Death Star Economics



OMG, Japan is actually growing

US jobless claims came in higher than expected and housing data disappointed as well, raining on the American recovery 2013 parade and adding to the uncertainty over the future of the Fed‘s asset purchasing program. read New York Times
At the same time, those with disposable income seem to be working on a new housing bubble of sorts. read Bloomberg

Japan reported its economy grew in the first quarter of the year, leading to a 3.5% annualized growth leap and supporting Shinzo Abe’s approach since his inauguration in September. Most of the growth is attributed to private consumption. read Bloomberg

Meanwhile, Japanese companies prefer to look for opportunities elsewhere, for example the US, where a handful of corporates bought into the US shale gas market for several billion dollar. read Financial Times

Following the Bloomberg user data debacle, Citigroup has banned its fixed income traders from participating in Bloomberg chat groups to shield the banks from any security breaches. read Financial Times

This morning…
Lloyds Banking Group might just be short of fully returning into private sector hands, as the bank’s shares rose higher than the government’s cut-off point for a sale of 61.2 pence per share. Over the past weeks, David Cameron had reiterated that bailed out and partly nationalized institution shouldn’t stay government owned for longer than needed. read Reuters

Word got out that Qatar spent up to $3bn on supporting the Syrian opposition since 2011, the same year in which Libya’s rebels also received support, fueling rivalry over political influence between Arab countries. read Financial Times

Other than that, there is not much going on, time to get on the below.

Weekend reading…

Bangladesh, globalization and the price of your t-shirts, read New York Times
– from pork bellies to ruling the world – a brief history of the Chicago Mercantile Exchange, read Economist
gold bulls vs bears, read Alphaville
– Super Abe and the fight for a prosperous Japan, read Economist leader
– on the uselessness of asset management, read Harvard Business Review

Have a good one.


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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.

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Splitting up – Barclays reconsiders investment bank, Catalonia favors seperatism

Barclays may have to follow the seemingly unavoidable path of European banks and split. The bank’s shareholders have demanded that new CEO Antony Jenkins should let go of investment banking operations, along the lines of UBS‘ shut down of its fixed income business last month that eliminated 10,000 jobs. The Swiss bank was fined £30m by the British FSA in connection to the $2.3bn insider trading loss that Kweku Adoboli got seven years for. Of course, axing the division would help Barlcays get around ringfencing investment banking and retail operations and may therefore be desirable from a regulatory point of view. read article

All of this coincided with Qatar Holdings selling a pile of Barclays shares this morning. read article

Yesterday, Spainish region Catalonia held elections, which saw a slight reduction of seats of CiU (Convergencia i Union), the party that demands a referendum. But those seats lost, were picked up by ERC (Esquerra Republicana di Catalunya), which demands independence from Spain without a referendum and as soon as possible. Four parties in favor of separating from Spain, holding 87 of 135 seats, are now present in the Catalan parliament. Gaining independence from the Spanish mothership would neither be simple nor quick. Catalonia is contributing 7-8% of its output to the central government in Madrid, and could cause an overhaul of Spain’s fiscal politicsread article

In terms of reforms, there is a new idea from Germany’s Finance Minister, who wants to force banks to write a restructuring manual for a bankruptcy scenario. Lawyers and advisory firms just collectively ordered new cars.

Otherwise, it is Cyber Monday, which is estimated to be the biggest online shopping day of the year for the third time in a row, says the Associated Press.

In Brussels, the “Eurogroup meets for third go at kicking can down the road” and to assess Angela Merkel’s campaign strategy in conjunction with Christine Lagarde’s hopes and dreams of a Greek debt haircut.

In the week to come, we’ll get the new governor of the Bank of England (330 pm today), updated US GDP, the Spanish budget, Chinese manufacturing and all unemployment number of the rainbow, with France on Tuesday, Germany on Thursday and eurozone on Friday.

So long.

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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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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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Catalonia requests credit, bank regulation/reputation crisis spreads to advisors

There won’t be a news brief tomorrow, Thursday, 30 August 2012.

Spain’s indebted region of Catalonia, which currently owes €42bn, requested a €5bn emergency credit line from the Spanish government. The money will come from an emergency fund for struggling regions [i.e. Spain] worth €18bn. In conjunction with yesterday’s recession announcement this makes for another great week for not-being Spanish. read article

After ploughing through more or less all banks out there, another regulator, the Securities and Futures Commission of Hong Kong, is taking Ernst&Young to court to force the advisory to disclose information about a former client “in a test case for how far mainland secrecy laws can shield disclosure of sensitive corporate matters in the territory.” read article

Mario Monti meets Angela Merkel in Berlin today. His plan is to push for the ECB’s emergency bond purchasing program by pointing out to Merkel that bond spreads seen by the periphery can be dangerous to ze muzerland as well. read live updates

Right after the meeting Merkel and a selected few will board a plane from Germany to China to strengthen trade relations and secure future export contracts. The fun mid-week trip includes representatives of Siemens, Deutsche Bahn, SAP, Volkswagen and a number of other big German [industrial] names.

new (potentially game-changing) player has entered the stage in the Glencore-Xstrata-takeover-and-then-not situationNorges Bank Investment Management, the fund manager behind Norway’s oil-oozing sovereign wealth fund, has joined forces with Qatar, to keep Glencore from completing the merger. NBIM has bought Xstrata shares worth around $500m over recent weeks, making it the company’s fourth largest shareholder (behind Glencore, Qatar and BlackRock). read article

Otherwise, today has the revised US Q2 GDP and German CPI in stock, all of which will be announced in the [British] afternoon. WSJ estimates the former to be revised up from 1.5% to 1.7%.

So long.

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Exports collapsing, deficit soaring, but at least we’ll get 4G

Japanese exports collapsed by almost three time more than what had been expected. Economists predicted 2.9% less exports year-on-year in July, but the actual data shows a slump of 8.1%. This is the largest fall in exports in the past six months. Japan is hoping for domestic demand from China to crawl out of the hole it fell into, but China is having issues of its ownDemand is stalling, while domestic companies oversupply the market. In other words, there’s little hope for Japan unless we’re nearing an unexpected growth boost.

Speaking of ailing economies.. rising spending and falling tax proceeds have led the British deficit to increase in comparison to last year, leaving public borrowing at £600m in July alone. read article

On September 11, the UK is getting 4G mobile internet services, which will first be available to customers of Orange and T-Mobile and hosted on Ofcom’s 1800MHz airwave frequency. Relevance or choice of date have not been discussed publicly. Orange and T-Mobile are both owned by Everything Everywhere, which stroke the deal with Ofcom, holding other mobile network providers back until the new data network is completely rolled out around the end of 2012.

Glencore made a public statement alluding to the possible abandoning of its $90bn merger with Xstrata, which otherwise would create one of the largest natural resource conglomerates in the world. The Qatari Sovereign Wealth Fund, another shareholder, is asking Glencore to increase its offer bid. At this point, Glencore is holding 34% of Xstrata, while Qatar’s SWF only holds 12%, enough to block the merger. In response, Glencore’s CEO Ivan Glasenberg said it wouldn’t be the end of the world if the deal didn’t happen and something to the extent of many more fish in the searead article

Otherwise, RBS is now also being probed for potentially having violated Iranian sanction agreements, and PSA Peugeot Citroen, “battered and bleeding cash” according to WSJ, has lost so much in value57%, that it is now in danger to lose its place in the French CAC40 index.

And finally, for some light and little infuriating lunch time reading (…), the first of potentially many opinion pieces on what should and will(!) happen with the whole Julian Assange situationread article

So long.

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