi and Mussolini, read article

– advertising and the Super Bowl, 2013 edition, read article

– the banking blog on complianceread article

Have a good one.

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US economy shrinks, RIM revives as BlackBerry

So that was quite the surprise. The US economy shrank 0.1% last quarter, while expectations had averaged on 1% growth. This is the first contraction of the economy in three years. To blame are, in part, a decline in business inventories, the fiscal cliff and government spending cuts, including the largest cut in defense spending since the Vietnam war. Employment data released tomorrow, could shed more light on whether the US is actually slowing down. read article

Elsewhere, in China, local government are also feeling the impact of the global economy. Frantic to meet their tax targets, North-Eastern cities demand taxes two years in advance from local steel mills. Now that’s sustainable. While China produces almost half of global steel supplies, the mills’ profits slumped 98% last year. read article

In happier news, RIM has managed to use the defibrillator on itself, officially rebranding to BlackBerry (BBRY) and introducing a new phone… with a touchscreen. Like they don’t know that the keyboard is the best feature. Shares fell 12%. Either way, the company has bought some time until private equity firms will start circling over its Canadian headquarters again. Winning in the category of most puns in single headline: the FT with “Rimless BlackBerry hopes to regain touch.” read article

Deutsche Bank reported losses worth €2.6bn in Q4 2012, mostly related to legal matters and writedowns. €1bn alone was allocated to legal costs arising from the Libor scandal. Over in London, BarclaysRBSLloyds and HSBC have to pay a total of £5bn in compensation after mis-selling interest-rate derivatives to SMEs. read article

Otherwise, Bundesbank president Jens Weidmann called for a more conservative approach to bailouts in Europe, in order to protect wealthier economies from throwing themselves in the deep end out of misunderstood solidarity, and Greek retail sales fell almost 17% in November, indicated that, no, the crisis is indeed not over.

So long.

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Spanish recession gets worse; Toyota recalls 1.1 million cars

Spain’s recession deepened in Q4, when the country’s economy shrank by 0.7% compared to the same period in the year prior. Over the course of 2012, Spain contracted by 1.7%.

The Bank of Spain says the return of international investors to Spain’s battered debt market, has not translated into the real economy, although it has allowed the government to conduct a large chunk of its 2013 borrowing at the start of the year, potentially easing the pressure on it for months to come.

In the background, Catalonia requested €9.1bn in aid from Spain’s regional liquidity fund. In 2013, the region will have to repay €13.6bn of debt. read article

Yet, overall the eurozone’s economic sentiment and business climate improved, along with expectations for inflation. read article 

In the US, the Fed is concluding its January meeting this afternoon and for once there won’t be economic projections or a press conference. Maybe, after months of easing, Bernanke wants to keep everyone guessing again. After all, being predictable is boring. According to a Bloomberg estimate released yesterdayQE3 will amount to $1.14tn before it ends in Q4 2014.

In Brussels, the FT got its hands on the blueprint for the financial transaction tax regulation. The draft imposes a levy of 0.1% on stock and bond transactions and 0.01% on derivative trades and would yield €30-35bn per year.

If this design of the tax is adopted, it would mean offshoots of banks headquartered in the tax area – such as Deutsche Bank or BNP Paribas – as well as any trades undertaken on behalf of clients based in the 11 countries will be hit by the levy, even if they are trading in the City of London. Any US or Asian institutions trading securities issued in France, Germany, Italy or Spain would also be taxed.

But on the plus side, the EU has departed from its ringfencing plan, separating investment banking and commercial banking activities, because it could jeopardize Europe’s growth prospects. read article 

Things were going too well for Toyota. Despite Japan’s continuous decline and China’s war on Japanese manufacturing of any kind, the company had nudged General Motors from the pole position of global  car producers. Now, Toyota is recalling 1.1 million cars worldwide, with the majority (752,000) sold in the US, due to defect airbags. This is the third bigger recall since October 2012 and will cost the firm around JPY 5bn ($55m). read article

In other news, Obama has introduced his immigration reform plan, making it easier for skilled workers to obtain US visas, and Zimbabwe‘s Finance Minister said the country has $217 left in the bank after paying public sector salaries last week. read article

So long. 

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