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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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“Biopolar enthusiasm” and the fiscal cliff

The Daily News Brief is going on Christmas holiday for a while and will be back in the new year.

The general consensus says we are making progress to make an outline to make a plan to move away from the fiscal cliff. Today even more so than yesterday. After Boehner’s proposal yesterday (look he has a chart), Obama came back suggesting tax increases for those with $400,000+ annual income, but apparently that is not his last offer. Then why even bother analyzing it? Reuters says, the mad velocity by which the negotiations are taking shape, “put[s] a deal realistically within reach.” read article

ZeroHedge sums it up:

By this point it has become clear to everyone that all fact-based news can be safely ignored […] it is clear that following yesterday’s detailed disclosure, the market is convinced, that a deal is virtually assured. This is a start contrast to 48 hours ago, when it thought the opposite. […] the latest bubble of bipolar enthusiasm which has now shifted to euphoric for the time being.

Also in the US. the Massachusetts Security Division of the SEC is kicking of the year in review part of 2012, reminding us just how much was blaming and blogging [about the blaming] was going on around the Facebook IPO, the company’s valuation and the decline of its stocks. Seven months later, almost to the date, Morgan Stanley was fined $5m for having failed to supervise its staff during the time of the IPO, i.e. for trying to influence research analysts right before the offering. Morgan Stanley paid up without denying or admitting to anything. Citigroup has already been fined $2m for “improper disclosures” and both Goldman Sachs and J.P. Morgan have been subpoenaedread article

J.P. Morgan is also being sued by the US Credit Union for Bear Stearn’s creation of mortgages worth $3.6bn that were distributed to clients under false information and later blew up in their faces. J.P. Morgan acquired Bear Stearns in 2008. read article

Meanwhile, Europe is entirely out of office now – the biggest news are that Germany‘s Bundesbank is expected negative GDP growth in Q4, while the European Commission gave the okay for the €3.9bn bailout of Monte dei Paschi di Siena, Italy’s third largest bank. Monti’s candidacy for the 2013 Italian election circus will stay up for discussion until Friday morning, so most Italian news will continue to be dominated by Berlusconi’s upcoming wedding. Brussels also filed a report regarding Spain‘s public debt, which is likely to keep rising if the country fails to reform its pensions system. According to the report, Spanish pensions will exceed the average EU spend until 2060. The other nation at risk, in part due to its pension spending, appears to be Cyprus which received aid from Brussels in June. read article

So much from me, happy holidays!

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The changing face of finance

All eyes are on Mario Draghi once again, who is holding an ECB meeting in Brussels today. That once thing both Draghi and the rest of the world are waiting for is Spain‘s formal request for a bailout that would trigger the newly agreed bond-purchasing program of the Union’s central bank. Until that happens, however, nothing else will. Most likely statement to come out of today’s press conference is therefore probably a request for a request for a bailoutread article

Meanwhile, the European Banking Authority (EBA) has come back from it’s survey of 71 European banks, finding that only four of them fulfilled the new extra-super-crisis-resistant capital requirements of 9%. The survey did not include Spain’s Bankia or any Greek bank. The EBA said further that banks that don’t reach the prescribed ratios won’t be paying dividends or bonusesread article (read WSJ Deutschland)

Morgan Stanley, which had been rumored to be looking into selling its commodities division, has reportedly entered talks with the Qatari Investment Authority, the 12th largest sovereign wealth fund in the world that owns every other bit of London. The sale is motivated by new regulation through the Dodd-Frank Act and more specifically the Volcker rule, which prevents proprietary trading. read article

Similar news from J.P. MorganLDH Energy, currently owned by Louis Dreyfus and  J.P. Morgan’s hedge fund Highbridge Capital, will be sold to the CEO of Highbridge, Glenn Dubin, and founder of Tudor Investment Corp, Paul Tudor Jones. read article

Both these sales, though the former more so than the latter, are indicators of how post-crisis regulation is shaping the financial services sector into something new. The first result of this seems to be a cutting back of those bank divisions that that were added in the scope of expansions, during more pleasant economic times. Of course, this is not exclusive to commodities. Credit Suisse is looking to get rid of its $385bn asset management division as a “direct consequence” of not being a major asset manager, while Lloyds TSB has continuously offloaded its private equity assets, worth more than £1bn. Time to cut your losses and move on.

In the US presidential race, Romney won the first TV debateThe Atlantic said Obama lacked energy and enthusiasm, the Handelsblatt called him “pale” [which, of course, is a hilarious figure of speech here].

Greece, in its ineptitude of being a serious country, is on track to pool €100m to build a new formula one Grand Prix track. Bernie Ecclestone, CEO of Formula One Group, who is vainly trying to float the company on the Singapore stock exchange, has allegedly backed the project. Not necessarily related, GermanyFinland and the Netherlands have demanded to delay the next bailout tranche for Greece, worth €31bn, until November. read article

In other news, Facebook has hit the 1bn users benchmark. Fair enough, that IS cool. read article

So long.

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All things considered, Mexico seems to be the place to go

The revised UK GDP for Q2 came in the morning, and it’s really just a parade of negative numbers. The good news first: it fell less than expected. Overall GDP was at -0.4% (instead of -0.5%), with the main drag coming from the construction sector, which was down 3%. Industrials and services came in at -0.7% and -0.1% respectively, household spending declined 0.2% and exports shrunk by 1.1%.

The final read on US Q2 GDP is published tomorrowExpectations are … managed.

The Street projects GDP this year will run at 1.9%. The first quarter came in at 2%, and the final read on the second quarter tomorrow is expected to come in at 1.7%. You can extrapolate from there what the next two quarters will look like, and it’s not pretty. For every decent data point, like, say, a rise in home prices, there’s at least one that counters the optimism.

In addition to that, earnings don’t look so good and a survey of American executives shows that Congress’ inability to deal with the fiscal cliff and the uncertainty around future tax policies is making it impossible for corporates to plan strategies and investments. Of course, that feeds right into the stalling activity everywhere you look. read article

Over the past three days, the People’s Bank of China has injected RMB365bn ($58bn) into the economy, one for each day of sluggish growth. read article

In other Asia news, the US has loosened its trade restrictions with Myanmar, following the release of political prisoners and reforms of the country’s political and economic system over the past 18 months. The European Union has also abolished many of its sanctions. The president of the Myanmar Federated Chamber of Commerce called on developed nations to “help us prevent the ‘miscarriage’ of our democracy in its embryonic stage.” read article

Santander floated 25% of its Mexican division yesterday, raisng $4.13bn. That makes it the largest IPO Mexico has ever seen and also the third biggest of the year, behind Facebook and Japan Airlines. In the first six months of 2012, Santander Mexico accounted for 12.4% of the company’s overall profits, while only representing 4% of the bank’s assets. read article

Meanwhile, both Spain and Greece are drowning in protests and riots. The Spanish budget will be announced at 1pm BST. It is likely to include the launch of a new tax supervisory authority, as suggested by the EU, limiting early retirement, new emission taxes and transaction taxes for stocks, while getting rid of some exemptions. It is a package that won’t please voters, but will please Brussels and pave the way to Spain’s bailout. Rajoy, a man of the people, is not in Spain today. He is attending the UN General Assembly in New York. read article

So long.

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Scandal-week just doesn’t end…

The US is closed for a collective barbecue party today, so there will be no news from across the Atlantic.

In the Barclays‘ case, the bank is now actually threatening the Bank of England and other government officials, accusing them of having been involved in the rate manipulation scandal, known by the unfortunate name of LIEborgate. Barclays’ ace up the sleeve is a note written in 2008 by BoE markets director Paul Tucker alluding to the possibility of a rate cut. But according to Alphaville …

You just don’t threaten then Bank. The City of London is not some sort of financial democracy. It is a hierarchy. It is not Capitol Hill; political brawling is prohibited.

Diamond will be facing parliament today.The whole affair is also warming up the question of ring-fencing investment banks, because of the size of the fine Barclays had to pay for the manipulation last week (£290m). read article

More on the note of scandals, GlaxoSmithKline was fined $3bn for healthcare fraud this morning, after pleading guilty in the case of mis-marketing drugs. These included antidepressants Paxil, approved for adults that were marketed to teenagers, and Wellbutrin, mis-marketed to treat weight loss and sexual dysfunction, says the US Department of Justice. read article

In Mexico, where Enrique Pena Nieto won the presidential election on Sunday, Andres Manuel Lopez Obrador demands a recount of votes. Pena Nieto’s victory has a peculiar after-taste for Mexicans, because his party, the Institutional Revolutionary Party, which had led the country for 71 years, including the times of the revolution, the ‘Mexican Miracle’ and an economic crisis. But hopes for Pena Nieto’s administration are high, as the country needs labor and tax reforms and increased international participation in the monopolistic national market. It is also expected that the new government will open up the country’s oil market, including allowing foreign investments in the state-owned oil company Pemex.

Meanwhile, the Romanian opposition is moving to suspend the country’s president, Traian Basescu, for unknown reasons. read article

In other news, Apple is apparently planning to bring a smaller and cheaper iPad to the market later this year. Oh, you mean like the iPhone? But however ridiculous it may sound right now, it will make Apple’s Christmas business. Also, Manchester United completed certain filings with the SEC in New York last night as part of the club’s ambitions of an IPO within the year. Initially, the owning Glazer family, had been planning a $1bn IPO on the Singapore stock exchange, but abandoned the plan due to volatile Asian markets. The New York IPO could be worth as little as one tenth of last year’s valuation.

So long.

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Don’t buy Facebook, buy eurobonds… oh no wait…

Yesterday, the pro-eurobond club counted Mario Monti, Mariano Rajoy, Jose Barosso, Francois Hollande and Barack Obama (sort of). Today, the OECD joins in with the choir and Angela Merkel is probably having a bad day. Thilo Sarrazin, ex-board member of the German central bank, just came forward with a new book in which he discusses why the euro is unnecessary and compares eurobonds to holocaust reparations. (German article here)

The statements that have been made regarding the issue, mostly by unnamed officials, show the misalignment of interests of the EU and Germany. The former says an agreement on eurobonds is under way, the latter says Germany will never agree to them. The bottom line: at least one of them is wrong. My guess is that it’s the latter,peer pressure is a powerful thing. But we shall see what happens tomorrow at the summit…

Otherwise, there is a truckload of OECD forecast data today, cutting expected eurozone GDP growth in 2012 from 0.2% to -0.1%, before growing 0.9% in 2013. Generally, 2013 seems to be the benchmark for when things get better again. I feel like that’s what we expected form 2010 as well. And 2011. Hmmm. read article

Facebook’s share price fell 11% yesterday: many consider it an embarrassing failure, some call it an optimally priced IPO. read article

Here’s a post on Crossing Wall Street about how $33 per share would have been a more accurate valuation for the company from the start. Wise words:

So now that Facebook is public,is the stock good buy? 

The short answer is no. The longer answer is noooooooo.

Right. So we got that settled.

The FT reports “secret” financial aid to Greece, facilitated by the ECB and paid out by the Greek Central Bank in form of ELA: emergency liquidity assistance. It’s what kept Ireland’s banks afloat back in the day, and about €100bn worth of it have been pumped into the Greek banking system.  Nouriel Roubini calls the ELA “the Trojan Horse for the eventual creation of the new drachma.” The problem: the ECB has the power to decide the terms and also termination of ELA. Last week, you may remember, the ECB suspended liquidity aid for four unnamed Greek banks, which makes them dependent on ELA. The (FT’s) bottom line: the ECB could nudge Greece out of the euro just like that.

Also, it’s time to look at the OECD’s better life index again, if only because it’s really pretty. Ordering the countries byhighest degree of work-life-balance, it’s a bit confusing that Spain ranks on the third, Greece on the eighth and Portugal the eleventh place… How do you evaluate the work-life balance in a country with more than 20% unemployment?

So long.

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Happy Brits, unhappy Greeks and very happy private equity investors

After the manufacturing PMI rose earlier this week, the British services sector is doing better as well. Forecasts saw slow growth for the month of January, but au contraire, it was its fastest expansion since March 2011 according to Reuters. read article

Otherwise, you might have noticed that there is still no deal on the private sector involvement in Greek debt. The ECB still refuses to partake in the discussions, which is shifting the whole scenario to the right side of this [FT Alphaville] graphic. More detailed guesses on “logical [next] steps” hereZero Hedge says none of this matters, as it just comes down to how much Greece is willing to fulfil German demands in order to be ‘saved’. read article

If you’re really really interested in the Facebook IPO, or more accurately in the company’s structure, who got what and what happens if Mark Zuckerberg dies, have a look at this (See p.133 for Accel Partners share value increase since 2005. One word: WHOA.). And if you’re lazy, have a look at this infographic that puts Facebook nation into perspective.

A new story from Joris Luyendijk’s Banking Blog: this time about the very end of the food chain, being an intern. The girl, M&A intern at a major bank at the time of the interview, sounds like about a good handfull people I know. Not generic, just familiar. She talks about thankless work and the “bruising” process of applying for jobs. I don’t think anyone who got out of university in the last four years would disagree, particularly with the latter… read article

On that happy note, have a good weekend!

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Eurocrisis – the musical. Seriously.

The CBOE volatility index, designating the fear in the market, hit the lowest mark since July yesterday. At the same time, the Kauffman Foundation released a report pooling economics bloggers’ opinions regarding the US economy. Most used words: ‘uncertain’ and ‘fragile’read report

But really, all I have been waiting for is this: EuroCrash! – the musical. It reminds me of “Occupy Wall Street – the musical”, but this time around it is an actual musical, with a stage and actors and songs about sovereign bonds. It started in Frankfurt, but will come to London in February. If I go, I promise a detailed critique afterwards. read article

In other news, Belgium’s recession was confirmed yesterday. The country’s economy contracted in the last six months of 2011. read article

And Facebook actually filed the papers to go public; Marc Zuckerberg even put on a suit for the whole charade (see homepage of FT). He remains to hold 28.4% of the company, which is a whole lot of money. But now that everything is out in the open, we also know that Facebook made exactly $1bn in profits in 2011. Now, and this is only funny if you’ve seen The Social Network (which I’m sure you have), TechCrunch reminds us of the scene in the movie where Sean Parker’s character says “A million dollars isn’t cool. You know what’s cool? A BILLION dollars.” Admittedly, a badass PR gagread article

Finally, as the deadline to save what there’s left to save in Greece keeps approaching, somebody might want to send Papademos a copy of Jonathan Tepper’s how-to manual on exiting the euro… a scenario in which ‘bank holiday’ actually means what it says. read article

So long.

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The parade of superlatives

The British PMI (Purchasing Manager’s index) rose from 49.7 to 52.1 in January, crossing the 50-mark that separates contraction from growth. Voices get louder that the UK might avoid a double-dip recessionread article To get an idea of the impact of this little number, here is what the situation looked like before the PMI came out this morning: read article

But the good news can be off-set with this: the FT reports that everyone except for Germany is subject to a eurocrisis-induced credit squeeze according to a survey by the ECB.

In New York, the NYSE and NASDAQ are waiting to receive the paperwork for Facebook’s $5bn-IPO (preliminary target), the largest public offering in history. The NASDAQ is also the home of Google ($2m IPO), Apple and Microsoft, but Facebook’s listing is not a done deal yet. read article

In other news, Fred Goodwin, who was CEO of Royal Bank of Scotland until 2009, lost his manhood knighthood. Under Goodwin’s lead, RBS lost £24bn, the biggest loss in UK corporate history.

The EU now has officially blocked the merger of Deutsche Boerse and NYSE Euronext on the grounds of EU competition law. The merger would have created the largest stock exchange in the world. NYSE Euronext is still advertising the deal on its website. Maybe the whole thing wouldn’t have been a bad idea after all, the website crashed on me 5 times this morning… read article

Otherwise, we remain to be oh so close to a Greek debt swap deal.

Finally, Pragmatic Capitalism explains why Americans shouldn’t be happy about the expected deficit drop. (Reminds me of “Life After Debt” that Planet Money found way back in October.)

So long.

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Thursday, #39

The Manufacturing PMI (Purchasing Managers’ Index) shows that the German manufacturing sector is still contracting. Shrinking. Going down. It’s doing a bit better than in November, but it’s still not growing. The magic number separating growth from contraction is 50. In November, we were at 47.8, now we’re at 48.1. Getting there… read article

Since yesterday, Michael Kors, American designer brand, is a publicly listed company. 42.7m shares (as opposed to 37.2 as planned) were sold at $20 each (as opposed to $17),amounting to $854m (this might increase to $1bn, by means of overallotment options to sell additional shares). Trading begins today under KORS on the New York Stock Exchangeread article

Outbrain, New York-based online content recommendation company, has got itself another round of funding (a Series D round and very possibly the last one before it outgrows venture funding), worth $35m. Since the announcement, Outbrain is all over the internet. Well, considering its field of expertise, it already was before. But in recent days it have become all the hype. Featured on techcrunch and FastCompany (and many more), now Felix Salmon is having his way with it. Towards the end of the article, Salmon asks if algorithms can really predict what content we are most likely to engage with and therefore replace human selection thereof. I’m willing to say that they probably can, or will be able to, but what about the information that is of interest to you but not reflected in your choices of online reading? Oh right, that’s what The Daily News Brief is for. Never mind. read article

Market equilibrium? Try earth-quake aftershocks. Mark Buchanan, physicist and writer talks about the outlook on economics as a scienceread article

And finally some decision theory: Karl Smith, assistant professor of public economics at the University of North Carolina at Chapel Hill, takes a stab at defending (or at least describing) the rationality of not climbing the social ladder that begins with college. read article

So long.

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