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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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US payrolls estimate up; Twitter IPO rumors back

Yesterday…
the ECB shook up Europe for a moment, with government debt yields falling to new lows under the soothing sound of disgruntled murmuring Germans. The ECB is ready for more [again], it says, but Germans on the policy committee are going to do everything to keep rates from tumbling. In ze mozerland, Economists are scared of a real estate bubble and argue that banks could use the freshly pressed money to bolster their equity capital, dragging the effect away from the real economy. read FT read Die Zeit

This morning…
The EU deficit report came out, showing that France, Spain and the Netherlands will breach deficit agreements, limiting countries to 3%. Italy got in just below at 2.9% (based on 2013 forecast). Because France and the Netherlands aren’t the real bad guys, and you can’t leave one standing alone in the rain (unless it’s Greece), all of them are expected to receive extensions for reaching their deficit goals. France got its waiver this morning. read FT read Reuters

Its jobs Friday in the US: nonfarm payrolls are seen up at 148,000 (almost double), with the unemployment rate unchanged at 7.6%. But stakes are high as the estimates vary within a range of 90,000 jobs added. March payrolls came in below estimates, for example, but jobless claims have been declining over the past weeks. After the jobs report, there will be April non-manufacturing PMI, which is expected to fall slightly to 54. Data releases begin at 8.30am EST. read WSJ

In the background, rumors of Twitter’s IPO are going wild after the company hired Morgan Stanley’s Cynthia Gaylor for corporate development, despite co-founder Jack Dorsey saying he was “not even thinking” about going public. read Bloomberg read Bloomberg (Dorsey)

On Monday, the UK will be out for the early May bank holiday.

Weekend reading…IvyConnect: is a ‘fascinating individual’ necessarily a douchebag? read Bloomberg
– the real culprits behind the Libor scandal are London broker nights, read WSJ
– ze Germans are gestuck with the Euro, read Bloomberg
– stripped off the alter ego: ex-Barclays CEO Bob Diamond takes the subway now, read NYTimes
– terrorism, conspiracy and the media, read New York Magazine

Have a good one.

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Letta new Italian PM; Apple profits drop for first time in decade

Yesterday…
It was a dark day for the European economy, with April PMIs across the globe disappointed, except for France, which beat expectations and soared to four-months highs. China and Germany on the other hand, undercut expectations – Germany even fell below the magic mark of 50, to 48.8, the lowest level in six months. read Bloomberg

After all the united G20 talk of appropriate monetary measures, S&P said that there’s a 30+% chance that Japan will lose its AA rating. The reasoning: it’s great to have quantitative easing, stimuli and private sector involvement, but that strategy doesn’t work if all you do is print money. read Reuters

Meanwhile in Portugal, the government is planning to lower corporate taxes to attract business. Good timing. read WSJ

Right after close, the Twitter account of the Associated Press was hacked, posting a tweet about attacks on the White House. The Syrian Electronic Army claimed responsibility. read Alphaville read BBC

Otherwise, it was all about Apple. The tech giant posted first quarter earnings,showing that profits dropped for the first time in a decade in year-on-year comparison. Alongside quarterly results, the company also announced an expansion to its now $100bn share buyback program to return money to investors. read WSJ

This morning…
Italy is set to announce a new Prime Minister. The current candidates are Guiliano Amato (Prime Minister 1992-1993 and 200-2001), Matteo Renzi (Mayor of Florance) and Enrico Letta (center-left deputy leader), all of which are less crazy than Berlusconi and none of which have worked for Goldman Sachs. read Reuters
BREAKING: Enrico Letta set to become Italy’s new prime minister

In anticipation on next week’s ECB meeting, rumor has it the Mario Draghi is likely to cut another quarter of a point off current interest rates, as inflation rates are below target and the eurozone finds itself back in recession. read Reuters

So long.

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Obama ready to cut social security for budget deal

Yesterday…
it was all about central banks: the Bank of Japan expanded its asset purchasing program to JPY7tn per month, which will increase the Japanese monetary base to JPY270tn – double – by early 2014. read article

Both the Bank of England and the ECB left their policies alone. Mario Draghi shared mixed views of the European economy, saying it was to benefit from improving financial markets sometime soon, while bank lending was negative and needed encouraging. Interest rate cuts are possible again.

This morning…
we’re waiting for US non-farm payrolls, expected to show 190,000-200,000 jobs added in March (according to Bloomberg and Dow Jones respectively), as opposed to 236,000 in February, with a steady unemployment rate of 7.7. read article

President Obama is willing to cut social security spending to finally get a budget deal together, the White House announced this morning. The new proposal would see cuts worth $1.8tn over the next decade and will piss off a lot of Democrats and unions. read article

Weekend reading…
women and Wall Street (again) read article
– why the French are an un’appy folk, read article
– the deal with interest rates, read article

Have a good weekend.

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Central Bank Center Stage: UK prepares for future easing

Today’s central bank action shows the Bank of England and the Bank of Japan leaving things as they were. In the UK, the budget, to be announced on March 20th, will give the BoE more leeway in reaching the 2% inflation target. In other words, it will be a Go! sign for the printers and for new governor Mark Carney to save the day. As for Japan, this was the final monetary policy meeting for current governor Masaaki Shirakawa. Whether his successor will employ this new found conservatism is uncertain. Meanwhile in Brussels, the ECB‘s policy meeting has begun; no changes are expected.

In the US, the Fed’s beige book survey showed moderate economic growth and easing employment conditions. At the same time, the FT (and Bloomberg) is running an article about the 750,000 people who could be out of work by the end of the year if the sequester doesn’t get amended.

A reduction of 750,000 jobs translates into about 0.4 percentage points higher on the unemployment rate. That, in turn, could mean it takes at least six months longer to reach the US Federal Reserve’s threshold of 6.5 per cent for a first rise in interest rates.

Meanwhile, the House of Representatives voted in favor of a last-minute legislation that gives greater flexibility to government agencies that are subject to the spending cuts mentioned above, avoiding a government shutdown on March 27th. Next up: the [delayed] budget. read article

Time Warner is going to spin their Time Inc and IPC (publishing the likes of InStyle, Wallpaper* and NME) magazine arms off by the end of 2013 valuing the new public company at $2.4-3bn, after sales talks with publishing group Meredith had failed. In recent years, Time Warner also got rid of AOL and Time Warner Cable, all in the name of “strategic clarity”. read article

KPMG might lose its $81m auditing contract with HSBC, because the bank is considering a new pair of eyes for their books after 22 years. Hello there, regulatory pressureread article

Finally, France reached an unemployment rate of 10.6% in Q4 of 2012, representing the highest rate since 1999 and an increase for a sixth consecutive quarter. read article

So long.

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Central bankers’ secretaries: All about minutes

The minutes from yesterday’s Fed meeting shed doubt on the future of America’s money printing program, showing that “many” (like what, more than four?) Fed officials are uncomfortable with printing all that dough. From MarketBeat:

Fed officials, including Richard Fisher, Charles Plosser, Jeffrey Lacker and Esther George (aha, four…), have previously raised concerns about the Fed’s easy-money policies. The minutes don’t identify participants by name, or specify how many officials expressed a particular view, making it unclear if other more dovish members changed their tunes in the latest Fed meeting.

Maybe someone else should do the minutes next time… At the other end of the spectrum, Bernanke seemed adamant that policies won’t change until the economy shows more convincing signs of recoveryread article

Across the Atlantic, markets are moved by even fewer people. Sir Mervyn King, who is about to leave the Bank of England to spend more time gardening, is pressing for more QE. Or maybe he just wants to take some pressure off of Mark Carney‘s shoulders, who knows. Another £25bn package, would up the Bank’s total easing program to £400bn. read article

Otherwise, the UK saw its budget surplus increasing upon the coupon payment from said QE program, reducing overall net borrowing by £2.6bn. By next the end of the next fiscal year, this number is meant to rise up to £12bn. read article

Elsewhere in Europe, uninspiring data caught on to all those high expectations, with Germany missing estimates and France dropping off the map. This recovery is going super well. read article

In Russia, central bank Governor Sergei Ignatiev, who is stepping down in summer as well, gave an interview saying Russia was losing $49bn a year through untaxed transfers to non-residents to finance illegal activities. read article

So long.

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Return to the headlines, Iceland and Ireland don’t want to pay

Like the ghost from Christmas past, Iceland and Ireland are making headlines again, both on the topic of not repaying their debts. Iceland, which held a referendum concerning the repayment of bailout debt to the UK and the Netherlands in 2010, has been relieved from the remaining £2bn outstanding to the British government. The reasoning of the EFTA (European Free Trade Association) court? They’ve learned their lesson. Meanwhile in Ireland, the ECB rejected a debt relief proposal regarding the €30bn EU-IMF bailout of Anglo Irish Bank. At present, Ireland has to repay €3.1bn per year, ending in 2023. read article

Another potential problem looming for Irish banks is the next round of stress tests, set for this autumn. With the domestic economy still shrinking and mortgage arrears much higher than anyone expected, the banks may require additional capital.

The investigation into batteries used in Boeing’s Dreamliner took pressure off of manufacturer GS Yuasa, shifting the attention to the battery monitoring unit, produced by Kanto Aircraft Instrument. The Dreamliner fleet has been grounded since January 17. All Nippon Airways has cancelled 459 flights until January 31 so far. Until about five years ago, Japanese airlines used Boeing jets almost exclusively. Deregulation opened the market to Airbus, which seems to be winning more ground as the Dreamliners stay on the ground. read article

In other news, Queen Beatrix of the Netherlands is abdicating in April, leaving the throne to her son Prince Willem Alexander, Sarah Palin was paid almost $16 per word as a commentator on Fox News and the German governing coalition has agreed to hold the national elections on September 22.

Also, as opposed to what you might have gathered in some of today’s headlines, France’ Labor Minister did NOT say France was bankrupt, he was merely mocking the past government’s take on the country’s finances. 

Finally, a post-mortem of the Davos ‘thank god we got over this crisis’ meetingread article

So long.

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Politics is about expectations: a referendum, taxes and inflation

Brace yourselves, it’s a Europe-heavy news day.

The big news of today is David Cameron’s EU speech, announcing a UK membership referendum sometime between now and 2017. Britons are applauding, while the rest of the EU is in a state of frustration. With the words of Laurent Fabius, Foreign Minister of tax hell France: “If you join a football club, you can’t say you want to play rugby.” Well, no. But was that what he was doing? Not really. Good analogy nonetheless. It set the tone for European politics this yearread article 

Eleven European countries (Germany, France, Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia) have proceeded to drafting legislation for a financial transaction tax on the trading of stocks, bonds and derivatives. That sounds specific, but really isn’t, as Brussels hasn’t decided on specifics at all. So one of the best reasons not to go on a rant of the ineffectiveness of the policy that is meant to generate €57bn for various rescue vehicles, is that it might be stuck in parliaments across the continent for a while, despite its scheduled implementation of January 2014read article

In Israel, Benjamin Netanyahu has been re-elected, though not exactly by a landslide. In the sobering words of the BBC:

It was relief more than real jubilation. The simple truth was that the combined list of candidates headed by Prime Minister Benjamin Netanyahu had performed disappointingly. But politics is about expectations.

More analysis from Israel, here: read article

In Davos, where the World Economic Forum [attended by both Merkel and Cameron – awkward] has begun, Russian Deputy Prime Minister Arkady Dvorkovich has admitted that Russia’s perception abroad is bad for foreign investments and is holding the country back. watch video

Overseas news bring us the policy decision of the Bank of Japan, which is braced to do what new PM Abe talked about all January: pump money in the economy to meet the 2% inflation target. In fact, Japan has never had a firm inflation target like that, so you’d expect it to be big news. Yet, nobody, from analysts to the IMF’s Christine Lagarde, seems overly impressedread article

In the background, Deutsche Bank has to simulate a breakup of its consumer and investment banking units. read article

So long.

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A new hope: lifting the debt ceiling a 76th time

It’s T-52 days until the United States may or may not bump its head on the debt ceiling, ‘may not’ being the more likely option. Since 1960, the US debt ceiling, the limit of how much it can borrow, has been lifted 75 times, last in August 2011. So why is this still front page news? Probably because of the drama it brings and the attention that it diverts from Spain and Italy. So let’s be appreciative and talk about it for a bit. Now more than ever, Republicans are opposed to any new tax increases. And now more than ever, Democrats think that not enough has been done. Hmm. Technically, the US hit the borrowing limit that’s currently at $16.4tn on 31 December, but some miracle accounting postponed the deadline to March. read article

Thanks to Gerard Depardieu, who is a Russian citizen now, Francois Hollande is apparently reconsidering his 75% tax. He’s busy arguing about gay marriage with the Catholic Church anyway. read article

And in Japan, businesses will profit from almost $5bn in various government stimuli, including lending schemes for technology R&D, low-interest loans for SMEs and support for acquisitions of foreign companies. read article

In a perfect example of lobbying, the banks have convinced the truly unbiased Basel Committee on Banking Supervision to lower their super strict post-global-blow-up liquidity requirements. Someone [Scott Talbott] has done their job right. Lower liquidity standards mean that the  requirements for what qualifies as a suitable high quality liquid asset has been loosened  When Basel III first came up, the assets allowed were cash, T-bills, medium to fantastic corporate debt. This list is a lot longer now. Additionally, the full implementation of the new rules has been delayed until 2019 (originally 2015), meaning that banks will only need to comply with 60% of the requirements by 2015. read article

News from the same category: in a last cleanup after the US mortgage crisis, 14 major banks agreed to a $10bn settlement deal for “flawed paperwork and botched loan modifications“. Money from the deal will be used as cash relief for Americans whose homes were subject to foreclosure during 2009 and 2010. read article

Meanwhile, Google Executive Chairman Eric Schmidt and Bill Richardson, Governor of New Mexico, are in North Korea. Although Schmidt said this wasn’t a work trip, not even his co-traveller believes that his motives are that pure. After all, don’t be evil doesn’t mean don’t do business. read article

So long.

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Something is rotten in the state of the Vatican

So, God and the Bank of Italy are having a stand-off. The Vatican, which is not on the EU’s white list of financially compliant states, is out of cash. Italy’s central bank refused authorization of the Deutsche Bank-run ATMs:

Italy’s central bank has blocked all electronic payments through cash machines and by credit cards in Vatican City following the world’s smallest state’s failure to fully comply with international anti-money laundering rulesread article

And if you’re wondering why we’ve heard so little out of Spain recently, then it might be because the country was busy using its Social Security Reserve Fund where it would otherwise have had to ask for foreign help. The fund, which said in 2010 that it may invest in Spanish debt, has now become a lender of last resort for the government: around 90% of the fund has gone towards Spain’s unpaid bills, eliminating the guarantee of [any] future pension paymentsread article 

Swiss bank Wegelin & Co, Switzerland’s oldest financial institution, will close its doors after 271 years in business. The bank pleaded guilty in a case brought against it in the Manhattan District Court for helping American clients to evade taxes on $1.2bn. The bank had been indicted in January 2012 and will now pay almost $60m in legal costs, including restitution, civil forfeiture and fines. Credit Suisse and Julius Baer are also under investigation on the same matter. read article

It took the Federal Trade Commission more than 1.5 years to look through all of Google’s search business looking for wrong-doing and antitrust violations. Now it’s official, Google has a clean slate. The investigation kicked off after Google’s competitors, such as Microsoft, claimed that Google services would have a preferred ranking in search results. read article

Otherwise, America’s car industry registered its best year since 2007, while that of France is seeing a 15-year low (on that note: “Nothing says Happy New Year like a burning car“). China‘s automotive industry crept on the front pages by doing nothing.

In the background, Venezuela’s president-re-elect Hugo Chavez is suffering form a respiratory infection that keep him from recovering fully from the cancer surgery he had in Cuba. Even though Chavez has not spoken or appeared in public in three weeks, it’s planned that he will be (re-)sworn in as Venezuela’s president on 10 January. In case new elections were necessary, they would have to be held within a month. read article

Weekend reading

– The Economist on the big international topics in 2013watch video

– So middle class, this world we live in, read article

– A case study of Germany’s bipolar voting behaviorread article

– Corporate welfare and the fiscal cliff deal, read article

Have a good one.

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