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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

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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BoJ to buy derivatives; US unemployment down to 7.7%

Haruhiko Kuroda, who is likely to be confirmed as the next governor of the Bank of Japan soon enough, declared that he will look into buying derivatives to send a strong message regarding the BoJ’s willingness to continue stimulating the economy. Kuroda, unlike many economists, doesn’t think the 2% inflation target would be at risk following this move. The last time a central bank engaged in derivatives purchases as part of their monetary policy was in 2008, as part of the Federal Reserve’s rescue program of Bear Stearns. read article 

Meanwhile, Japanese manufacturing isn’t doing so well, with machinery order having dropped 13.1% between December and January, showing that the economy is slow to respond to the new government and its actions. According to the WSJ, the median estimate had only been -1.4%. read article 

Over the weekend, there was a bunch of economic data from China giving mixed indications for 2013:

The short version is that some growth indicators were significantly weaker than expected, but others beat consensus forecasts – and consumer inflation appears to be on the rise again, even when the new year effect is discounted. This comes after strong export growth and weak import data surprised everyone late last week.

And right before the weekend, the US jobs report came in quite positive, cutting the unemployment rate to 7.7%, a number last achieved in 2008. read article

After much clamoring over financial regulation from Brussels, the UK’s Parliamentary Commission on Banking Standards has now deemed the British government’s own regulatory proposal too weak, back-stabbingly risking tighter rules for City banks than elsewhere on the continent… or so the FT writes. All in all, it remains to be said that there will be regulation – and everyone knows that – the degree of which may be a lot less important than whether or not it is sensible and appropriate. To be continued.

On that note, a [last] defense of banker bonuses, conveniently summarized in an RSA-like cartoon drawing (including some critical notes from Alphaville). read article 

Otherwise, Intrade has put its website services on hold due to an investigation into possible “financial irregularities”. read article

As for the rest of the week, there will be industrial production data from all around Europe, as well as unemployment and inflation numbers on Friday.

Have a good week.

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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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