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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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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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Cypriot capital controls, EU templates and Japanese QE

Yesterday…
Cyprus‘ President Nicos Anastasiades announced that the country’s banks are going to stay closed until Thursday (again: which Thursday…) and that capital controls will be put in place until it all blows over. read article

The new head of the Eurogroup, Dutch Finance Minister Jeroen Dijsselbloem, threw everyone for a loop by saying the private sector contribution in Cyprus (i.e. the haircuts) would lead future EU bailouts by example. He retracted the comment later on. Thanks for that.

The MSCI Emerging Markets Index has had the worst first quarter since 2008, lagging behind industrial economies most since 1998. Ongoing QE programs (see below for Japan) are cited as a reason in favor of developed markets. read article

Presumably not for the same reason, the BRICS nations are planning their own version of the World Bank. read article

Meanwhile, China is finding itself in a public health crisis, with rotten ducks floating down rivers in the southwestern Sichuan province and 11,000 dead pigs being fished out of Shanghai’s water supply system. read article

Otherwise, a 17 year-old British kid has sold its bedroom-developed app Summly to Yahoo for $30m. read article

This morning…
there’s not a whole lot going on except digesting overnight news, because most people, including myself, got nothing but chocolate eggs on their minds.

New Bank of Japan Governor Haruhiko Kuroda is already warming up the printers, saying the BoJ will consider buying five-year+ bonds. The next policy meeting is next week, April 3-4.

So long.

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Italian elections – Berlusconi with a vengeance

Italy is left in limbo without a conclusive election result, probably another round of elections looming, preceded by an embarrassing attempt by [presumably] Pier Luigi Bersani to form a coalition, and a full re-appearance of Silvio Berlusconi on the political stage (in the Senate). But despite the obvious screw-up that this election seems to be, there are clear winners and losers: Mario Monti, in the rational corner, plays the role of the latter. Beppe Grillo, anti-euro comedian in the ridiculous corner, came out heading the largest single party in the country’s lower house. Winner. Inconclusive is only one way of putting it, although I guess we can gather that the Italian people generally have an issue with austerity measures. Let the name-calling begin. read article

Just in: Bersani will hold a press conference at 5pm CET in Rome.

Summarizing some reactions:

Notably, the European markets display alarming symptoms of contagion: Italian elections drove up yields in Spain, Portugal, Greece and Ireland, and pulled down yields in Germany, France, the Netherlands, Austria and Finland.

Meanwhile, everything Italian that can be bought or rather sold is about to be subject to a short-selling ban. Elsewhere, US stocks fell the most since November of last year, with the volatility index at its 2013 record high.

But there are a couple of other things quietly happening in the background. The Japanese government will sell a third of its 50+% stake in Japan Tobacco, the third largest tobacco company and formerly a Japanese monopoly. The sale comes as part of policies to reduce stakes in state-backed companies to raise funds for this economic recovery that’s taking so long. read article

Over in the Netherlands, Rabobank, commonly clean slate poster-child bank, one of the safest institutions and bailout-free, is looking at a $440m+ in fines for involvement in the Libor rate rigging scandal. The fine could come as early as May. read article

Back in New York at Moody’s, it seems like lessons have been learned since 2008. The rating agency announced that any mortgage-backed securities can’t receive top ratings any longer. Aa is the new Aaa. Other agencies are expected to follow suit. read article

So long.

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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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Return to the headlines, Iceland and Ireland don’t want to pay

Like the ghost from Christmas past, Iceland and Ireland are making headlines again, both on the topic of not repaying their debts. Iceland, which held a referendum concerning the repayment of bailout debt to the UK and the Netherlands in 2010, has been relieved from the remaining £2bn outstanding to the British government. The reasoning of the EFTA (European Free Trade Association) court? They’ve learned their lesson. Meanwhile in Ireland, the ECB rejected a debt relief proposal regarding the €30bn EU-IMF bailout of Anglo Irish Bank. At present, Ireland has to repay €3.1bn per year, ending in 2023. read article

Another potential problem looming for Irish banks is the next round of stress tests, set for this autumn. With the domestic economy still shrinking and mortgage arrears much higher than anyone expected, the banks may require additional capital.

The investigation into batteries used in Boeing’s Dreamliner took pressure off of manufacturer GS Yuasa, shifting the attention to the battery monitoring unit, produced by Kanto Aircraft Instrument. The Dreamliner fleet has been grounded since January 17. All Nippon Airways has cancelled 459 flights until January 31 so far. Until about five years ago, Japanese airlines used Boeing jets almost exclusively. Deregulation opened the market to Airbus, which seems to be winning more ground as the Dreamliners stay on the ground. read article

In other news, Queen Beatrix of the Netherlands is abdicating in April, leaving the throne to her son Prince Willem Alexander, Sarah Palin was paid almost $16 per word as a commentator on Fox News and the German governing coalition has agreed to hold the national elections on September 22.

Also, as opposed to what you might have gathered in some of today’s headlines, France’ Labor Minister did NOT say France was bankrupt, he was merely mocking the past government’s take on the country’s finances. 

Finally, a post-mortem of the Davos ‘thank god we got over this crisis’ meetingread article

So long.

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Eurozone crisis: Just grow out of it, stupid!

After yesterday’s news of the shrinking German economy, Spanish PM Mariano Rajoy called on all those country’s who aren’t Spain, Portugal, Ireland, Greece, Cyrpus, really also Italy and maybe not even France, to implement growth stimulating policies as long as they can, because Spain sure can’t. This is the same Spain that still hasn’t called the ECB for help. Should someone break the news that Europe might not just grow out of this crisis? Maybe. But it’s siesta now. Let’s wait. read article

In the meantime, the German central bank is working on the logistics of getting 700 pounds of gold back into German vaults. At this point most of it is stored at the New York Fed, with the rest of it locked up in Paris, a precaution that is still in place from the cold warread article

The Netherlands‘ fourth largest bank SNS Reaal announced that it would need a restructuring due to its toxic property loans in autumn 2012. Now, the bailout will have to be carried out by the government. According to a decision by the European Commission, Dutch banks ING and ABN Amro will not be allowed to be part of the restructuring, because they received bailouts during the financial crisis. One scenario would be the creation of a bad bank for said loans, with all other big Dutch banks as shareholders. Hello over there at the Basel committee! Does this sound systemically risk-free to you? Altogether, it is estimated that SNS Reaal will need about €1.2-1.8bn to keep its doors open. In 2008, the bank received €750m from the government. read article

Otherwise, there are a number for “Facebook searching for revenue” headlines out there, because the website just launched its own search function, which despite it’s lose limits on Facebook itself, is stepping onto Google’s turf. Has that ever been a good idea? read article

And speaking of corporate catfights. It seems obvious that EADS has won the “massive plane”-round against Boeing. The Dreamliner (787), competitor aircraft to the A380, doesn’t seem to fly so well. This morning All Nippon Airlines and Japan Air grounded their 787 fleets for review, after yet another Dreamliner had to perform an emergency landing due to technical difficulties. read article

A whole truckload of banks announce fourth quarter earnings today, including JP Morgan, which has just announced to cut CEO Jamie Dimon’s salary in response to his responsibility in the London Whale case.

So long.

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More stimulus for Japan, more consolidation for Europe (ex-Turkey)

Japan isn’t messing around. Today, the government announced a new stimulus package of almost double the size of the last one in October. With JPY880.3bn ($10.74bn), Japan is now living off all its savings to avoid having to sell more government bonds. The government expects the new stimulus to push GDP by 0.2%. JPY161.2bn will be put towards reconstruction of areas hit hardest by 2011 earthquake. read article

In Europe, the day starts with decisive words from the IMF and the ECB, demanding for Europe’s nations to consolidate their budgets and create a European banking union, also to oversee all banks within the union. The IMF also claimed that France needed to revisit its stubborn views on reform, as Italy and Spain could surpass the country by taking the necessary steps. read article

The German parliament has approved the latest Greek bailout shenanigans. Next up are the parliaments of France and the Netherlands. In the latter, prime minister Mark Rutte said he wants tighter European control over financial issues, while reconsidering powers that currently lie with Brussels but could be handed back to nationsread article

Otherwise, data for German and Greek retail sales (read German retail sales), Italian unemployment, Italian, Spanish and eurozone-wide CPI and Swiss industry, retail and wholesale all missed estimates. Happy days. Eurozone unemployment seems to be the only thing that came in as expected – at a record high of 11.7%.

Meanwhile, Turkey is still holding a grudge against Brussels for not having been able to join the EU yet. Prime Minister Tayyip Erdogan, who recently said the EU had to make a decision on Turkey’s accession by 2023, before the country will turn east, has now commissioned a “giant mosque that will be visible from all across Istanbul.” According to the plan, it would hold 30,000 people. According to Reuters

It is symbolic of Turkey’s tilt to the east under Erdogan, who has chipped away the founding secularism of the modern republic and presided over its emergence as a power in the Middle East.

In other news, the UN assembly has granted Palestine nonmember observer state” status, same as the Vatican. read article

Dominique Strauss-Kahn and Nafissatou Diallo, formerly housekeeper at the Sofitel hotel in New York, have reached a settlement deal, after she had pressed sexual assault charges against the former head of the IMF in 2011. Ka-ching.

Weekend reading

– The Leveson inquiry and modern journalism, read article

– The FT and your flash player explain the UK’s Autumn Statementread article

– More interaction with PBS explaining the web of betrayal behind David Coleman Headleyread article

– Vladimir Putin‘s battle against corruptionread article

– More on corruption, India prepares for cash handout programread article

– Why plan C for Greece isn’t better than any before, read article

Have a good one.

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US closed for business, Dutch form government

The US is closed until further notice until ‘Sandy’ has blown over. The last time Wall Street closed due to weather conditions, was in 1985 for hurricane Gloria. The decision was based on low expected trading volumes that could show disproportionate responses.

But while everybody is staying at home, US consumer spending rose 0.8% in September, beating expectations. read article

With everything on hold on the east side of the Atlantic, attention and pressure has been diverted the other way (employing the Eurocentric world map) to Japan. The Bank of Japan is meeting tomorrow, giving its biannual outlook report. Finance Minister Koriki Jojima is pressing the Bank to do something about the country’s deflation. The general expectation seems to be a JPY10tn ($125.7bn) extension of the country’s QE program. read article

In the Netherlands, the incumbent VVD (People’s Party for Freedom and Democracy) that secured most votes in September’s election, has struck an agreement with the PvdA (Labor Party) to form a coalition agreement. Budget negotiations that would bring the Dutch budget down to the EU-set benchmark of 3% are already taken care of. read article

After rumors last week, publishing houses Pearson and Bertelsmann announced today that they would join forces and create the largest trade publisher in the world: Penguin Random House. 53% of the new joint-venture will be held by Random House’s parent company Bertelsmann, while Penguin’s parent Pearson will hold the remaining 47%. read article

The FT’s headline of the weekend was that US money market funds have overcome their fear of the eurozone explosion and went back to making investments in Europe, increasing their exposure by 16% in September. So maybe Francois Hollande spoke to them before announcing that the worst of the crisis was over.

Meanwhile, a Greek newspaper published a list of individuals with Swiss bank accounts, causing the editor of the investigative magazine Hot Doc to be arrested on Sunday for suspected tax fraud. Greece’ sloppy way of handling its tax receipts (and the follow-up of those unpaid) has been a cause of criticism from its lender all along. read article

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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