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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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Brussels vs Moscow, and Bernanke leaving the Fed

Yesterday…

the Federal Reserve confirmed its asset purchasing program worth $85bn per month to continue until the US economy would improve past the first scarce signs of recovery. read article

Ben Bernanke also alluded to leaving the Fed to pursue other projects, retirement for example. read article

The UK budget saw five more years of spending cuts, right past the 2015 elections to alleviate the country from its £121bn budget deficit and ensure its credit rating. The Office of Budget Responsibility expects 2013 growth to be at 0.6%, followed by 1.8% in 2014read article

Elsewhere, this happened over the course of yesterday: Cyprus’ Finance Minister conferred with Russia, while Angela Merkel said Cypriot banks had to chip in for the bailout, followed by Brussels saying that Cyprus had to present its own refinancing plan after voting against the EU proposal. It all looked like we had a new credible exit candidate until Cyprus asked for more time to come up with a better idea. Now it just looks like Greece. Here are four scenarios that could unfold over the coming days and weeks.

This morning…

The European Central Bank announced that Cyprus had until 25 March, coming Monday, to get its bailout plan ready without losing access to the ECB’s Emergency Liquidity Assistance (ELA) that keeps the island’s banks alive. read article

Finally, China released some promising manufacturing data, showing the sector expand faster than expected and giving the recovery hypothesis more support. read article

So long.

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A bailout with a side of bank-run

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

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

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

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

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

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

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

Have a good day.

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UK triple-dip on steroids; finance lobby fights in DC

There won’t be an update tomorrow, Wednesday, March 13th. 

In the UK, George Osborne announced that his Funding for Lending scheme, which has yet to prove effective in any way, will be extended and enhanced, in his words put on steroids. Currently geared to drive down mortgage prices, the reformed scheme will also benefit SMEs. Meanwhile, the county fears the reality of its third recessionsince the financial crisis as manufacturing output shrank again – at the fastest rate since July. read article

Over in the US, the financial services lobby is marching on Washington, much as it has in Europe, just with more funding. The matter at hand are not bonuses, but policy proposals that could lead to the forcible restructuring and breaking up of big banks. Goodbye, Citigroup, goodbye, too big to fail. read article

The Mexican government is taking on billionaire Carlos Slim, who ownes large parts of the country’stelecommunications sector. The proposal would force Slim to sell assets and open the market for foreign competitors. Upon Enrique Pena Nieto‘s election in July 2012 hopes for economic reform, particularly in Mexico’s oil market, rose. read article

Hungary passed an amendment to its constitution, allowing prosecutors to choose the judges that will hear their cases. Both Brussels and the US are skeptical of the vote and even more skeptical of the state of democracy in Hungary following the change. In December 2011, there was a letter exchange between Jose Manuel Barosso, President of the European Commission, and Viktor Orban, Prime Minister of Hungary, regarding the country’s funding from Brussels and its compliance with EU laws, showing Hungary’s drive for independence while expecting full financial backupread article

So long.

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Banker bonus debate: Why it’s always better to be Switzerland

After the EU’s policy proposal to cap banker bonuses last week, Switzerland voted in a referendum on a similar topic, regarding both [executive] salaries and bonuses. Surprisingly, the result leaned towards Brussels, with 68% voting in favor of new rules. On the one hand, that’s surprising because Switzerland is already losing business to places like Singapore that offer favorable tax rates to big multinationals like Trafigura, which could lead to a relocation of their headquarters. But on the other hand, the Swiss proposal gives more rights to shareholders and seems to encourage internal management of compensation as opposed to a blanket EU-one-will-fit-all-because-it-has-to policy (on the far side of the spectrum, Breakingviews suggests the introduction of tipping for services). read article 

On the same topic, George Osborne will launch a last lobbying effort on behalf of the City tomorrow, trying to mitigate the reach of the proposed rule to protect London’s financial district. Before that, the Eurogroup will begin meetings in Brussels today to discuss Cyprus’ bailout program.

Over in the USinvestors worry about the effect of new cuts and taxes on consumer spending, particularly in the light of a 3.6% slump in personal incomes in the beginning of the year weighing on household budgets. The government’s worries still lie with last week’s sequestationObama wants to get the issue resolved to move on to other policies, but Congress is currently just laughing in his faceread article

Elsewhere, China has pushed past the US and has become the world’s largest net oil importer, driven by America’s move into fracking and shale gas, as well as China’s rising demand for fuel. The analysis was derived from December data, when US net imports dropped to their lowest levels since 1992. read article

As for the week aheadJapan is poised to announce a current account deficit of JPY 768.5bn on Friday, according to ZeroHedge, which is the worst number ever recorded. Otherwise, all central banks of the rainbow are meeting this week, leaving plenty of room for statements on the currency wars.

Have a good week.

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Italy at the polls; UK loses triple-A rating

Over the weekend, the UK lost its triple-A rating, with Moody’s downgrading the country to Aa1. The pound is weak and nobody is surprised. But Moody’s also cut the rating of the Bank of England, which is confusing, considering the outrageously unlikely event of a central bank default. In other words:

The question then is: what exactly does a rating mean for a sovereign which borrows in its own currency? Right now, it seems little bar political pain.

Responding to said political pain, George Osborne said he wouldn’t bow under pressure from the opposition and have Britain stick to the course of austerityread article
 
The first exit polls for the Italian election will be coming in at 2pm GMT today, when voting stations close. So far the election has seen topless feminists screaming for the end of Berlusconi’s rule over Italy (…), and a 55.2% voter turnout, 7.3% less than last year. read article
 
In Cyprus, Nicos Anastasiades’ center-right party has won the election with a 57.5% majority, leaving the country’s bailout to be finalized by the new government and the EU. Anastasiades, however, likes to think of himself as not just another sheep-like follower of the regime of international lenders, and wants to reach a deal that doesn’t include privatizations, which are believed to raise up to €2bn. read article 
 
Meanwhile in the US, only four days are left to steer the country away from the sequester. So far neither side of the table seems to a have an idea how, despite Obama’s begging for compromise. read article
 
In other news, the Deepwater Horizon trial begins today and Japan‘s Prime Minister Shinzo Abe is looking to nominate a new governor for the country’s central bank. So far, possible choices, which include the current President of the Asian Development Bank, are all pro-stimulusread article
 
Have a good week.

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Central bank center stage: light winds from Canada

Today’s agenda is full, with the ECB press conference this afternoon, future Bank of England governor Mark Carney being quizzed in the UK parliament and the aftermath of the sudden overnight re-ignition of the rate-fixing scandal(s).

Starting with the latter, the Libor investigation has led to fines all around already, but now it uncovered the unfortunate wordings of some RBS traders (to be read here). FYI, I like both steak and sushi. Meanwhile, Japanese banks, as well as RBS’ Tokyo division, have been accused of manipulating Tibor, the Tokyo Interbank Offered Rate, which they have done, of course, because why would something like this be contained in London. On the continent, the investigation of Deutsche Bank’s Euribor fixing is progressing and has led to the suspension of five traders in Frankfurt. More fun to come.

While all that is happening, Mark Carney, former governor of Canada’s central bank and incoming governor of the Bank of England, is facing the Treasury Select Committee. Prior to the session, George Osborne declared how upset he is about the UK’s monetary policy, asking for more easing to stimulate growth. All questions are really just trying to get to the point of one thing: what’s going to change now? We already know about his nominal GDP-targeting idea, but what else? He stressed the importance of flexibility in meeting inflation targets again and gave the current BoE regime his support, praising its “entirely possible, in fact probable” positive impact on the economy. read article.

As for the ECB, Mario Draghi will hold a press conference at 1.30pm London time. Presumably on the agenda are the LTRO repayments, the euro and the latest ECB Bank Lending Survey, which indicated tighter lending conditions due to bank’s capital requirements. Maybe, Draghi will comment on Ireland’s debt burden, which the ECB reportedly eased.

Meanwhile, the People’s Bank of China noted the increased inflation risks due to QE exercised by the US and Japan, which “may push up commodity prices and make global capital flows more volatile.” China reports its January inflation rate tomorrow; it is expected to come in at 2%, as opposed to 2.5% in December.

In other news, India lowered its growth forecast from 5.5% (prior to last week at 5.8%) to 5% and Cathay Pacific decided to up the value of its cargo, switching from e.g. apparel to transporting diamonds and pharmaceuticals to boost revenues. Also, the EU-leaders summit kicked off in Brussels today.

So long.

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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.

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Berlusconi creeps back, Citi cuts 11,000 jobs

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

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

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

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

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

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

So long.

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€1.45bn fine for electronics cartel, capital gains at heart of US negotiations

In the UK, George Osborne is currently delivering the Autumn Statement, a summary will follow tomorrow.
Before the announcement, the Telegraph says that Italy is the only country with a slower growth rate than the UK in the G7, while the BBC said

If the figures are as bad as many expect, the chancellor could be forced to abandon two key coalition targets: A five-year plan to eliminate the underlying deficit, which could be stretched to eight years, and his commitment to have Britain’s debts falling as a share of GDP by 2015.

Another point of concern that is likely to be covered are new rules for pension funds’ reporting standards. Under a new “long-term view on projected returns,” numbers could smoothed to a five-year average. Not sure how that’s going to solve the problem. Looks like a layer of opaque glass to me.

The fiscal cliff has turned into the continuation of the presidential election campaign, with the Republicans fighting against an increase in capital gains tax. It was proposed that alongside other tax increases to step away from the cliff, capital gains tax should be raised from 15% to 23.8%. While the tax increase on dividends, that could cross the 40%-mark seems much less of an emotional issue, capital gains tax is as important to the GOP as guns. read article

In Australiaeconomic growth slowed slightly, as the government is implementing spending cuts in trying to meets its budget surplus targets for 2013. BUDGET SURPLUS!

In the world of retailTesco has decided to abandon its American Dream and let go of Fresh & Easy. While Wal-Mart is a potential buyer of the stores, Tesco will probably have to write part of the investment £1bn off. Fresh & Easy is expected to have lost £850m by February 2013. Although Wal-Mart is doing well overall, it also got the home advantage. Elsewhere, the company may face legal chargesIndia only lifted its FDI-ban on retailers in September of this year, but Wal-Mart snuck its way in all the way back in 2010, by investing in a consultancy that had started its corporate existence as a retail holding. read article

Taiwanese electronics firm Chunghwa Picture Tubes blew the whistle on a cartel that had been fixing prices of TV and monitor cathode-ray tubes for the last 10 years. The European Commission fined Phillips, Panasonic, Samsung, Toshiba, LG, Samsung, Technicolor and selected affiliates a grand total of €1.45bn for violating antitrust laws. Chunghwa seems to have learned – two years ago it had to pay towards an overall fine of €648m against a cartel of LDC manufacturers.

So long.

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