Death Star Economics

Icon

ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

Portugal could need second bailout (to pay for the first)

This morning…

the Eurogroup is meeting in Dublin; on the menu: stop messing around with bank stress tests (i.e. tighten measures) and the bailout schemes of Portugal and Ireland. Some say even if Portugal was granted an extension of its bailout repayment, it could potentially face a second collapse and thus a second bailout. Ireland is looking in the same gloomy direction. According to the FT:

Lisbon’s bailout is due to come to an end in July 2014 and the extension of maturities of its bailout loans is intended to smooth its full return to markets. But it has to raise €14,1bn next year and €15bn in 2015, whereas before the crisis it was typically raising €10-€12bn a year. Ireland is also facing a big financing challenge. It needs to refinance €20bn per year from 2016-20, which is about 12 per cent of the country’s projected economic output for this year.

Thus, the world is quiet in anticipation of next week’s news country of choice. It might be early days for Slovenia, so maybe it’ll drift back to Cyprus or Italy.

Meanwhile, Japan will officially enter the Asia-Pacific trade talks this summer, which are currently held between Canada, Mexico, Australia, Chile, Peru, Singapore, Malaysia, Vietnam, Brunei and the US. read article

Weekend reading…
– The Economist on Margaret Thatcher‘s legacy, read article

– William Cohan on the revolving door between Wall Street and the White House, read article

Climate change may double turbulence on transatlantic flights, read article

– The Winklevoss twins are all over bitcoin, read article

JPMorgan explains why you should avoid investment banks, read article

Have a good one.

Advertisements

Filed under: news brief, , , , , , , , , , , , , , , , , , , ,

A new benchmark fixing scandal!!

Yesterday…

former British Prime Minister Margaret Thatcher died of a stroke at the age of 87. Despite her polarizing character, there seems to be a consensus of her importance to the role of the UK on the global stage, both economically and politically. Finally, she also remains Britain’s only female PM. Most used terms: ‘liberalization’, ‘relentless’, ‘unforgiving’, ‘open markets’. read article

In the US, we see the beginning of a new benchmark fixing scandal: interdealer broker ICAP and some unnamed banks have been subpoenaed by the CFTC yesterday for potentially fixing the interest rate swap benchmark ISDAFIX. read article

Asset manager BlackRock has hit back at the Fed’s QE program, saying it distorted the markets. This is quite a change in BlackRock’s stance, as the company was all over government debt before until it started to nudge investors into less interest rate-sensitive products. read article

Following the court ruling that restricted Portugal‘s austerity measures last week, the country could see delays for future funds and no revision of the repayment schedule. According to the FT:

The court ruling means Lisbon will not receive the next €2bn installment of its €78bn bailout until it has convinced international lenders that fresh cuts in spending on health, education and social security will be sufficient to compensate for the rejected measures.

This morning…

we got CPI data from China, showing lower inflation at 2.1%, with food price inflation down from 6% in February (i.e. the Lunar New Year is a ripoff) to 2.7%.

In the UK factory output rose by 0.8% in February, more than the median estimate of 0.4% as according to Bloomberg, while German exports slumped in February, just to see imports decline by more than double the rate at -3.8%. read article

So long.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , ,

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.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , ,

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. 

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , , , ,

Sequestation is no medical term

Amusing as ever, the Wall Street Journal and the Financial Times try to sell us two different worlds this morning. As for WSJ:

Meanwhile, the economy is improving, central banks continue to pump money into the financial system, corporate earnings aren’t horrible and turmoil in Washington has waned.

While elsewhere, the FT announces “US faces fresh financial shock.” Well, that’s confusing. The problem at hand is the sequester, another beast of $1.2tn in automatic spending cuts, passed in 2011 and in effect from March 1. It cuts the Pentagon’s budget by $600bn until 2023, while the same amount is cut from other discretionary government spending.

Unlike the fiscal cliff deals – which was widely anticipated – the sequester would cause a big hit to 2013 growth forecasts. According to forecasting firm Macroeconomic Advisers, the sequester would knock 0.7 percentage points off growth in 2013, taking its forecast down from 2.6 to 1.9 per cent.

In the business of fixing rates, the attention shifts to Singapore, where internal reviews have uncovered a scheme to fix rates for non-deliverable foreign exchange forwards. When the Libor scandal broke lose in London, Singapore’s regulator ordered financial institutions to review their rate submission processes to the Association of Banks in Singapore, which publishes the benchmark. JP Morgan, UBS, HSBC and DBS are the most active players in Singapore’s offshore FX market. read article

In ItalyMonte dei Paschi di Siena is looking for a new investor. He should have at least €720m lying around to pay a potential fine for derivatives trades between 2006 and 2007, and not be part of any center-left political movement. A dislike of moral high horses would also come in handy. read article

Otherwise, Toyota is once again the world’s largest car manufacturer according to 2012 figures, taking its old place at the top back from General Motors.

So long.

Filed under: news brief, , , , , , , , , , , , , ,

Go team Draghi

So we got ourselves a banking union. That is surprising for a number of reasons. First of all, the Eurogroup struck a deal. Secondly, the Eurogroup struck said deal before the deadline. Finally, Germany managed to add a clause that protects its Mittelstand. Oh no wait, the last one isn’t the least bit surprising.

A summary a la WSJ:

Ministers said the European Central Bank would start policing the most important and vulnerable banks in the euro zone and other countries that choose to join the new supervisory regime next year. Once it takes over, the ECB will be able to force banks to raise their capital buffers and even shut down unsafe lenders.

Once approved by the European Parliament, the show could kick off as early as March [let’s be realistic and say July]. The threshold for banks under supervision is €30bn of assets held, leaving Germany’s retail banking sector more or less untouched.

Unfortunately, the EU delegates involved were just as impressed with their own efficiency, so they decided to leave all other decisions be for now… until June. According to the FT, both budget negotiations and economic reform contracts, were completely taken off the agenda. The remaining time spent together will be used to play Secret Santa (guess who got Greece).

Moreover, Mario Draghi, soon to be puppeteer of Europe’s financial institutions was named the FT’s person of the year. Good for you, Mario. We know it hasn’t been easy. read article

In legal/regulatory/scandal news, the FSA, CFTC (US Commodities Futures Trading Commission) and the US Department of Justice are about to fine UBS more than $1bn for fixing libor ratesDealbreaker explains how such a humongous number (double of what Barlcays had to pay) comes together:

The fine-setters seem to have about four things to think about: 1) how much bad stuff did the bank do, 2) how much money did they make doing it, 3) how caught are they, and 4) how sorry are they now.

It calls for an investigation.

Co-head of Deutsche BankJuergen Fitschen, is under investigation for tax fraud committed in 2009. In his opinion, the reaction of German authorities, sending officers with machine guns to the Deutsche Bank headquarters in Frankfurt on Wednesday, was a bit much and he doesn’t intend to resign any time soon.

For the weekend, Japanese elections are on, with the opposition (the Liberal Democratic Party) led by Shinzo Abe expected to winread article

Weekend reading

– North Korea: playing with rockets, read article

– Felix Salmon on NYT Dealbook’s first conference this week and whether it was a success, read article

– Joris Luyendijk’s banking blog returns to blame fund managers, read article

– Alphaville is selling shirts (or ECB collateral) for charityread article

Have a good one.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , ,

Monti set to resign, new stance on global internet regulation

On Saturday, Italy has crawled back to the center of attention of the eurozone blow-up. Mario Monti, the country’s unelected prime minister, announced his intended resignation following the approval of the Italy’s 2013 budgetThe FT summarizes:

The 2013 budget law is expected to receive parliamentary approval before the Christmas recess. Whether parliament is dissolved immediately and Italy heads into snap elections in early February – rather than in March or April as had been expected – depends on Mr Napolitano. The president could decide instead to ask for a vote of confidence in the government and appoint a provisional prime minister who would oversee the passage of key economic reform legislation still before parliament.

Last week Thursday, the Italian parliament faced turmoil, after Berlusconi’s party walked out of a vote on fiscal matters. Since then, rumors got louder that Silvio Berlusconi will try to return to office. He is currently being charged for relations with an underage prostitute and abuse of power (possibly related, but two court cases). In Italy, all legal charges are put on hold if an individual is running for a public office. Berlusconi had been convicted to four years imprisonment for tax fraud in October 2012, which was later reduced to one year and then to the prohibition from ever running for office again. Clearly, that has not worked out so well. But the left ranks before Berlusconi’s People of Freedom party in the polls. The Wall Street Journal spoke to Pier Luigi Bersanti, the current favorite according to said polls. read article

Japan is finding itself back in recession, after Q2 GDP was revised down from 0.1% growth to -0.1% (annualized and seasonally adjusted). Shinzo Abe, who is leading the opposition in the election on Sunday, wants unlimited monetary easing and more stimulus until the economy gets back on track. Expectations, however, point at another quarter of negative growth for the end of the year. read article

Meanwhile in Dubai, the Arab state delegation, supported by Russia and China, have proposed a

new regulatory framework for the internet. The opposition, simply put the Western world, is strongly in favor of the current regulation, which doesn’t regulate so much. read article

American and British financial regulators are working on a blueprint on how to deal with failing banks, or more specifically, failing G-SIFIs (global systemically important financial institutions). Once agreed, the new regime is meant to protect tax payers on either side of the Atlantic, while drawing on creditors and shareholders. read article

According to this Sunday’s New York Times Bloomberg is looking into buying the Financial Times, which also includes a 50% stake in The Economist. The other possible bidder is, of course, Thomson Reuters. The Financial Times Group is estimated to be worth around $1.2bnread article

So long.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , ,

No growth for Europe, Starbucks wants your love back

German central bank has cut its economic growth forecast for 2013 from 1.6% (June estimate) to 0.4%. Estimates for 2014 are back at 1.9%. Oh well, so we’ll wait another year and pour more money into Europe’s open wounds. No biggie. Yesterday, the ECB said if the recovery was to kick in in the second half of 2013 as hoped [Draghi would have said ‘expected’], the eurozone will grow 1.2% in 2014read article

Also in Germany, financial regulator BaFin sat in on Deutsche Bank’s audit committee meetings during the financial crisis and should therefore have known about the skewed numbers that may have saved the bank from requiring a government bailout. The SEC, who’s investigating the derivative mis-valuations, is bound to be pissed off. read article

When Starbucks started to write your name onto its white paper cups, that was an effort to make you feel more at home, more individually loved in each stock-standard store. Then the company was part of a tax avoidance case worth millions of pounds. Today, Starbucks issued an open letter from its UK managing director, promising to pay up to £20m more in corporate tax just to be nice. Of course, that is an image-protecting half-truth, because Starbucks, Google and Amazon had become the poster children of tax avoidance in the UK. Yet, paying so much money for a one-page add just to remind me that there will always be a barrister barista waiting for me, almost got me walking into a Starbucks this morning. Then I remembered that the coffee’s not that good.

In fiscal cliff news, everybody has returned to the negotiation table, or so it seems. On that note, a depressing visualization of US debt.

The US is also awaiting jobs data that will be completely distorted by Sandy. Meanwhile, Hillary Clinton is convinced that Russia is planning a new Soviet Union and must be stopped. read article

And finally, bidding farewell to the Financial Times Deutschland.

Weekend reading

– The New Yorker goes for lunch with Warren Buffetread article

– The FT got balls: In this opinion piece on the Autumn Statement, George Osborne became G-Dawgread article (click here for a picture of the print version)

– Why Dilma Rousseff needs a new economic advisorread article

– The US could create jobs by building a Death Starread article

Have a good one.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , , , , ,

Black Friday after Black Thursday; FT Deutschland shuts down

It’s Black Friday, THE day in the world of retail, except some companies started early this time around. Firms included Wal-MartTarget and Toys”R”Us offered their traditional Black Friday discounts on Thanksgiving day itself. What was that good for? MarketBeat says it raised the bar: on expectations and stock prices.

On EU issues, this summary says it all:

First it was Greece, which Europe couldn’t “resolve” on Monday night despite Juncker’s vocal promises to the contrary, and was embarrasses into postponing until next Monday when everything will surely be fixed. Now, the time has come to delay the “resolution” of the EU budget, which was supposed to be implement[ed] last night, then a decision was delayed until today, and now every European government leader is saying a new meeting will likely be needed to resolve the budget impasse.

The FT reports that the deadlock between the EU’s North and South could delay a budget deal until the new year. So far, rumors say the overall size of the budget, approximately €1tn hasn’t changed – much to the displeasure of the UK and Sweden. As mentioned before, the European common agriculture policy takes the biggest share of the budget, and received an additioanl €7.7bn.

In other news, Bolivia has been invited to join Mercosurthe association between Brazil, Argentina, Paraguay, Uruguay and Venezuela, while Argentina has criticized yesterday’s decision of a New Yorker judge that the country has to proceed with its debt repayments and reimbursements to its hedge fund bond holders, sparking new fears about another South American defaultread article

The gender battle about the next appointment to the ECB’s board has been won by Yves Mersch of Luxemburg. Politically, Mersch is part of the German anti-inflation party. The German edition of the Financial Times is officially shutting down on 7 December, slashing 364 jobs in Hamburg, Frankfurt and offices abroad. I am deeply upset.

Weekend reading:

– Deutsche Bank and the [unbiased] case for the “universal” mega bankread article

– Is Ben Bernanke the new Wizard of Ozread article

– Gaza in an infographic, read article

– Inflation measured on the price of turkeyread article

Have a good one.

Filed under: news brief, , , , , , , , , , , , , , , , , , , ,

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.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , , , ,

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 213 other followers

%d bloggers like this: