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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

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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Central bank center stage: the downside to repaying debt

In the US, the balance sheet of the Federal Reserve has exceeded $3tn in assets for the first time this week, resulting from its continuous stimulus policy. Only last week, the Fed purchased assets worth $48bn. In comparison, in the week before Lehman Brother’s collapsed, the Fed’s balance sheet measured $924bnAccording to Bloomberg:

One risk from a large balance sheet is the possibility that the Fed’s interest income could evaporate in coming years as rates rise, according to a paper released last week by researchs in the Fed’s monetary affairs division [surely, that’s the only division they have…].

Also in the US, Tim Geithner stepped down as Secretary of the US Treasury today.

Across the pond, the European Central Bank has announced that banks that borrowed cheap money under the ECB LTRO ‘funding for lending’-type scheme last year may repay some of the outstanding debt now. Estimated between €100-200bn, some reports say the repayments amount to €137.2bn. What’s disconcerting about people repaying their debt is that it will shed light on those banks that are doing poorly, throwing the EU for a loop yet again. read article

The UK sees its economy sliding in the general direction of a triple-dip recession (it’s starting to sound like ice-cream). In the aftermath of the Olympics, with lower manufacturing output and decreasing oil production in the North Sea, British GDP has shrunk 0.3% between October and December 2012. More than expected and frankly more than the UK can take if it wants to keep pretending to be a world power. read article

Another story shook the EU yesterday, with the Commission voting against actively supporting carbon prices in its emissions trading system, causing prices to collapse by 40% in just a couple of minutes. From the FT with no mercy:

The price collapse in the cornerstone of its climate policy is an embarrassment for the EU. It could also have far reaching implications at a time when other countries, such as China and South Korea, are testing or launching similar markets.

Weekend reading:

– Advance in data storage: let’s put it into DNAread article

– Tim Geithner on quitting, read article

– riding the 99%-wave – why suing Goldman Sachs doesn’t work when they’re not guilty, read article

– McSweeney’s guide to a middle manager’s principlesread article

– more on Cameron’s idea of the future EUread article

Have a good one.

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Across the board disappointing results: Japan’s deficit, Apple’s earnings, S Korea’s GDP

Over the past weeks, Japan has done a lot to try and convince the rest of the world of its [return to] well-being, but no distraction really did the job. And now this: Japan’s 2012 trade deficit hit JPY6.93tn ($78.27bn), the highest ever reported. Reasons are poor performance of its largest companies, rising fuel costs, the strength of its currency and the whole argument with China over the Senkaku Islands in the East China Sea. read article

South Korea’s 2012 GDP underperformed, recording the weakest growth figures since 2009. The country’s very own central bank had forecast the economy to grow 3% over the whole year – the actual number game in at 2%. To blame is the eurozone crisis, among other things, weakening demand for export products, which account for 50% of the South Korean economy. read article

The US House of Representatives approved a short-term extension on America’s borrowing spree, answering the question of whether the US will be able to pay its bills in the near future. This has bought some time to come up with a budget proposal to solve all problems – and without raising taxes, if you believe Paul Ryan, Chairman of the House Budget Committee. read article

The timing of the extension means the debt limit will be revisited after two other fiscal deadlines. Many members of both parties have said they want to revise of replace across-the-board spending cuts set for March 1, and they will need to renew funding by March 27 if they want to prevent a partial government shutdown. They are far apart on how to achieve both goals.

According to Reuters, the US Treasury will need the remaining $16.4tn the country is legally allowed to borrow until early March.

In Davos, Angela Merkel shows patience, saying that she was going to listen to David Cameron‘s complaints to work out the best possible solutions under which the UK would stay in the European Union. Wise words, after all, the UK’s vote would be helpful on her European budget proposal. Barack Obama also urged Britain to stop messing around and stay in the union. In the background economists polled by Reuters say that there is a 60% chance the UK will lose its AAA rating, which it has held since 1978, in the coming 12 months.

In other news, Apple announced earnings last night, showing the weakest increase in sales in 3.5 years, and the most disappointing profit growth since 2003. Since the shares of the world’s largest public company hit $700 in September, the price has fallen by 27%. Other technology companies like IBM, Google and Netflix did well and beat expectations in Q4 of the last year. Microsoft will report earnings tonight. read article

So long.

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Deutsche Bank profits from Libor fixing (maybe and also, duh!)

Whether any of today’s apparent top stories are actual top stories remains to be seen. There is Deutsche Bank’s profits from Libor trades (or not), ECB action (or not), and the suspiciously low Vix volatility index showing that all problems are solved (or not). Hm.

So the Vix hasn’t been this low in 5.5 years. Now that the US didn’t fall off the cliff, there’s hardly anything left to worry about… Is it going to stay like this? Of course not, there’s a debt ceiling on fire, spending cuts lying around and an earnings season to come. This merely seems to be a reflection of ‘stopping to care’ and ‘calming the f*uck down’. read article

Months after the Libor scandal unravelled and shook the City of London, the Wall Street Journal reported that Deutsche Bank recorded €500m in profits from trades linked to the notorious benchmark rate in 2008. In the worldwide rate-rigging investigation, the bank had not been charged with any fines yet. In response, Deutsche Bank emailed Bloomberg, outraged, saying trades relied on analysis and “not on any belief that the bank could inappropriately influence interbank lending rates.” Of all global players, Deutsche Bank has been bashed significantly less than other investment banks. Only in home-sweet-home Germany, where traditionally all social democrats hate the firm, things are a bit more difficult.

AIG decided against participating in a shareholder lawsuit against the US government for not being nice enough during the insurer’s $40bn bailout yesterday. The case is being pursued by former AIG CEO Maurice R Greenberg, whose Starr International Corporation used to be a shareholder of the insurance company. In short:

The suit contends the US government extracted too-onerous terms in its rescue package for AIG, and seeks about $25bn from the government. A federal claims court in Washington ruled in July that the case could proceed, after the US government sought to dismiss it.

In the background, Barack Obama has chosen his chief of staff Jack Lew as Treasury Secretary and the ECB is meeting to discuss this month’s policy decision, which are unlikely to result in anything new if you believe a Reuters poll. (Aha, there we go, nothing happened.)

So long.

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