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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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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 to unveil $3.77tn budget

Yesterday…Slovenia‘s new Prime Minister Alenka Bratusek said the country didn’t require any help to deal with its banking crisis that the OECD seems to consider as serious but not urgent. Many Slovenian banks are already owned by the state; the OECD has recommended stress tests and the potential recapitalization or closure of failing institutions, but Bratusek is having none of it, saying the bad bank that will be set up until early summer will be able to take the toxic assets. read article

This morning…
EU is considering extending the bailout programs for Ireland and Portugal. According to Reuters, where this story came from, this will be discussed at the Eurogroup meeting on Friday.

To make everything worse, the ECB’s [first ever] Household Finance and Consumption Survey found that the average Cypriot is richer than the average German (by median net wealth). Even though the classic North-South divide re-appears in the median gross income figures, that won’t go down too well. read article

China reported its first trade deficit in over a year for March 2013, again it could be another hangover from the Lunar New Year holiday, leading to increased imports, while exports grew less. read article

Meanwhile in the US, President Obama will unveil a $3.77tn budget plan at 11am EST today, when he will speak from the White House. read article

So long.

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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.

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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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Cypriot banks re-open, German unemployment higher

Yesterday…
word got out that UK banks Lloyds and Royal Bank of Scotland, both backed by tax money, needed to raise an additional £9bn in correspondence to capital requirements set by international banking regulators. The additional cash needs to be on the balance sheets (£3bn for Lloyds, £6bn for RBS) by the end of this year. read article

This morning…
Cyprus is making history by being the first EU country to impose restrictions on capital flows, “with limits on credit card transactions, daily withdrawals, money transfers abroad and the cashing of cheques.” The withdrawal limit seems to be €300 per day, while transfers of more than €5,000 will require central bank approval. read article

German unemployment rose by 13,000 people, as opposed to an expected drop, while German 10-year bunds dropped to their lowest yield since early August 2012 (1.255%).

Meanwhile in Asia, the Bank of Japan has already exceeded its self-imposed limit on asset purchasing limit (well done) and South Korea cut its 2013 growth forecast from 3% to 2.3%.

Easter reading… – a list of people who are investigating JP Morgan, read article
– what extremely successful people were doing in their 20s, read article
– greatness of nations: India vs China, read article

Happy Easter, have a good one.

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Cyprus rejects Russia, EU deadline looming

Cyprus… failed to reach a deal with Russia, as reported very early on this morning, but is said to discuss an EU solution in parliament today. That would include a bailout program for Cypriot bank Laiki, splitting it into a ‘good’ and ‘bad bank’. Jobs would be saved and deposits under €100,000 would be guaranteed, the rest would go towards the bank’s dark side. Besides this proposal, the parliament has six others to discuss. read article

Yesterday…

The US House of Representatives voted to prevent the government from shutting down by the end of the month and supported Paul Ryan’s budget proposal. This means that both government agencies and programs will stay in place until the end of the fiscal year on September 30. Ryan’s budget on the other hands, cuts taxes, healthcare and social costs to lower the budget over the next decade. It is expected that the Democrats’ counter example of a plan will be passed in the Senate today. This has brought us nowhere. read article

In some last minute action, Blackstone, together with Southeastern Asset Management, is considering a bid for computer company Dell. Silver Lake Partners and founder Michael Dell have put in their bid in Feburary, but the official deadline is only todayread article

This morning…

German business confidence, measured by the IFO index, reported a slump after a 10-month high in February. Surprising or not, this is hardly a sign that even Germany is going under, and is following a lower manufacturing PMI as well. read article

Finally, family traits: Raj Rajaratnam’s brother has been accused for insider tradingread article

Weekend reading…

– how Obama is trying to solve the Israel-Palestine conflict, read article

– next up in Venezuelaread article

– Nicholas Sarkozy and elderly women, read article

– Cyprus cartoonsread 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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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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