Death Star Economics

Icon

ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

Slovenia slides down the bailout slope

Yesterday

The Fed is considering tougher capital requirements over worries that banks could be playing the [Basel III] system. Currently, the international agreement sees equity capital at only 3%. Basel brought that up significantly, but also gave the parties involved more room for… creative accounting. Give a bank a loophole. read FT

Moody’s downgraded Slovenia to junk with negative outlook (ouch), which is unfortunate, because the country was planning to auction off some debt. read FT
And now the pathway to an EU bailout: (read Bloomberg)

Rising loan losses resulting from a housing bust and a second recession in two years have left a hole of about 7.5 billion euros ($9.9 billion) at Slovenia-based lenders, investment bank Keefe Bruyette & Woods estimates. That’s a lot for a 35 billion-euro economy: A bank bailout would push government debt above 70 percent of economic output.

Apple issued $17bn in debt – the largest corporate debt offering ever – in six tranches to return money to shareholders and avoid repatriation taxes on overseas funds. read WSJ

In New York, the Empire State Building was lit up in FT-pink to celebrate the 125th anniversary of the newspaper.

This morning…
is quiet due to Labor Day in vast parts of the world.

Later on, we’ll get some data from the US, including the ADP employment report, ISM manufacturing data and the post-FOMC meeting statement from the Fed (ex Bernanke press conference). The ISM is expected to drop below 50, as it last did in November of last year and several months in 2009.

So long.

Advertisements

Filed under: news brief, , , , , , , , , , , , , , ,

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.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , ,

Brussels vs Moscow, and Bernanke leaving the Fed

Yesterday…

the Federal Reserve confirmed its asset purchasing program worth $85bn per month to continue until the US economy would improve past the first scarce signs of recovery. read article

Ben Bernanke also alluded to leaving the Fed to pursue other projects, retirement for example. read article

The UK budget saw five more years of spending cuts, right past the 2015 elections to alleviate the country from its £121bn budget deficit and ensure its credit rating. The Office of Budget Responsibility expects 2013 growth to be at 0.6%, followed by 1.8% in 2014read article

Elsewhere, this happened over the course of yesterday: Cyprus’ Finance Minister conferred with Russia, while Angela Merkel said Cypriot banks had to chip in for the bailout, followed by Brussels saying that Cyprus had to present its own refinancing plan after voting against the EU proposal. It all looked like we had a new credible exit candidate until Cyprus asked for more time to come up with a better idea. Now it just looks like Greece. Here are four scenarios that could unfold over the coming days and weeks.

This morning…

The European Central Bank announced that Cyprus had until 25 March, coming Monday, to get its bailout plan ready without losing access to the ECB’s Emergency Liquidity Assistance (ELA) that keeps the island’s banks alive. read article

Finally, China released some promising manufacturing data, showing the sector expand faster than expected and giving the recovery hypothesis more support. read article

So long.

Filed under: news brief, , , , , , , , , , , , , , , , , , ,

UK triple-dip on steroids; finance lobby fights in DC

There won’t be an update tomorrow, Wednesday, March 13th. 

In the UK, George Osborne announced that his Funding for Lending scheme, which has yet to prove effective in any way, will be extended and enhanced, in his words put on steroids. Currently geared to drive down mortgage prices, the reformed scheme will also benefit SMEs. Meanwhile, the county fears the reality of its third recessionsince the financial crisis as manufacturing output shrank again – at the fastest rate since July. read article

Over in the US, the financial services lobby is marching on Washington, much as it has in Europe, just with more funding. The matter at hand are not bonuses, but policy proposals that could lead to the forcible restructuring and breaking up of big banks. Goodbye, Citigroup, goodbye, too big to fail. read article

The Mexican government is taking on billionaire Carlos Slim, who ownes large parts of the country’stelecommunications sector. The proposal would force Slim to sell assets and open the market for foreign competitors. Upon Enrique Pena Nieto‘s election in July 2012 hopes for economic reform, particularly in Mexico’s oil market, rose. read article

Hungary passed an amendment to its constitution, allowing prosecutors to choose the judges that will hear their cases. Both Brussels and the US are skeptical of the vote and even more skeptical of the state of democracy in Hungary following the change. In December 2011, there was a letter exchange between Jose Manuel Barosso, President of the European Commission, and Viktor Orban, Prime Minister of Hungary, regarding the country’s funding from Brussels and its compliance with EU laws, showing Hungary’s drive for independence while expecting full financial backupread article

So long.

Filed under: news brief, , , , , , , , , , , , , , , ,

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.

Filed under: news brief, , , , , , , , , , , , , , , ,

Jobs Friday and Barclays latest disaster

Before 1.30pm (8.30am EST):

After Wednesday’s announcement of the shrinking US economy, today’s jobs report gained in importance. Forecasted is a flat unemployment rate at 7.8% with a 11,000 more jobs added than in December (166,000). As according to MarketBeat:

To get the rally back on track, the jobs figures might not only have to beat expectations, but beat them handily. […] On top of that the January jobs report, in particular, is typically difficult to read. The government updates its population estimates at the beginning of every year, which in the past has caused big movements in the survey figures compared to the December data.

After 1.30pm (830am EST):

Ouch. This didn’t work out at all, did it now… With jobs only up slightly from 155,000 to 157,000, the unemployment rate rose to 7.9%. But not all is bad, in hindsight both November and December were better months for the job market. read article

If there was a part of you hoping that an end would be in sight for this ubiquitous bailout hangover from the financial crisis, I’ve got bad news for you. Allegedly, Barclays lend money to the Qatari government, the go-to investor for all of London, to invest in the bank and avoid a bailout by the British government. Improper disclosure and dubious fees could deem this deal illegal. read article
 
In the background, Barclays CEO Antony Jenkins refused his 2012 bonus.

Otherwise, there’s not a whole lot going on. UK manufacturing picked up, as did consolidated eurozone manufacturing, and the Dutch government will fund a €14bn bailout of SNS Reaal, the countries fourth largest bank. 

Weekend reading:

– things economists worry about, by likelihood and impact, see graphic

– in defense of Europe’s financial transaction taxread article

– the life and death of moneyread article

– Berlusconi and Mussolini, read article

– advertising and the Super Bowl, 2013 edition, read article

– the banking blog on complianceread article

Have a good one.

Filed under: news brief, , , , , , , , , , , , , ,

Japan’s recursive debt dilemma; Papandreou’s mother evaded taxes on €550m

The morning news sang the song of positive Chinese manufacturing data as the savior of the world economy. Quietly, in the background, the CEO of the Bank of Tokyo pointed at the systemic risk deriving from government debt exposure of Japanese banks. According to the Bank of International Settlements, Japan’s lenders hold 900% of their tier 1 capital in Japanese government bonds. For comparison: since 2002, the equities to tier 1 ratio is capped at 100%.

As usual, things are messier in Europe, where Moody’s downgraded the credit worthiness of the ESM super-duper rescue fund over the weekend, while Greece announced its intention to buy €10bn in debt back.

Angela Merkel said in a weekend interview that she was willing to consider a Greek debt haircut in a possible world in which Greece got its finances back under control and doesn’t require additional debt. In other words, she isn’t really.

In other Greece news, Margaret Papandreou, the former prime minister’s 89 year-old mother is the beneficiary of an HSBC account worth €550m in Geneva. Oh well that is awkward. Switzerland has loosened its privacy laws on bank accounts to give the troika a better look at Greek tax evasionread article

In an embarrassing attempt to market Paris as a location, Christian Noyer of the Banque de France as argued that it was intolerable for the eurozone to have its financial center, i.e. London, outside the monetary union. Under normal circumstances, one should laugh at Noyer for being French […] and ridiculous [……..], but he has influence in the ECB, which will be have power over all European banks as soon as the banking union is agreed upon. read article

In the world of aviation, Delta, the world’s second largest airline after United Continental, is considering buying the 49% stake in Richard Branson’s Virgin Atlantic that is currently held by Singapore Airlines. In 1999, the stake was wrth £600m. If the deal goes through, Delta’s partners in crime Air France-KLM could acquire part of Branson’s 51%. Delta’s motivation for buying into the airline is (surprisingly) not the midnight ice cream-trolley on 34,000 feet, but Virgin’s slots at Heathrow, where it is ranked third in terms of take-offs and landings per week. read article

No room for news from the fiscal cliff, in a word: deadlockread article

So long.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Renault found the eurocrisis advantage

The US is closed for the Turkey feast and the rest of the world is in and out of meetings, with the EU summit kicking off today in Brussels and the ASEAN summit in Phnom Phen just finished.

With the US at the table to stay in the loop of what’s happening around the Pacific, it seems like the non-interference politics of ASEAN are changing on the very topic they started out on: the South China Sea. read article

Staying East, preliminary Chinese manufacturing data shows above-trend growth in November for the first time in over a year, restoring faith in China’s economy across the globe until further notice. read article

Just two days after mentioning the underperforming French [car] industryRenault came out with the following plan: if the French unions make life difficult for you, while European car sales are doing terrible, why not take your production to a place where everybody is desperate for a job? No, not London. Renault will create 1,300 jobs in Spain, as Spanish labor unions jumped on the low-wage deal. Let’s appreciate how good an idea this is: Spaniards are happy, Renault is happy, the unions would be happy if they’d be capable of expressing anything but discontent, and the EU is happy too, because nobody needed to leave the continent to make this happen. read article

There’s also default news from a country that is not Greece. Yep, you heard me, this is not about our favorite producer of Feta cheese, it’s about Argentina. A New York District judge ruled that Argentina has to proceed to pay the holders of its defaulted bonds a total of $1.33bn. The original ruling from October 26 was under consideration until today. Besides the above payment, Argentina also has to pay $3bn in repayments of restructured government debt. Sam Jones of the FT says that JP Morgan says December 31st is the date to watch in this case. If the Argentina fails to fulfil its financial obligations, it could revisit 2001, when it first defaulted on $95bn of debt. read article

So long and happy Thanksgiving.

Filed under: news brief, , , , , , , , , , , , , , , , ,

Spain runs out of money for the 87th time, China under pressure

Most of today’s bad news come from Spain, where Moody’s downgraded five regions, including Catalonia, the Scotland of Spain, that accounts for a fifth of GDP, questioning the effectiveness of Spain’s regional liquidity fund. So far €17.2bn have been drawn from the fund which is capped at €18bn, leaving little leeway to change much with the remaining €800m. Moreover, Spain is under way to accrue a budget deficit of 7.3% for this year. That exceeds the target set by the EU by one percent. The Spanish newspaper El Confidencial attributes the missed target to €10.5bn deficit in the country’s social security system. Wild guess: the money went towards unemployment benefits? read article

Chinese companies are facing pricing pressures due to what Bloomberg calls “the worst wholesale-cost deflation since 2009, signaling corporate earnings may deteriorate further and putting a damper on global inflation pressures.” If you are the rest of the world and believe in quantitative easing, this is a good thing, because it gives more room to stimulate growth by pumping money into the economy. If you’re China, it’s pretty shit. The country’s industrial output fell 6.2% YOY in August and wholesale prices dropped 3.6% in September, the biggest decrease since October 2009, the benchmark year for the post-Lehman inferno. read article

Yahoo reported earnings, for the first time under management of Marissa poster-child-for-mother-with-high-profile-career Mayer, performing better than expected overall, mostly on the back of the sell-off of its Alibaba stake, while actual revenue fell. Mayer wants to turn the business around by developing Yahoo’s mobile applications, catering to all of us smartphone users who need to check everything all the time and now there’s 4G as well woohoo! Yahoo shares rose on the promises. read article

In the final presidential debate in the US election, Romney and Obama played an expected blame game of “would you really want that man to be your Commander in Chief?!” According to European papers, Obama had the clear lead, while the American commentators are either less impressed or more confused than before. NYTimes CNN WaPo

So much for now.

Filed under: news brief, , , , , , , , , , , , , , , , , ,

EU getting ready to pay, China-Japan conflict boosts German car production

There won’t be a news brief tomorrow and Wednesday, 09/10 October 2012.

Hugo Chavez won another six-year term in Venezuela’s national elections held on Sunday. By the end of the new term, he will have been in office for 20 years. Chavez is planning to step up effort to nationalize companies in areas like finance, nutrition and healthcare. Prior to Sunday’s elections, Chavez underwent cancer treatments in Cuba; his illness may pose a threat to his upcoming term as president, commencing on January 10. read article

The Eurogroup of Finance Ministers is meeting today to officially launch the ESM, concluding the day with a press conference in the evening. The second bailout fund will hold €80bn paid-in capital (mostly by Germany, as we know), with €620bn of callable capital, which will be used as a base to borrow money in the public markets, reaching full capacity in 2014. The focus of the meeting will be next steps for Spain and possible the progress of Greece, where Angela Merkel and an army of 7,000 policemen will observe the situation tomorrow. read article

Following last month’s conflict between China and JapanToyota, Honda and Nissan are cutting their production targets for Chinese plants by about half until further notice, due to a slump in Chinese demand. In direct response, sales for South Korea’s Hyundai rose 15%, while German brands Audi, BMW and Mercedes-Benz rose 20%, 55% and 10% respectively last month. read article

Also in ChinaHan Hoi Precision Industry, a subsidiary of Foxconn that assembles iPhones, iPads and other Apple products, is the bullseye in a labor rights dispute that is igniting in China. Foxconn employs 1.2 million people in China, some of which were involved in a strike last week Friday. The strike regarded increasing working hours and quality assurance, was supported by China Labor Watch and involved employees working on the new iPhone 5. According to WSJ:

Labor groups have criticized Hon Hai for its work practices after several workers at the company’s massive manufacturing base in China jumped to their deaths in separate incidents in 2010. Hon Hai has since increased salaries and outfitted worker dormitories with safety nets in an effort to prevent such incidents.

In the US, earnings season is starting tomorrow evening with Aluminum producer Alcoa. Expectations are depressing and will underline the poor performance of the Western economies despite government efforts to boost growth. But a quarter doesn’t make a year, according to the FT, “S&P 500 companies are on course for record cash profits in 2012.”

Also in the news, Google is tapping into its massive cash reserves and will launch its own credit card. The card will be exclusively linked to its AdWords business and make it easier for clients to purchase advertising space. This is following Amazon’s announcement to make loans to their vendorsread article

Otherwise, applications for the position as Governor of the Bank of England have closed. Alphaville considers the contestants Paul Tucker and Lord Turner.

So long.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , , ,

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 213 other followers

%d bloggers like this: