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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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US budget deficit decreases; ECB rate cut likely

Yesterday…
The IMF warned of the Asian bubble, saying too much FDI was leading to explosive credit growth and property prices, and it was to get even worse if Japan’s monetary policy was to have the intended effect on the Japanese economy (hold your horses, Christine). read FT

Deutsche Bank is issuing €2.8bn of new stock to improve its capital base. According to WSJ, Deutsche Bank has one of the lowest capital ratios among European banks. read WSJ

This morning…
The Dutch Queen Beatrix abdicated, to be replaced by her son Willem-Alexander. She will be demoted to Princess Beatrix. read BBC

The US Treasury is expecting the first lowering of the budget deficit since 2007 between April and June 2013, when it is looking to repay $35bn, against the February estimate of shouldering another $103bn in debt. The deficit cut is due to tax increases, spending cuts and tax revenues recoveries. read FT

There was a whole flood of data out of Europe this morning: both Eurozone and German inflation came in at 1.2%, lower than expected, making a rate cut by the ECB on Thursday more likely. German unemployment added to its rise in March, but the adjusted rate is still only marginally above the two-decade low of 6.8%. Eurozone unemployment climbed to 12.1%. No surprise there, when has it not been rising… read Alphaville

Spain reported GDP growth for the first quarter – keyword ‘growth’ – at -0.5%, leading the Bank of Spain to lower it 2013 growth expectations from -0.5% to -1.3%. read CNBC

So long.

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Spain turns to stimuli, as Merkel points to two-tier Europe

Yesterday…
Spain’s unemployment rate rose to a new high of 27.2%, possibly marking the final point that austerity measures haven’t work in this case or simply don’t work at all (hello, Keynesians). Between January and March, almost 240,000 people lost their jobs. read BBC
Following the announcement, Mariano Rajoy announced the government would lay low on cuts and tax hikes, as even though the deficit has shrunk, the country is doing miserable. Stimulus for everyone! read WSJ

The UK dodged the bullet on a triple-drip recession, reporting first quarter GDP growth of 0.3% from the previous quarter

This morning…
Angela Merkel stirred the European debate with remarks about the potential impending rate cut by the ECB. Merkel pointed out that country’s like Germany actually needed a rate increase, while other country’s required further easing, underlining the divide between functional and dysfunctional Europe.

In Italy, coalition building is underway. Prime Minister-to be Enrico Letta said the conservatives would have to work out a compromise regarding the property tax that Berlusconi promised to get rid off before joining the coalition.

Today, the US is announcing first quarter GDP growth, which is expected to come in at 3% from the final quarter of 2012. Over the next three months, this number will be revised three times, once due to the change in government statistics in late July. read WSJ

In Japan, consumer prices have fallen fastest in two years in March, which doesn’t really come as a surprise considering all the excess liquidity in the system. Prices fell 0.5% on the year, slightly more than expected. read Bloomberg

Weekend reading:
Italy’s new heads of state – an evalution, read The Economist
– meet Janet “anti-inflation” Yellen, possibly the next head of the Fed, read NYTimes
– why the city of Los Angeles is suing Deutsche Bank, read Businessweek
real bad boys smuggle dairy, read Bloomberg

Have a good one.

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IMF joins Cyprus creditors; Fannie Mae records first profits in 6 years

There won’t be an update tomorrow, Thursday April 4th.

Yesterday…In the US, people are getting more nervous about the Fed’s spending spree. Eyeing over to Japan, that might be fair. Once again, it’s Jeffrey Lacker, President of the Federal Reserve Bank of Richmond, who doesn’t beat around the bush when it comes to disliking monetary policy. read article

Fannie Mae, which received a total of $116.1bn in bailout finance from the US Treasury since the financial crisis, officially returned back to black. For the financial year 2012, the mortgage business recorded $17.2bn in profit. Finally. Although things are looking up, $84.7bn of its bailout package remain outstanding. read article

Speaking of earnings, the SEC has given companies the okay to announce earnings and other news via Facebook and Twitter, throwing off all those institutions (read banks) that blocked social networking sites for their employees. read article

Cyprus’ Minister of Finance resigned, saying he had done his deed in negotiating the bailout deal. In related news, the IMF stated today that it will pay €1bn of the total €10bn bailout package for Cyrpus, spread out over three years.

This morning…
there’s little to talk about. By 9.45am the most striking news were that Apple may release two new phones this year, and even that was a story from yesterday. read article

Spanish Prime Minister Mariano Rajoy is looking towards Brussels to get the growth in Europe going (good luck with that) and stop the austerity vise (even more luck for that), asking for countries in the position to do so to spend more to stimulate the economy. read article

So long.

Death Star Economics
ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

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Laiki depositors to lose up to 80%, Poland turns against euro

Yesterday…The Spanish central bank forecasts its economy to contract by 1.5% in 2013, while unemployment is seen to rise to close to 30%:

The economy will be marked by weak domestic demand, a fragile labor market and tight financial conditions, the bank said.” read article

Meanwhile in Poland, Prime Minister Donald Tusk is floating the idea of a euro referendum. The country has been pushing to join the foreign currency pretty much as long as it has existed – proximity to Germany would bring an additional trade advantage (despite the disadvantage for cheap manual labor). Anyway, now Poland is not so sure anymore. The political opposition claims the eurozone has changed too much since 2004, when the country joined, for a decisions to possibly still be valid. read article

The US economy must be improving, because it’s not getting worse. That was the idea of the morale following the data announcement of January home prices rising at the fastest rate since summer 2006 and an increasing demand for durable goods. read article

In other news, the Financial Times has found that the group of AAA-rated countries has decreased by 60% since 2007, and Warren Buffet will become one of Goldman Sachs’ ten biggest investors after exercising some warrants issued in 2008. read article

This morning…
Cyprus‘ central bank announced some details on the impending haircuts, saying uninsured deposits at Cyprus Popular Bank (Laiki) could be cut by 4/5th. The estimated 40% haircut seems to remain the benchmark for larger insured deposits. According to WSJ:

Based on estiamtes from government officials, the losses would affect some 19,000 deposit-holders at the Bank of Cyprus who, combined, hold some €8.01 billion in uninsured deposits. Uninsured savers at Cyprus Popular Bank, who hold a combined €3.2 billion, will lose most of that.

The Bank of England said British banks were facing a £25bn capital shortfall with regards to compliance with new banking standards. read article

So long.

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Budget cuts and peripheral misery

Today at midnight (Saturday morning in the old world), the US is facing the much discussed spending cuts, decreasing government spending by €85bn until the end of the federal budget year in September. Maybe it’s time to depart from discussing the sheer possibility of this scenario. If you believe Bernankethe pain will be close to intolerable, slowing the economy down by 1.5%. The Congressional Budget Office estimates a 0.6% decrease in GDP. If you believe Fortunecompany earnings are strong enough to allow ignoring the issue. Without a budget fix, the automatic cuts will continue in the following financial year. read article

And things aren’t pretty in Europe’s periphery either. First, numbers out of Spain showed that Spanish corporations faced the largest decrease in earnings ever recorded in Q4, including Bankia’s €19.2bn net loss. Meanwhile in ItalyBersani rejected all rumors regarding coalition talks with Berlusconi. Over in Greece, 2012 revenue targets were missed and the burden of unpaid taxes increased, causing skepticism in Brussels, where the next loan instalment, worth €2.8bn, can be withheld if Greece’ financial report is not satisfactory. At the same time, the IMF, usually in bed with the EU, was more positive, saying Greece had collected more taxes recently and could avoid a further reduction in government salaries.

We shouldn’t forget, however, that despite the mess that is Southern Europe (oh yes, I made that generalization), there are still countries out there that want to join the union and currency. Poland, for example, which originally wanted to have the euro by 2012, is now discussing meeting all criteria (the same criteria that Greece met once…) by 2015read article

In India, Q4 GDP growth dropped to 4.5%, as the government announced a more pro-business deficit-reducing budget for the coming year. read article

Otherwise, Andrew Mason removed from his position as CEO of discount firm Groupon, which recorded losses in the last two quarters of 2012. In his own words:

After four and a half intense and wonderful years as C.E.O. of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today. If you’re wondering why… you haven’t been paying attention.

Weekend reading

– The “Because I Can” attitude of senior managementread article

– Dear Banker, this is how we’ll pay you in the futureread article 1 read article 2

– the European Union and Ricardian equivalenceread article

Have a good one.

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Eurozone stuck in recession until 2014 (except for Germany, because they think positive)

It’s a Europe-centric Friday, with breaking news of poor performance all around Europe’s economies – we know, thanks for pointing it out again.

The Commission revised its growth expectation for the year, saying the eurozone’s economy will contract by 0.3% in 2013. Bye bye, 0.1% growth. Bye bye, post-recession world. It will be accompanied by an unemployment rate of 12.2% and inflation of 1.8%. At least there will be room for rate cuts. read article

In Spain, the budget deficit increased to 10.2% due to aid costs for the banking sector. The bailout package for Bankia alone added 3.2 percentage points to that. Incidentally, Bankia, which is reporting 2012 earnings next week, will report annual net losses worth €19bn+, the largest loss in Spanish corporate history. read article

The German Ifo business climate index came in higher than expected, because Germany is vehemently following its optimism strategy that includes ignoring any data or reality.

In good news, the ECB recorded a €1.1bn profit from interest payments on a €208bn debt portfolio of PIIGS bonds. Over the last year, income from sovereign bonds even amounted to €14bn. read article

Meanwhile, US consumer confidence is being rocked by rising prices on gas, which climbed 15% up to $3.75 per gallon last week. Car owners in Europe are weeping and cycle to the US embassy to apply for visas. read article

Over the weekend, we’ll see Italy’s general elections (24-25 Feb), aka the Silvio Berlusconi show. In case of a hung parliament, the election limbo would continue for months, and Italy would be stuck with a caretaker government that doesn’t want to implement policies. read article

Weekend reading:

– horsemeat economics, read article

– and then ‘cyberwarfare‘ became a thing, read article

– rethinking drug policiesread article

– in case you’ve read the Bloomberg editorial on $83bn annual bank subsidies, here’s a discussion of it read article

Have a good one.

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The sequester is back, as is Europe’s political madness

In the US, the chaos that is the national budget and the cuts thereof is picking up in newsworthiness again. Yesterday, President Obama tried to guilt Republicans into agreeing with his proposal, which didn’t achieve all that much. New estimates say the sequester could chop 0.5% off this year’s GDP and destroy 700,000 jobs. Others say that besides the overall effect, the demand side won’t feel the $85bn spending cuts. read article

Something that won’t suffer cuts is medical research, generally a positive thing, with the billion dollar research project Brain Activity Map (BAM), the first neurological project of its kind, starting in a couple of weeks. read article

As of today, Bulgaria is without government, after the country protested against austerity measures, utility prices and corruption. In next steps, a caretaker government will be formed, before official elections sometime in Springread article

In other European news, Italy’s center-left Democrats are trying to build a coalition government with Mario Monti to fight the good fight against Berlusconi, while Mariano Rajoy of Spain said the Spanish economy was seeing “no green shots or recovery in any shape or form.

Also from Spain, the government is imposing a yield limit on regional government bonds to combat the country’s overall debt burden. The new limit will be set at 100 basis point above government debt, a benchmark that Catalonia has long passed. read article

In other news, Microsoft has abandoned Hotmail, phasing out the emailing service by this summer. All 350 million users (seriously, who still uses Hotmail??) will be moved to Outlook.com, which already has 60 million users of its own. read article

So long.

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Currency wars – silent edition

Over the weekend, the G20 did a great job in shattering trust in the system: after a week of publicly denouncing a currency war of easing until there’s nothing left to ease, while predominantly pointing the finger at Japan as the culprit, the outcome goes as follows. Everyone, including Japan, may do as they please as long as there is no public advocacy for devaluing currencies. So far, all that talking about it has done is making things worse. read article

In Spaintoxic assets on the books of the country’s banks have decreased by €24.1bn in December, after November had recorded the highest bad-loan ratio ever. And overall loans declined by around €80bn as well, as many underperforming ones have been poured into the ‘bad bank‘ the government set up in October, as a black hole for foreclosed assets and developer loans. From ZeroHedge:

[…] as El Pais reported yesterday, official Spanish debt (not counting the hundreds of billions in off balance sheet obligations), rose to €882 billion in 2012, a surge of €146 billion in one year, sending interest expense to an all time high €38.7 billion.

Elsewhere, Nicos Anastasiades, leader of the Cypriot conservative party, has one the first round of the presidential elections. Anastasiades is an austerity man, much like Merkel likes them, and his election would pretty much secure a bailout deal for Cyprus. read article

Meanwhile in Hong Kongbankruptcy filings have risen 62% from January 2012, measuring the highest rate in almost two years and highlighting Hong Kong’s weakened economy. read article 

Despite the US being closed for President’s day today, some important documents have leaked from the White House. Obama’s proposal for a reform of the immigration system would see illegal immigrants legally applying for US citizenship if they have been in the country for more than eight years. read article 

Have a good week.

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Sue the banks (check), sue the auditors (check), sue the rating agencies (pending)

We’ve done the banks and the auditors, now it’s time to turn to other services providers in the sector: the rating agencies. The US Department of Justice is suing Standard&Poor’s (McGraw-Hill) over mortgage-bond ratings between September 2004 and October 2007. According to the filings, the ratings agency understated the riskiness of the assets sold. According to Bloomberg:

The company bent rating models to suit its business needs to the extent that one CDO analyst commented that loosening the measure of default risk for a certain security in 2006 “resulted in a loophole in S&P’s rating model big enough to drive a Mack truck through,” the U.S. said.

Shares in the publishing company fell the most since 1987 in response to the lawsuit. In November 2012, S&P was found guilty for misrating CPDOs (constant proportion debt obligations). The other big rating agencies, Moody’s and Fitch, which presumably did the exact same thing at the exact same time, have been left alone so farread article

Across the pond, Barclays bill for mis-selling products has increased to more than £3.4bn. Today, the bank announced to add £425m to the pool used for redress on mis-sold interest rate hedges, as well as adding another £600m to the indemnities pool for mis-sold payment protection insurance. read article

From ZeroHegde:

In the meantime, the political scandal scene in both Italy and Spain is unchanged, and getting worse, especially with Rajoy summarizing it all with this absolute pearl according to El Pais: Rajoy Says “It’s All Untrue, Except Some of It. No seriously, he said that.

In other news, the banking union turns out to be job creation machine: The ECB, which is meeting on Thursday, will have to hire up to 2,000 people to fully exercise its responsibilities as the watchdog of the banking union. Over in China, the People’s Bank of China injected RMB450bn ($72bn) into the country’s money markets as part of a short-term liquidity fix before the Chinese New Year holiday. 

So long.

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