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OMG, Japan is actually growing

Yesterday…
US jobless claims came in higher than expected and housing data disappointed as well, raining on the American recovery 2013 parade and adding to the uncertainty over the future of the Fed‘s asset purchasing program. read New York Times
At the same time, those with disposable income seem to be working on a new housing bubble of sorts. read Bloomberg

Japan reported its economy grew in the first quarter of the year, leading to a 3.5% annualized growth leap and supporting Shinzo Abe’s approach since his inauguration in September. Most of the growth is attributed to private consumption. read Bloomberg

Meanwhile, Japanese companies prefer to look for opportunities elsewhere, for example the US, where a handful of corporates bought into the US shale gas market for several billion dollar. read Financial Times

Following the Bloomberg user data debacle, Citigroup has banned its fixed income traders from participating in Bloomberg chat groups to shield the banks from any security breaches. read Financial Times

This morning…
Lloyds Banking Group might just be short of fully returning into private sector hands, as the bank’s shares rose higher than the government’s cut-off point for a sale of 61.2 pence per share. Over the past weeks, David Cameron had reiterated that bailed out and partly nationalized institution shouldn’t stay government owned for longer than needed. read Reuters

Word got out that Qatar spent up to $3bn on supporting the Syrian opposition since 2011, the same year in which Libya’s rebels also received support, fueling rivalry over political influence between Arab countries. read Financial Times

Other than that, there is not much going on, time to get on the below.

Weekend reading…

Bangladesh, globalization and the price of your t-shirts, read New York Times
– from pork bellies to ruling the world – a brief history of the Chicago Mercantile Exchange, read Economist
gold bulls vs bears, read Alphaville
– Super Abe and the fight for a prosperous Japan, read Economist leader
– on the uselessness of asset management, read Harvard Business Review

Have a good one.

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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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Laiki depositors to lose up to 80%, Poland turns against euro

Yesterday…The Spanish central bank forecasts its economy to contract by 1.5% in 2013, while unemployment is seen to rise to close to 30%:

The economy will be marked by weak domestic demand, a fragile labor market and tight financial conditions, the bank said.” read article

Meanwhile in Poland, Prime Minister Donald Tusk is floating the idea of a euro referendum. The country has been pushing to join the foreign currency pretty much as long as it has existed – proximity to Germany would bring an additional trade advantage (despite the disadvantage for cheap manual labor). Anyway, now Poland is not so sure anymore. The political opposition claims the eurozone has changed too much since 2004, when the country joined, for a decisions to possibly still be valid. read article

The US economy must be improving, because it’s not getting worse. That was the idea of the morale following the data announcement of January home prices rising at the fastest rate since summer 2006 and an increasing demand for durable goods. read article

In other news, the Financial Times has found that the group of AAA-rated countries has decreased by 60% since 2007, and Warren Buffet will become one of Goldman Sachs’ ten biggest investors after exercising some warrants issued in 2008. read article

This morning…
Cyprus‘ central bank announced some details on the impending haircuts, saying uninsured deposits at Cyprus Popular Bank (Laiki) could be cut by 4/5th. The estimated 40% haircut seems to remain the benchmark for larger insured deposits. According to WSJ:

Based on estiamtes from government officials, the losses would affect some 19,000 deposit-holders at the Bank of Cyprus who, combined, hold some €8.01 billion in uninsured deposits. Uninsured savers at Cyprus Popular Bank, who hold a combined €3.2 billion, will lose most of that.

The Bank of England said British banks were facing a £25bn capital shortfall with regards to compliance with new banking standards. read article

So long.

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The housing market doesn’t care about the fiscal cliff

The pendulum of market-moving news has swung back to the US fiscal cliff. Not much has happened there since Greece was re-rescued, but somehow fear got the world in its grips. And what triggered the panic? Harry Reid, Senate Majority Leader, saying that there was little progress. Hang on, wasn’t there just as little progress last week? It’s like the news are recycling themselves. Either way, the wave of fear of the US falling into recession come 2013 depressed stocks all around the world.

If you want to believe the Wall Street Journal, however, the US economy should refocus on the housing market, which is blossoming in the background:

[…] an improving housing market is buoying consumers’ spirits and giving the economy its biggest lift since the real-estate boom. Macroeconomic Advisers projects the economy will grow at a 1.4% annual rate in the fourth quarter with housing contributing 0.4 percentage point. IHS Global Insight is projecting a 1% growth rate, with housing contributing 0.53 of a percentage point – the largest contribution since 2005.

And the best thing about it: so far the housing market doesn’t care about the fiscal cliff. Not like it won’t if America goes back into recession, but at this point things are still looking up. read article

The counter example are companies paying dividends, which are freaking out about the worst case scenario. Since October, US firms have paid out the largest amount of special dividends since 2010, to avoid the possibility of paying higher taxes come January. The current tax rate sits at 15% but could increase to 40% upon the expiration of Bush era tax cuts and – again – if no deal is struck on the whole fiscal cliff. read article

In European news, the EU approved the restructuring of four Spanish banks, Bankia, NCG Banco, Catalunya Banc and Banco di Valencia, the latter of which will be sold to CaixaBank. The remaining three will shrink their balance sheets by 60% until 2017. Upon the restructuring next month, the Spanish rescue fund FROB is eligible to receive another €100bnread article

The EU is also making it easier to sue rating agencies of sovereign debt for gross negligence in Europe in an attempt to manage the catastrophe that is the eurozone crisis. read article

So long.

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T-1 month for Japanese election; $4.5bn settlement for BP

One election down, one to go: Japan is getting ready for December 16, when, rumor has it, the Liberal-Democratic Party will be re-elected over the incumbent Democratic Party of Japan. Over the past six years, Japan has elected a prime minister seven times. In between it was struck by disasters of all kinds. Shinzo Abe, leader of the liberal democrats, is determined to get the economy back on track, revisit US-Japanese relations and try not to go to war with China. Now there we have a reasonable approach to governing. Unfortunately, the world of money won’t have any of this. US hedge funds are increasingly betting against Japan’s corporate futuresays the Wall Street Journal, buying CDS’ for Sony, Panasonic, Nippon Paper Group and Kobe Steel.

In The Hague, Ante Gotovina and Mladen Markac have been released from prison after they had been charged with a 24 and 18 year prison sentence respectively for war crimes against ethnic Serbs during an offensive to retake Croatia’s Krajina region in 2011. read article

In the UK, some MPs have claimed that is is unlikely that £66bn poured into Lloyds and Royal Bank of Scotland will ever be recovered. Two weeks ago, Jim O’Neil, who is responsible for the two bank investments on behalf of the government, admitted that the purchase may not have been absolutely necessary at the time. This is angering all the anti-Keynesians who are chanting “we told you so”. Yet, the US Treasury managed to recover its bailout payments to AIG and actually sell the stake at a profit, maybe not all is lost. American public funds are going to be redirected towards the recovery of the housing marketsaid Bernanke yesterday. Today, the Federal Housing Administration reported that its insurance fund is running $16bn deficit for the year leading up to October. read article

Updating yesterday’s news of BP’s fine, the company has to pay $4.5bn in settlement charges. This includes an actual fine worth $1.256bn, the biggest penality of its kind in history. The Deepwater Horizon disaster let 4.9 million barrels of crude oil flow into the Gulf of Mexico. read article

Weekend reading:

– Lloyd Blankfein got America’s recovery all figured out, read article

– American oil and gas for everyone, read article

– Questions for and a defense of left-libertarianismread questionsread defense

– Making “fiscal history”: India’s tax reformread article

– reality HomelandPatraeus‘ affair, read article

Have a good one.

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‘Sandy’ to cost $10-20bn in damages, Spain gets serious about bad bank

Wall Street‘s equities and fixed income markets remain closed today as well, leaving us with nothing but the news of Paul Krugman’s dead cat. The last time the stock exchange stayed shut for two days due to weather conditions was in 1888 Estimates say that Sandy could cost the US up to $55bn in damage repair. Catastrophe risk modeling company Eqecat forecasts damages to reach $10-20bn, with insured losses of $5-10bn.

Meanwhile, the Economist is looking at Sandy from the election angle, arguing that the storm could influence early voter turnout in favor of the Republicans, as Obama is more likely to rely on sporadic voters than Romney.

Disregarding the storm or state of catastrophe on America’s east coast, AMR, parent company of American Airlines, is planning to request $1.5bn in new bond financing in Bankruptcy Court. Except… the US Bankruptcy Court is in Manhattan and the scheduled hearing is unlikely to take place today. American Airlines filed for bankruptcy protection 11 months agoread article

In SpainGDP contracted yet another time in Q3, showing a decline of 0.3%. Overall, Spanish GDP is down 1.6% from 2011. But the Spanish government is preoccupied with setting up a bad bank, so bad, in fact, that it might be too big and bad to function. Spain’s rescue fund FROB said the new facility, called SAREB (Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria), was still looking for investment support from the private sector. It will hold foreclosed assets bought at a discount of 63% and developer loans at a discount of 43%. Spain’s nationalized banks will contribute €45bn to SAREB. Fernando Restoy, chairman of FROB, said the bad bank will be profitable and have a lifespan of 15 years, yielding at least 14-15% ROE. Good pitch, but do you really want to commit to a long-term business plan in Europe’s periphery right now? Maybe not. read article

Otherwise, German unemployment was at 6.9% in October, the by far lowest rate in Europe, rising by 20,000 claims, and the Bank of Japan did as expected and added another JPY10tn to its asset purchasing program.

China also threw some money at its economyinjecting CNY395bn ($63bn) into its banking system to ease a tax-induced credit squeeze. Corporate income taxes for Q3 are due to be paid tomorrow. In the background, Nissan is dissing China‘s sluggish growth. It’s understandable, the conflict between Japan and China is ruining Nissan’s third quarter earnings; sales fell by 35% in September alone.

So long.

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Central bank center stage: Japan is riding the QE dragon

The Bank of Japan has locked step with the Fed and expanded its quantitative easing program by ¥10tn. It now amounts to ¥80tn, ot $1.01tn. The deadline for the policy program was extended to the end of 2013. The added ¥10tn, will be split 50:50 between short and long-term Japanese government bonds. As a result, the dollar rose against the yen and the Nikkai exploded upwards. read article

But Japan’s worries are not only domestically. After yesterday’s anti-Japan protests in China, forcing many factories to shut down, Japanese car manufacturer are getting ready to face the consequences. According to Bloomberg:

The collective market share of Japanese car brands, No. 1 among foreign nameplates in China since 2005, will probably fall to 22 percent this year, whil eGerman marques could increase their share to 22.5 percent, according to projections by China’s Passenger Car Association.

Nissan has the biggest plans in the country, with its China venture budgeting 50 billion yuan($7.8 billion) in investments to raise sales to more than 2.3 million vehicles in China by 2015 from 1.3 million in 2010. Toyota said this month it aims to increase Chinese deliveries to 1.8 million vehicles by 2015, more than double the tally last year, by adding at least 20 new models. Honda said in April it plans to double deliveries in the country over four years after being “too cautious” in its expansion.

The Bank of England confirmed to keep its rates and QE target steady for the moment. The current asset-purchasing program is capped at £375bn, but after yesterday’s inflation data came out, it is very possible for the target to be reset in November’s policy meetingread article

Meanwhile, the US is waiting for the announcement of an awful lot of housing data this morning.

Saudi Arabia is feeling socially responsible and wants to combat high oil prices, by adding some more to the market. It’s like oil-QE. The Saudi oil production amounts to 10 million barrels per day. read article

Otherwise, Goldman Sachs has found a new CFO to pay $15.8m annual remuneration to (final salary of departing David Viniar). With 12 years in the role, Viniar is the longest serving CFO on Wall Street. Harvey Schwartz, who will move into the new position in early 2013, is yet another one for the next-CEO-question-mark list.

And the fun fact of the day, according to the Telegraph, journalists rank higher than bankers in the least trusted professions (probably because bankers don’t trust journalists…).

So long.

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Dramatic commodities and unfriending facebook

The looming food crisis is gaining more traction, as Argentinian farmer’s have planted the second-smallest amount of wheat in more than a century this year, due to unfavorable (dry) weather conditions. From the Economist:

The United Nations Food and Agriculture Organisation’s food-price index was up by 6% in July, as corn and soyabean prices hit records. The rise, the steepest in nearly three years, is the result of drought in many of the world’s crop-growing regions. Ample supplies of wheat and rice helped to keep the index, which tracks export prices, 10% below its peak in February 2011.

After the Lonmin platinum mine was forced to shut down last week due to labor union disputes, it has now become the scene of what is called the bloodiest labor-related event South Africa has seen since the end of apartheid. Not a happy day for South Africa or its mining industry… read article

Meanwhile, the White House has resumed considerations to release some of its strategic oil reserves to combat high oil prices. read article

Mitt Romney was going to have Wall Street behind him and business execs praising his policy agenda… until it all came differently. The FT-Economist Business Barometer conducted by the Economist Intelligence Unit, shows that the private sector around the globe prefers Obamaread article

Also in the US, Facebook’s first lockup clause expired yesterday, meaning that some pre-IPO investors were [finally] allowed to sell their shares. And selling they did. The company’s share price dropped 6%. Over the next ten months, around 2 billion previously locked shares will be freed up.

And finally, the Telegraph, one of the UK’s worse newspapers, is pushing a rumor that Finland is preparing for a Greek exit from the euro after an interview with the Minister of Foreign Affaires, while official confirmation can’t seem to be found. read article

Weekend reading:

– Fancy prepositions, get ready for ‘modulo’, read article

– John Cusack and the US housing market, read article

– Jay-Z and investing in the Brooklyn Nets, at c. 7.30min, watch video

– Alphaville on the correlation of online dating and recessions, read article

– A rough patch for US-UK relations, read article

Have a good one.

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‘Fremdschämen’ for Barclays, China’s imports lower and the mess that is oil

Marcus Agius, resigned chairman of Barclays, is sitting where Paul Tucker sat yesterday: in front of the Treasury Select Committee. Tucker yesterday denied having intervened on Libor. Watching the hearing was an exercise in what the Germans call ‘Fremdschämen‘, feeling embarrassed FOR someone else[‘s actions]. The most asked question by the Treasury was “don’t you think that’s rather odd?” Full summary of the awkwardness here.

In terms of the Chinese data marathon that is this week, the country’s imports and exports both slowed down in June from May, with import growth almost halving to around 6% in June. Not only does that show the slowing domestic demand, but it is also hitting China’s trade partners and gives a reason for last week’s rate cuts by the People’s Bank. Its main import partners are Japan, South Korea, the US and Germany, most of which could really do with some growth right now, there are bailouts to be paid for…

After yesterday’s 10-hour Eurogroup meeting that led to nothing (statement here) we didn’t already know before, a blueprint for Spain‘s additional €100bn aid package was agreed upon, leading to the first tranche of €30bn being deployed by the end of the month, sourced from the ESM, which is not fully ratified yet. The German Constitutional Court is hearing arguments in favor and against the ratification of the fund today. A decision won’t be made until later in the day, but a positive response would give the bailout mechanism the ‘okay’ from its largest contributor. read article

The effect of Francois Hollande‘s introduction of the 75% maximum tax rate, a higher wealth tax for those with an annual income above €1.3m and taxation of foreign-owned French property is mostly felt by London’s real estate market, it seems. While housing prices in the rest of the country are falling at their fastest pace since Q4 2011, London, which is usually immune to price drops, sees a changing buyer profile: Les French. They’re buying fast and they’re buying big. The FT reports that luxury property sales to French buyers have picked up by 40% in the last three months, with the average price increasing from £1.1m to £3.9m.

Otherwise, Norway has reached an agreement over pensions claims with its oilworkers, preventing the country’s resource industry to shut down. Important fact in this regard, the government can actually force these worker, who count as the country’s top earners back to work. Norway is the world’s eight largest exporter of oil and the 16-day strike over lowering the retirement age from 65 to 62 cost the country more than $500m. Meanwhile in Iran, which ranks number four in terms of oil global reserves, oil production has fallen to a 20-year low in response to international sanctions. It’s all a bit messy.

So much for today, let’s hope tomorrow has more new news…

So long.

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A reminder that the UK would rather be the US

All European cat-fighting got a lot more serious, or should I say a matter of life and death, when Angela Merkel said there would be no Eurobonds for as long as she lives. Needless to say, her disgruntled communications squad made her amend the statement immediately. That puts her against the proposal of the joint EU presidents from yesterday. Meanwhile, Mario Monti made the opposite move, saying he would resign (boring!) if eurobonds don’t happen quickly.

In other continental news, the Bank of Spain said the country’s recession deepened in Q2, while Evangelos Venizelos (Remember him? He’s one of the 725,000 former Greek Ministers of Finance) said Greece needed an urgent liquidity fix and the recession is worsening by the minute. Italy is getting a taste of Spain’s banking problem, with UniCredit’s shareholder Pamplona Capital increasing their stake by 3%. UniCredit is the country’s largest bank and pan-European banking group and was the worst performing stock across Europe at certain times this month. Over the last 12 months, it lost almost 73% in value on the Milan stock exchange. Ouch.

But most importantly, we got a new acronym!!! Indeed. And it is unrelated to Greece, although its draws from it for inspiration. Take is away, Alphaville

Just when you had had enough of Grexits, Greuros and Drachmageddons, here’s another irritating term to add to the eurozone crisis lexicon: Brixit. Yes, the genius fusion of the words Britain and exit to describe another gloomy scenario.

How realistic a Brixit is remains up for discussion. Despite all the whining and finger-pointing, I’m pretty sure the UK wouldn’t be the first to jump off the sinking ship.

Mervyin King of the Bank of England, however, provides ammunition by saying that the UK is not even half way through crisis brought to us live from across the Channel. read article

Meanwhile in the US, the American housing market is sort of alive and kicks a bit as well, with the largest number of new home sales in the last two years recorded this week and prices rising. But not so fast, says MarketBeat

“But before we bust out the pom-poms,” says MarketBeat, “let’s remember housing has exhibited many head fakes throughout its fitful recovery.”

Think of how long this is taking. Think of the US economy. And now think of how that’s going to look in Spain. Summer house, anyone? read article

The potential demerger of Newscorp into two separate divisions is likely to be decided on over the course of the day. Holding 40% in each division, the Murdoch family would remain in control of both. In the meantime, Dealbook dives into the numbers. read article

And finally a short read for the how-to-be-a-banker book (chapter 7: don’ts): enter Sheldon Maschler. read article

So long.

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