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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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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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Fed stress test: why the world is better now than in 2008

Today’s headline story is the results of the Fed’s annual bank stress test – and how Goldman Sachs and Morgan Stanley would be torn to pieces in the unlikely event of a loss of cabin pressure. If unemployment was to soar to 12.1%, while both housing prices and the stock market collapsed by 20+% and 50+% respectively, Goldman alone would suffer a loss of up $20bn (which is by far not the biggest in the report…), while Morgan Stanley’s tier one capital ratio would be slashed to 5.7% (from 13.9%). That’s the story you’re fed on the front pages. Both these banks have passed the Fed’s stress test however. The official source itself seems much happier with the results:

Despite the large hypothetical declines, the aggregate post-stress capital ratio exceeds the actual aggregate tier 1 common ratio for the 18 firms of approximately 5.6 percent at the end of 2008, prior to government stress tests conducted in the midst of the financial crisis in early 2009.

Aha! Nothing to see here, move along. read full unbiased report 

In the US, it’s jobs Friday, with a projected 160,000 jobs added, up 3,000 from January’s rate. From WSJ:

The trend isn’t important necessarily to see where we’ve been, but to project where we might go – and especially for the markets, when the unemployment rate might fall to a level at which the Federal Reserve feels comfortable to start winding down its massive bond-buying programs.

In China, February exports increased almost 14% more than the median estimate by 21.8%, indicating stronger global demand. At the same time, imports fell to their lowest rate in 13 months, suggesting that no, China is indeed not done recovering.

Otherwise, there is a lot of analysis of yesterday’s central banking action, which left rates unchanged across the board. The consensus seems to be that it is not a question of economic recovery, but rather a question on waiting to see what happens without a new round of easing. Stay tuned for the summer.

Weekend reading
– meet Mr Jones, Dow Jones, of Alma, Arkansasread article

– European horse meat sales are upread article

– just as we thought we were past this: is financial risk rising again? read article

– management consulting for the Poperead article

Have a good one.

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