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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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Letta new Italian PM; Apple profits drop for first time in decade

Yesterday…
It was a dark day for the European economy, with April PMIs across the globe disappointed, except for France, which beat expectations and soared to four-months highs. China and Germany on the other hand, undercut expectations – Germany even fell below the magic mark of 50, to 48.8, the lowest level in six months. read Bloomberg

After all the united G20 talk of appropriate monetary measures, S&P said that there’s a 30+% chance that Japan will lose its AA rating. The reasoning: it’s great to have quantitative easing, stimuli and private sector involvement, but that strategy doesn’t work if all you do is print money. read Reuters

Meanwhile in Portugal, the government is planning to lower corporate taxes to attract business. Good timing. read WSJ

Right after close, the Twitter account of the Associated Press was hacked, posting a tweet about attacks on the White House. The Syrian Electronic Army claimed responsibility. read Alphaville read BBC

Otherwise, it was all about Apple. The tech giant posted first quarter earnings,showing that profits dropped for the first time in a decade in year-on-year comparison. Alongside quarterly results, the company also announced an expansion to its now $100bn share buyback program to return money to investors. read WSJ

This morning…
Italy is set to announce a new Prime Minister. The current candidates are Guiliano Amato (Prime Minister 1992-1993 and 200-2001), Matteo Renzi (Mayor of Florance) and Enrico Letta (center-left deputy leader), all of which are less crazy than Berlusconi and none of which have worked for Goldman Sachs. read Reuters
BREAKING: Enrico Letta set to become Italy’s new prime minister

In anticipation on next week’s ECB meeting, rumor has it the Mario Draghi is likely to cut another quarter of a point off current interest rates, as inflation rates are below target and the eurozone finds itself back in recession. read Reuters

So long.

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Cyprus rejects Russia, EU deadline looming

Cyprus… failed to reach a deal with Russia, as reported very early on this morning, but is said to discuss an EU solution in parliament today. That would include a bailout program for Cypriot bank Laiki, splitting it into a ‘good’ and ‘bad bank’. Jobs would be saved and deposits under €100,000 would be guaranteed, the rest would go towards the bank’s dark side. Besides this proposal, the parliament has six others to discuss. read article

Yesterday…

The US House of Representatives voted to prevent the government from shutting down by the end of the month and supported Paul Ryan’s budget proposal. This means that both government agencies and programs will stay in place until the end of the fiscal year on September 30. Ryan’s budget on the other hands, cuts taxes, healthcare and social costs to lower the budget over the next decade. It is expected that the Democrats’ counter example of a plan will be passed in the Senate today. This has brought us nowhere. read article

In some last minute action, Blackstone, together with Southeastern Asset Management, is considering a bid for computer company Dell. Silver Lake Partners and founder Michael Dell have put in their bid in Feburary, but the official deadline is only todayread article

This morning…

German business confidence, measured by the IFO index, reported a slump after a 10-month high in February. Surprising or not, this is hardly a sign that even Germany is going under, and is following a lower manufacturing PMI as well. read article

Finally, family traits: Raj Rajaratnam’s brother has been accused for insider tradingread article

Weekend reading…

– how Obama is trying to solve the Israel-Palestine conflict, read article

– next up in Venezuelaread article

– Nicholas Sarkozy and elderly women, read article

– Cyprus cartoonsread article

Have a good one.

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Happy new year, happy old problems

Welcome back to the party, folks.

It’s a new year and despite the problems largely being the same, this is a time of anticipation. 2013 still has potential to be the best year ever.

After all, both British and Chinese factories recorded better output in December and shipping company Maersk says trade between Europe and Asia is set to expandNorth Korea‘s leader Kim Jong-un has announced his intent to make peace with South Korea. Also, Oil cartel Opec recorded $1tn in net revenues in 2012, providing more money for Middle-Eastern sovereign wealth funds to invest in London real estate.

Against the odds (…), there was progress on the fiscal cliff on the New Year’s Eve day. Senate approved Obama’s solution package and the House of Representatives followed suit last night. The summary:

Boehner voted to enact “Obama’s tax cuts”, the new de facto Bush tax cuts (which expired yesterday), and which will raise the budget deficit over the next decade by $4 trillion, yet which at the same time paradoxically also hiked taxes on nearly three quarters of Americans with an emphasis on the wealthiest 1%.

Strictly speaking, we did fall off the cliff, but as Jan-1 doesn’t count as a real day, things just about worked out. Of course, the deal is a half-baked mess of even less baked compromises and is already calling for reform. But there’s no time for that, because the debt ceiling is next in line. It would like to get lifted.

In two months, the U.S. will face the need to increase its borrowing limit. Additionally, the delayed $110 billion in spending cuts will again kick in. read article

In Europe, French president Francois Hollande is holding on to the most recent tax hikes of 75% income tax on income above €1m. Besides ruining is popularity ratings, Hollande pledged to solve France’ massive unemployment issue, he said in his New Year’s address. read article

Which brings us to the negative side of thingsEurope is still burning, despite the current absence of drama, and output from the eurozone’s factories continues to slump, led by Germany. Maybe we could bailout all of European manufacturing. Or the ECB could buy all the output, drive production up and create a whole new wholesale market of manufactured goods. Brussels could use the agriculture policy as a blueprint.

In the background, Denmark is trying to contain a four-year old financial crisis of its own.Triggered by a real estate bubble that got Danish banks in trouble after 2008, Denmark now has to cut costs and increase welfare. Yes, INcrease. With the rest of Scandinavia just a Smørrebrød’s throw away, Denmark welfare needs to stay competitive. The Danish economy is expected to have contracted by 0.4% in 2012. read article

So long.

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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.

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Heathrow to be renamed China-Qatar International Airport

The US saw 158,000 jobs added in October, undercutting expectations of 162,000. Jobless claims fell by 9,000 from last week. ADP, which releases the numbers, changed its methodology for this report, introducing its new partner company Moody’s Analytics, after having faced criticism regarding the data’s relation to the monthly unemployment report. Said report will get out tomorrow, despite being almost delayed due to the aftermath of hurricane Sandy. This is the second last unemployment data release before falling or not falling off the fiscal cliff in January, as this wonderful infographic illustratesForecasts see unemployment going up to 7.9%.

PMIs were released both in the UK and China. The former missed expectations, hope and dreams of a number closer to the magic 50 (growth benchmark), proof the exiting a recession is not as fun as it sounds. In China on the other hand, fears over the country’s slowdown were eased with stronger growth returning to the manufacturing sector and the October PMI reading being back in the black.

And the timing could hardly be any more ironic. Yesterday, CIC, China Investment Corporation, confirmed to have bought a 10% stake in Heathrow, the third busiest airport in the world. The stake will be acquired from Spanish infrastructure investor Ferrovial, which currently holds 5.7% of Heathrow’s holding company, which will acquire an additional 4.3% to guarantee CIC’s ownership of 10%. It’s busy days at the European Competition Authority, which is still in the middle of reviewing the purchase of 20% of the airport by Qatar’s sovereign wealth fund. Since 2007, Heathrow has been involved in debates as to whether or not the airport would get a necessary third runway.

Otherwise, JP Morgan has filed a case against the supervisor of the Bruno Iksil, the London Whale, in London’s High Court of Justice. Javier Martin-Artajo, who has left the bank along with a number of other people associated with the $5.8bn loss, has not been served yet. Details of the bank’s legal arguments or the amount of money the whale watcher is being sued for are are not publicly available.

And while JP Morgan continues to be under investigation from the FBI concerning the above, Barclays was fined $470m for manipulating California’s electricity market. The fine includes a $35m disgorgement for the period from 2006 to 2008. BP and Deutsche Bank are also under investigation of the Federal Energy Regulatory Commission. Maybe it’s time to manipulate utilities in another state? One that’s less experienced in law suits against big corporations maybe? Just a thought.

So long.

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Europe blazing, Apple releases Christmas-iPad

German business confidence fell for the sixth month in a row, on the back of PMI data that missed expectations, and maybe also general scepticism towards Germany’s role in Europe. On the other side of the world, the same indicator for China showed a much better result and eased the fears over slowing growth.

The ECB’s Mario Draghi is in Germany today, discussing the legality of the ECB’s bond purchasing program that could save Spain and the world with the Bundestag’s committee for finance, budget and European affairs. Adding a legal struggle to the idea, could have obvious devastating effects to the development of Europe’s peripheral disaster. The OMT, Outright Monetary Transactions program, introduced by the ECB in September, is exceeding the bank’s mandate and leaves many questions about the administration of the program unanswered, says the German government. At this point, Spain has still not requested a bailout, maybe because the ECB has not figured out their role in it yet.

Meanwhile in the UK and US, authorities seems to be ready to pump some more money into the economy: the US despite it’s modest improvement, and the UK despite its best efforts so far. The Bank of England’s Mervyn King warned of the limits of quantitative easing and asked for patience to see results. Alphaville on UK vs US development throughout the crisis.

Apple released another new product: the ultimate bridge between the not-really-that-necessary iPad and the much-more-necessary-but-did-it-really-have-to-be-taller iPhone, is an iPad in Kindle-size for the bargain price of £269. Take a wild guess which competitor that’s aiming at. The pricing of Christmas-iPad is a source of investor worries, as it is still much more (more than £100) expensive than Amazon’s Kindle or Google’s Nexus. read article

After the EU regulation imposing a women-quota of 40% in company boards was rejected in the European Parliament yesterday, presumably to the disappointment of center-left parties, the World Economic Forum Global Gender Gap Report 2012, released today, shows that equality is slowly improving. Of the 132 countries in the survey, 82 improved their equality ratings from 2011 to 2012, closing 60% of the global economic gender gap. Only 60%. The UK (#18) and Germany (#13) have each lost two ranks, while China’s gender gap has actually widened a bit. Unsurprisingly/Traditionally, the top 5 countries were Iceland, Finland, Norway, Sweden and Ireland.

So long.

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China makes the world go round

There’s not much going on today. In the words of ZeroHedge:

Tonight’s session has been even more boring than yesterday’s, when nothing happened.

China‘s non-manufacturing PMI fell [unsurprisingly] by 2.6 points between July and August, marking the lowest score since March 2011. Most of it is attributed to the low global demand due to the financial and sovereign debt crisis.

On the back of this, oil prices declined in a panic over global fuel demand. This is a day after Iran’s president Mahmoud Ahmadi-Nejad admitted that Iranian oil sales had declined since the implementation of international sanctionsread article

But any slowing of China is risky business for export-driven Germany, the biggest trade partner in Europe and fifth largest in the world. But Germany, which is celebrating  its federal unity today, seems to be doing confusing well regardless of said risks.

Reflecting intertwined fates of the German and Chinese economies, the Dax and Chinese share prices have largely risen and fallen in tandem since the early 2000s. Lately, however, that relationship has appeared to break down. While internationally-traded Chinese shares have fallen about 1 per cent since early August, the Dax is up 8 per cent.

And some say there could be a new all-time high in the coming year, brought about by the countries relative economic strength (or if you believe the FT article quoted above, due to “different Teutonic factors”).

Also in Europe, a draft proposal that leaked out of Brussels last night, shows the attempt of a new fiscal reform act to be signed by all 17 eurozone members in this month’s summit. It appears to be based on Germany’s request for stricter supervision of countries with inconsistent reform track recordsread article

Almost five years after Bernie Madoff‘s arrest for running a Ponzi scheme that cost investors more than $17bn, the date for the Madoff employee trials has been set for October 2013 with all of 3.5 months allocated for the hearings.

I’m going to leave it at this.

So long.

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Bad at budgeting, countries and airlines edition

The US Congressional Budget Office estimates that the US will enter a recession come 2013, with the budget deficit reaching $1.1tn (t-r-i-l-l-i-o-n), government debt totalling 73% of GDPunemployment moving towards 9% and economic output declining 0.5%. That would push the debt to GDP ratio beyond the levels of the 50s and about double as high as five years ago. According to Bloomberg:

Congressional leaders have said they probably won’t consider until after the election the Bush-era tax cuts set to expire Dec. 31 or $1 trillion in automatic spending cuts that would begin taking effect in January. There is no sign of an agreement to avoid a so-called fiscal cliff, and the CBO report prompted partisan finger-pointing.

Enter the minutes taken at the FOMC (Federal Open Market Committee) meeting on 31 July/1 August. In a nutshell, the note show agreement that as things are still shit (see above) despite stronger retail sales and lower jobless claims, some QE is still in order. Everybody go back to being excited. read article

Meanwhile, Qantas as canceled an $8.5bn order for 35 Dreamliners, making it the largest cancellation of aircraft ever. Kind of a blow for Boeing, which has been behind schedule since the idea of the B787-9 Dreamliner has been put on paper for the first time. Its first order by All Nippon Airways was delayed by more than three years. China Eastern Airlines had canceled the order of 24 Dreamliners in fall of last year. After paying a cancellation fee, Qantas will be get $433m in refunds. The company will need it; in the year leading up to June 30, it lost AUD245m, marking a fall in profits of almost AUD500m from the year prior. read article

Otherwise, the Chinese flash PMI came in at its lowest since November 2011, supporting the more-QE-from-the-PBC thesis, while the French PMI outperformed expectations in terms of manufacturing and services. The German and overall eurozone PMI were meh, i.e. mixed, but as usual pointing towards the worse.

Finally, NYT Dealbook explains the dynamics of sovereign debt restructurings (literally any, but mostly Belize) by the example of the Maltese Falconread article

So long.

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Downgrading Germany – breaking the last taboo

The calm before the storm when we had time to worry about China’s growth and American unemployment are over. SO over. Europe exploded back onto the center stage, with Moody’s doing the unthinkable: downgrading Germany.

Well, the rating outlook for GermanyLuxemburg and the Netherlands also had their outlook cut, while Finland’s Aaa-rating was confirmed as stable. The reasons for the downgrade were the possibility of Greece’ exit from the eurozone and the consequences thereof, as well as the debt burden of Spain’s and potentially Italy’s bailout, which would have to be carried jointly by the country’s named above. The Handelsblatt says a Greek default would cost Germany at least €45bn, while I remember other estimates exceeding €85bn…

German 10-year bond yields grew to 1.27% on the news (they were at 1.12% yesterday…). German manufacturing [sentiment] data came in more than a whole point below the lowest estimate, which is bad news even if you don’t believe in the relevance of PMIs. YET, may I just say it… the eurozone rises and falls with the German economy, but not all is lost. As a matter of fact, some say any reaction to the news will be exaggerated because it’s August and there’s not a whole lot else going on.

Spain’s and Germany’s Finance Ministers are set to meet today, presumably to start a support group for officials of country’s with poor credit ratings.

And after a pretty bad day yesterday, Italy and Spain have re-imposed three-months short-selling bans. For Spain, this is a first. In the words of Felix Salmon

A ban on short selling didn’t reverse a drop in stocks when the SEC imposed one covering 19 financial companies in July 2008, including, ahem, Lehman Brothers. Spain and Italy believe they can achieve more success – the countries have reinstate a ban on short selling the shares of their financial institutions.

And in response from MarketBeat

Here’s a news flash: Short-selling bans won’t solve Europe’s fundamental problems.

In good old European fashion, let’s do something ineffective first.

China’s PMI on the other hand doesn’t look quite so bad, but that’s not because of the thriving manufacturing industry [as a matter of fact, the manufacturing index is down], but rather because of declining unemployment figures.

In terms of earnings, Apple’s Q2 report is due this evening, as well as those of the two largest American tobacco companies Altria (i.e. Philip Morris) and Reynolds American. The latter are expected to report very positive growth figures, despite the decrease in smokers:

Their main attraction: an average dividend yield of 4.7%, which is more than three times the yield on 10-year, U.S. Treasury notes.

In line with today’s news, Joris Luyendijk’s banking blog is featuring someone who used to work for a rating agency in Londonread article

So long.

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