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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

Europe is the new Japan – ECB cuts rates

Yesterday…The Fed’s FOMC meeting notes showed that we’re moving away from the “let’s close the money tap” idea and back to “whatever it takes” – meaning easing or no easing. The statement said that policy action will be taken with an eye on how the economy will progress. read Alphaville (interestingly, Matthew Yglesias of Slate has interpreted this as a call for stimulus)

Apple‘s mega bond of $17m helps the company to avoid $9bn in taxes. If Apple would have had to bring in money from abroad to pay dividends to shareholders, that’s what it would have cost them. Of course, the average Apple customer, like me, doesn’t care about tax avoidance (it’s not even illegal), but the American state is upset, as it’s trying to crack down on offshore tax avoidance like never before this year. read FT

Otherwise, an infographic to yesterday’s ADP employment report. view graphic

This morning…
all eyes are on the ECB, which just announced a benchmark interest rate cut by a quarter point to 0.50%. A press conference during which Mario Draghi will wear a suit made of money is set to follow at 1.30 BST. Let the excitement begin. Money for everyone.

UBS is holding an investor meeting today, during which the bank may be urged to split its investment banking and wealth management units [again]. read Reuters

So long.

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

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A bailout with a side of bank-run

Good morning, due to new commitments Death Star Economics gets up early now.

After Cyprus exploded in such an unexpected fashion on Monday, followed by the revision of the bank account levy proposal assigning a 15% tax on deposits above €500,000 and a closing of all banks until Thursday [making ZeroHedge wonder which Thursday…], which was then followed by the Cypriot parliament rejecting the proposal altogether. In the background, Russia has appeared on a white horse, sending Gazprom to offer to bail the country out for nothing butaccess to its natural resources [and money laundering facilities]. Cyprus’ Finance Minister is currently in Moscow.

In the background, the EU reached a provisional deal on the ECB’s role as single bank supervisor in the Union. Once in place, the reformed central bank could bail out European banks directly. read article

It’s budget day in the UK today, and once again it won’t be pretty. Expected are 2% spendingcuts, totalling £2.5bn. Also, inflation sits at 2.8% in February and in-coming Bank of England Governor Mark Carney wants to focus on more indicators than just getting that number down. There is the possibility that the budget will steer the BoE bank onto the 2% inflation target courseread article

BlackRock, the largest asset manager in the world, is set to restructure the firm and fire 300 people, about 3% of its global workforce. read article

In regulatory news, Citigroup has to pay $730m in settlement fees for misleading investors in mortgage-related (read “-backed”) securities between 2006 and 2008. Crisis-era legal case #765.read article

UBS decided to leave the panel that sets the Euribor benchmark rate. Previously, Rabobank, Raiffeisen Bank, Bayrische Landesbank and Citi had left the panel. read article

Have a good day.

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Sequestation is no medical term

Amusing as ever, the Wall Street Journal and the Financial Times try to sell us two different worlds this morning. As for WSJ:

Meanwhile, the economy is improving, central banks continue to pump money into the financial system, corporate earnings aren’t horrible and turmoil in Washington has waned.

While elsewhere, the FT announces “US faces fresh financial shock.” Well, that’s confusing. The problem at hand is the sequester, another beast of $1.2tn in automatic spending cuts, passed in 2011 and in effect from March 1. It cuts the Pentagon’s budget by $600bn until 2023, while the same amount is cut from other discretionary government spending.

Unlike the fiscal cliff deals – which was widely anticipated – the sequester would cause a big hit to 2013 growth forecasts. According to forecasting firm Macroeconomic Advisers, the sequester would knock 0.7 percentage points off growth in 2013, taking its forecast down from 2.6 to 1.9 per cent.

In the business of fixing rates, the attention shifts to Singapore, where internal reviews have uncovered a scheme to fix rates for non-deliverable foreign exchange forwards. When the Libor scandal broke lose in London, Singapore’s regulator ordered financial institutions to review their rate submission processes to the Association of Banks in Singapore, which publishes the benchmark. JP Morgan, UBS, HSBC and DBS are the most active players in Singapore’s offshore FX market. read article

In ItalyMonte dei Paschi di Siena is looking for a new investor. He should have at least €720m lying around to pay a potential fine for derivatives trades between 2006 and 2007, and not be part of any center-left political movement. A dislike of moral high horses would also come in handy. read article

Otherwise, Toyota is once again the world’s largest car manufacturer according to 2012 figures, taking its old place at the top back from General Motors.

So long.

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Go team Draghi

So we got ourselves a banking union. That is surprising for a number of reasons. First of all, the Eurogroup struck a deal. Secondly, the Eurogroup struck said deal before the deadline. Finally, Germany managed to add a clause that protects its Mittelstand. Oh no wait, the last one isn’t the least bit surprising.

A summary a la WSJ:

Ministers said the European Central Bank would start policing the most important and vulnerable banks in the euro zone and other countries that choose to join the new supervisory regime next year. Once it takes over, the ECB will be able to force banks to raise their capital buffers and even shut down unsafe lenders.

Once approved by the European Parliament, the show could kick off as early as March [let’s be realistic and say July]. The threshold for banks under supervision is €30bn of assets held, leaving Germany’s retail banking sector more or less untouched.

Unfortunately, the EU delegates involved were just as impressed with their own efficiency, so they decided to leave all other decisions be for now… until June. According to the FT, both budget negotiations and economic reform contracts, were completely taken off the agenda. The remaining time spent together will be used to play Secret Santa (guess who got Greece).

Moreover, Mario Draghi, soon to be puppeteer of Europe’s financial institutions was named the FT’s person of the year. Good for you, Mario. We know it hasn’t been easy. read article

In legal/regulatory/scandal news, the FSA, CFTC (US Commodities Futures Trading Commission) and the US Department of Justice are about to fine UBS more than $1bn for fixing libor ratesDealbreaker explains how such a humongous number (double of what Barlcays had to pay) comes together:

The fine-setters seem to have about four things to think about: 1) how much bad stuff did the bank do, 2) how much money did they make doing it, 3) how caught are they, and 4) how sorry are they now.

It calls for an investigation.

Co-head of Deutsche BankJuergen Fitschen, is under investigation for tax fraud committed in 2009. In his opinion, the reaction of German authorities, sending officers with machine guns to the Deutsche Bank headquarters in Frankfurt on Wednesday, was a bit much and he doesn’t intend to resign any time soon.

For the weekend, Japanese elections are on, with the opposition (the Liberal Democratic Party) led by Shinzo Abe expected to winread article

Weekend reading

– North Korea: playing with rockets, read article

– Felix Salmon on NYT Dealbook’s first conference this week and whether it was a success, read article

– Joris Luyendijk’s banking blog returns to blame fund managers, read article

– Alphaville is selling shirts (or ECB collateral) for charityread article

Have a good one.

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US corporate tax up for discussion, BoE changes course (towards Canada)

There won’t be a News Brief tomorrow, Thursday, December 13, 2012.

There are actual news regarding the fiscal cliff, with President Obama and House Speaker John Boehner putting corporate tax up for discussion. Reforming the corporate tax rate, currently between 15% and 35% depending on the state, would be part of a policy package that could yield $1.4bn in new revenues, as opposed to $1.6bn as proposed earlier. Some sources say that an overhaul of the current corporate tax regime could reduce the maximum rate from 35% to 28%. Obama’s current proposal also includes lifting the debt-ceiling and increasing infrastructure spendingread article

Germany has gently (read harshly) reminded Silvio Berlusconi to leave blaming Germany for Italy’s economic policies out of his election campaign. Berlusconi said that Monti’s government had employed German-centric policies and Berlin had used the spread between German and Italian bond yields to cause his last cabinet to collapse. read article

Meanwhile in the UK, i.e. New Canada, Mark Carney has had the entire BoE‘s senior management stumble as he announced the central bank needed more radical measures, steady rates, numerical unemployment targets and maybe consider leaving inflation alone for now and replacing it with nominal GDP targeting. Mervyn King is real happy about his successor right now. read article

Today also marks the day when the libor scandal creeps back onto the front pages. A former trader for Citigroup and UBS and two employees of interdealer broker RP Martin were arrested and questioned regarding the rate-rigging that was uncovered in Spring 2012. Barclays paid $450m in settlement charges in June in connection to the scandal. read article

So long.

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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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A Swiss kind of problem: Credit Suisse splits and gets sued

It’s a pretty epic day for Credit Suisse. The bank announced to split into two units, wealth management and investment banking, squeezing its asset management arm into the former, which had been planned for a while now to decrease back office costs. The bank cited “the new regulatory reality” as a reason for the restructuring. Capital will be split 50:50 between the two units and the investment bank’s risk-weighed assets are meant to be cut by another 10%. Credit Suisse is aiming to save SFR4bn by 2015.

Some of those ambitious savings, however, will need to be put towards the legal costsEric Schneiderman, New York’s Attorney General, strikes again and filed a civil lawsuit against Credit Suisse after investors in mortgage-backed securities lost more than $11bnread article

Staying with Swiss banks and fines, ex-UBS Kweku Adoboli was convicted in four cases of false accounting and two cases of fraud in the lawsuit brought against him after he lost £1.4bn in trades between October 2008 and September 2011read article

In Japan, the government has announced to put another JPY1tn ($12.3bn) towards its stimulus program to save its economy. Japan’s economy is forecasted to shrink 0.4% in Q4. Following the 3.5% decrease in Q3, this would push the country into the third recession since 2008. Meanwhile, the Bank of Japan has left it’s asset-purchasing program untouchedread article

Yesterday, the FT’s Wolfgang Muenchau, the godfather of the eurozone crisis commentators, denounced France as Europe’s next problem child, saying:

The relatively robust growth during the third quarter was a fitting example that France is often more resilient than forecasters and commentators generally acknowledge. […] the currently fashionable French-bashing is politically motivated – a rightwing reaction against a Socialist president.

This morning, Moody’s, which doesn’t subscribe to the FT, downgraded France to Aa1. Au revoir, A-triple.

With unemployment figures at the highest in 13 years and French household names like Peugeot Citroen losing ground on the global market, this is just another weakness to France’ voice in European negotiations. read article

So long.

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War of the roses: IMF vs EU

There won’t be a news brief tomorrow, Wednesday, 14 November 2012.

Everything seems a bit unsettled today: the EU and the IMF had there biggest falling out yet, Swiss banks face more fraud investigations now that Switzerland is opening up more and more to bi-lateral data sharing agreements, the investigation of ex-CIA head David Patraeus‘ private affairs are getting increasingly confusing, adding more people to what started as a simple affair (as simple as an affair with the head of the CIA can be…), and the FSA is investigating the potential manipulation of prices in the British gas market. It’s messy, that’s what it is.

“Just this time, we’ll let you get away with it, you hear me?”

That is what EU finance ministers decided to tell Greece yesterday. What’s one concession when everything else is working according to plan? So Greece got a two-year extension to balance its budget. Except, that’s not what the IMF wanted to hear them say. Lagarde insists to stick with the 2020 target for Greece to decrease the deficit to 120%. The decision about further rescue funding is postponed to November 20, when all parties step back into the ring. While Eurogroup chairman Jean-Claude Juncker, who has admitted to lie to the press at times, indeed wants an extension of the deadline for Greece, Lagarde is in favor of another haircut, to help the country meet its targets. In Germany, Angela Merkel is worried about these developments; she has an election coming up in September 2013 and big losses for the German taxpayers would be ill-timed. read article

Also in Germany, 50 clients of struggling Swiss bank UBS are being investigated for tax fraud. The personal details of clients were obtained on CDs with information of Swiss bank accounts held by German citizens, which were purchased by German tax authorities in 2010. Last week, the same authorities started an investigation of UBS employees for aiding said tax fraud. Switzerland is just not what it used to be anymore.

Meanwhile, the New York stock exchange has to suspend trading of 216 companies due to a technical fuckup, and the UK inflation exceeded expectations by 0.2% for October, hitting 2.7% due to an increase in tuition fees and food prices.

In post-election AmericaGlenn Hubbardeconomist and dean of the Columbia University Graduate School of Business, said the US could make significant steps away from the January fiscal cliff by increasing taxes on high income earners. The crux: Hubbard was one of Mitt Romney‘s led economic advisors throughout his presidential campaign. Awkward.

So long.

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Election prep and Darwinian finance

With the US presidential election on the agenda for next week Tuesday, this weekend is used by all news outlets of the world and really anybody with a n opinion (thanks, internet…) to publish op-eds on said matter. So here we go.

– The Economist endorsed Obama as indirectly as possible (of course they did), read article

– The Washington Post’s Wonkbook looks at campaign expenditure, concluding that this election is the most expensive on record, read article

– Pimco’s Bill Gross is disgruntled about America and rewrites the Pledge of Allegianceread article

– The FT’s data blog looks at the importance of economic issues in the election read article

– Mayor Bloomberg, who is not member of any party, also endorsed Obama, saying that “Hurricane Sandy had reshaped his thinking, read article

Today’s US employment figures show that 3.57 million people are currently out of work in America as opposed to 4.11 million last year. Yet, the unemployment rate increased from September, amounting to 7.9%, exceeding the rate of January 2009. Estimates had seen 125,000 jobs added; the number was beaten by 46,000 new employees. read article

Commerzbank, Dexia and Lloyds TSB were removed from the list of G-SIFIs (global systemically important financial institutions) or G-SIBs (global systemically important banks) or “the world’s most dangerous banks” like the German FT calls it, due to diminishing “global systemic importance”. Ouch. That’s a weird insult, but an insult nontheless. After all, having the “evil” stipped off of them by a couple fo Swiss regulators, pushes them towards irrelevance, if you will. CitigroupDeutsche BankHSBC and JP Morgan are the four giants at the top of the list, required to hold an additional 2.5% in common equity to meet requirements set out by risk-management regulation Basel III. The general requirement amounts to 7% equity holdings as a percentage of risk-weighed assets. read article

The other big topic this week is the supposed end of investment banking as an industry/career/ethos. Triggered by UBS’ mass firing and essential termination of its fixed income unit on Tuesday, this a welcomed turn of events for those who either supported Occupy [insert location], or critically observed the developments in more stable housing. The WSJ bemoaned the death of fixed income, while the Economist compared core competencies. Gillian Tett wrote about a paper that examines the fluctuations in financial services as a career destination, and Harvard Business School announced that more of its graduates were now heading into consulting rather than investment banking. Because that’s what a world in shambles really need… more fucking consultants.

Election-unrelated weekend reading:

– Greece finds Medea: what happens when you talk about tax evasionread article

 Sandy and climate change on the cover of Businessweek, read article

– Felix Salmon‘s take on the above, read article

– Leaving China and going … where? read article

Have a good one.

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Emerging markets: a snowball of negative scanning

After Brazil’s economic growth collapsed from 7.5% in 2010 to 2% in 2012, the government has now launched a stimulus package worth R$133 or $65.6bn. It involes improving the country’s appalling infrastructure by selling government owned highways and such to private companies. Now, just as a thought experiment, say Brazil slows down further… and further… and further. And the world economy doesn’t pick up come 2015. What happens next? Exactly, they host the Olympics. Ring a bell? read article

Meanwhile in another deteriorating emerging economy, foreign direct investment in China has fallen to the lowest rate in the past two years, amounting to 8.7% less than in summer 2011. But every attempt for China to boost investor confidence seems to stir adverse reaction, as everybody KNOWS what they’re trying to do, indicating that the slowdown is much more severe than expected. It’s like a snowball of negative scanning… read article

In Europe, Spain is about to receive $100bn in emergency funding for its banks, triggered by restrictions of the ECB concerning bank borrowing. These restrictions came into effect last month, when the ECB limited loans against government-guaranteed bonds, causing a planned loan for nationalized Bankia to fall through. Ergo, money needs to come from somewhere else. Oh no wait, it’s coming from the same place, but with a different labelread article

And BusinessInsider gave out a warning that we will soon have to start talking about Greece again. As though I ever stopped…

Banking scandal round-up:

Deutsche BankCitigroup, JP MorganRoyal Bank of ScotlandBarclays (duh), HSBC and UBS have been subpoenaed by New York state attorney general Eric Schneiderman to talk about Libor.

Tonight, the verdict concerning Julian Assange’s deportation to Sweden will be decided. WikiLeak’s founder is sitting around in the Embassy of Ecuador in London since June this year, to avoid his involuntary return to Scandinavia, where he his wanted for sexual assault. Ecuador has already decided to grant Assange asylum, but the British government has informed the South American country that it could have the embassy stormed if they would resist the deportation. All very dramatic.

So long.

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