Quote of the day: Despite decent M1 growth, broader monetary aggregates in the EU have been very weak. As I’ve mentioned before, this is likely a result of the impaired banking system – something that the AQR (along with forced recapitalization programs) will hopefully fix. I think this is a problem that the ECB recognizes, and a reason why the TLRTO’s specifically target bank lending, as well as coinciding with the AQR. IMO, this is also a reason the ECB is reluctant to pursue QE outright. There are many views on how QE affects the economy, but one of the clearest effects is the growth in base money… that really isn’t the problem at this juncture. – Global Macro Trading
Friday, August 29
Thursday, August 28
Wednesday, August 27
Previously on MoreLiver’s:
W/E: Weekly Support (updated)
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Optimism? In the Eurozone? Forget it – TradingFloor
It may be the long European summer but in reality this is the perfect time for the Eurozone to send a few ferrets down the many holes in the system and see what startled rabbits pop up. They're likely to be very sickly.
Sharp decline in intra-EU trade over the past 4 years – Bruegel
Divergence between the Euro Area and the European Union as a whole is almost non-existent
Where European Banks are Lending – Marc to Market
Lending at their strongest pace since 2008, but not to European counterparts, to Asia.
Italy must cut growth forecast, economy minister tells Corriere – BB
Italy must cut its output growth forecast, its economy minister told a newspaper, adding that economic weakness was a European problem that the region's governments needed to tackle together.
Europe: Stagnation, Default Or Devaluation – Evergreen Gavekal
Austerity hits growth in Finland – Danske Bank
How Low Can Euro-Zone Yields Go? – WSJ
With yields already at rock bottom levels, how much good could central bank buying of sovereign debt possibly do to the wider euro-zone economy? Maybe not much. But it shouldn’t be written off completely.
The Greatest Depression? German Yields Now Negative Through 2017 – ZH
10-year Spain and Germany to record lows – BB
Hollande takes a hard line against anyone questioning his subservience – Krugman / NYT
What France Needs From Europe – BB
Yes, in the fullness of time, supply-side reform is indispensable. For now, though, monetary and fiscal accommodation should be Hollande's most urgent priorities.
Hollande Doubles Down to Impress Europe – PIIE
Facing record low approval ratings at home and skeptical European partners in Berlin, Frankfurt, and Brussels, the French president had little alternative but to double down on his recent political shift right toward a more mainstream European center-left social democracy for the French Socialists. Hollande is hoping that his commitment to austerity and reforms at a time when Europe is turning to a more activist fiscal policy earns him some appreciation from Germany and the European Central Bank (ECB).
UKRAINE / RUSSIA
Ukraine crisis update – Danske Bank
Markets groan as Ukraine unable to bridge gap with Russia – TradingFloor
Nadia Kazakova: Both Ukraine and Russia need a deal brokered for economic reasons * Russia is pushing Ukraine to recognise the separatists as a legitimate party * Ukraine preparing to tough it out, but faces harsh winter
Finland Upgrades NATO Ties After Condemning Russian Tactics – BB
EUROPEAN CENTRAL BANK
ECB easing - will it work? No. 3: Carry trades and 'hot potato' effect – Danske Bank
Still possible to do carry trades, but less attractive than earlier * The first three months of negative rates: signs of the ‘hot potato’
Can Mario Draghi save the euro again? – WaPo
Draghi only had to say "whatever it takes" to end Europe's financial crisis. But Draghi will actually have to do whatever it takes to end Europe's economic one. That's what he's trying to do now, but the eurocrats might not let him. They have their rules, after all.
BMO makes the case for ECB asset purchases – FT
ECB's Draghi has been 'overinterpreted', says Germany's Schaeuble – BB
ECB Hires Blackrock For ABS-Buying Advice – ZH
ECB says selects Blackrock to help develop ABS plan – BB
ECB’s Coeure Says ABS Push May Fail Unless States Back Debt – BB
“Europe is facing a very fundamental choice if it wants to move to an ABS market that is as deep and liquid as the U.S. market. To reach this goal, the securitization market will require a significantly different amount of public sponsoring than is currently the case.”
German consumer confidence drops for the first time in 20 months – TradingFloor
A single month, wiped nearly all gains of the boom of the last 12 months – Wolf Street
CBO Sees Wider U.S. Deficit as Slower Growth Cuts Revenue – BB
The budget deficit in the U.S. this year will be wider than predicted four months ago as weaker- than-expected economic growth in the first half hurt tax revenue, the Congressional Budget Office said.
Bringing It Back Home – Project Syndicate
An increasing number of American companies are making plans to shift their headquarters to Europe, in order to escape the United States’ uniquely unfavorable corporate tax rules. So what should US policymakers do?
China: Is the housing market weakness cyclical or structural? – Danske Bank
Since 2006 there has been a substantial slowdown in new home investments. Our calculations suggest that structural growth in new home investments could already have declined below 7%...Nonetheless, at least 70% of the decline in new home investments over the past year appears to be cyclical and can largely be explained by tighter financial conditions.
Foreigners in the firing line as Chinese regulators take aim – TradingFloor
Pauline Loong: Foreign companies swept up in China’s anti-trust investigations may soon find company in misery. The threat of rising defaults in wealth management and other investment products is focusing regulatory attention on the liabilities of fund management companies and that of their foreign partners.
China property slump persists into August, data shows – FT
China Industrial Commodities Collapse, Sentiment Tumbles – ZH
Daily Central Banks – WSJ
Blackstone’s Take: The ECB’s New Math: 5+5=QE * ECB and Fed Face Policy Divergence, For Now * Hungary Leaves Key Rate Unchanged After Two Years of Cutting * Europe’s Banks Boost Lending in Asia
Daily Macro – WSJ
Euro-zone bond yields slide to yet new record lows as expectations grow that the European Central Bank is lining up a massive dose of quantitative easing—perhaps focused on purchases of private sector assets, such as ABS, rather than government bonds. It has put the onus very strongly on ECB President Mario Draghi, who helped create this anticipation with his speech in Jackson Hole last weekend. Some are calling those comments “Whatever it Takes 2,” a rerun of his pledge from two years ago to save the euro, but this time he absolutely has to deliver concrete policy action. Words are not enough. If, after all this talk, nothing happens, the snapback in the market will be violent. Let’s hope he has the full backing of the Germans.
ECB and Fed Face Policy Divergence, For Now – WSJ
The linkages between the euro zone and the U.S. could make it difficult for the two central banks to run markedly different policies for long. “Either the global environment gets good enough for the euro-zone outlook to improve–then the ECB will not be on a different path as the Fed for long–or if the global outlook goes down, then the Fed would delay a policy tightening”, said Berenberg chief economist Holger Schmieding.
EURUSD: Further weakness ahead – TradingFloor
Sell EURUSD about 1.3175, stop 1.3204 initially, trailing stop to break-even and better once 1.3145 is broken, target 50% at 1.3115 and 50% at 1.3070
When FX wars become negative interest wars – FT
FX strategist at UBS has been wondering about what the Swiss National Bank may do if the ECB’s measures to weaken the euro begin to test its 1.20 EURCHF floor.
Dollar Slips, while Bond Market Rally Continues – Marc to Market
Another USD regime shift? – FT
BofAML’s David Woo: The momentum behind the outperformance of Eurozone peripheral debt and Eurozone high yield credit has been slowing since the start of Q3….Investors maybe rotating out of European bonds into US bonds… If we are right that foreign private buying of US bonds (on a currency unhedged basis ) is picking up, the USD will be the primary beneficiary.
Weekly Bond Update: Hoping to dodge a setback in Europe – TradingFloor
Explaining My Portfolio – The Short Side of Long
Where does one see value in current global macro environment * Silver’s bear market is now ongoing for almost 3 and half years * Sugar is one of the most disliked agricultural commodities… * Uranium is one of the most oversold industries in the world… * Australian economy has not suffered a recession for 23 years! * I do not want anything to do with US stocks or US bonds!!! * I am closely tracking Russian stocks & Gold Mining Juniors
Venäjä-pakotteiden ja vastapakotteiden talousvaikutukset vähäisiä – Verkkouutiset
EU:n ja muiden maiden rajoittavilla toimenpiteillä ja Venäjän tuontikiellolla on vain vähäisiä suoria vaikutuksia Venäjän ja sen kauppakumppaneiden kokonaistaloudelliseen toimintaan, arvioidaan keskiviikkona hallitukselle luovutetussa raportissa.
Onko rahapoliittisen keskustelun käymisessä mitään järkeä? – Tyhmyri
sekä kertauksena heinäkuulta 2013:
Vaarallinen elvytysharha – yhtä vaarallinen kuin säästämisen harha – Tyhmyri
Masokistinen talouspolitiikka johtaa talousanemiaan – Jan Hurri / TalSa
Hallitus tasapainoilee budjettiriihen linjauksia muka yllättyneenä talouden heikosta yleiskunnosta. Talouden anemian ei kuitenkaan pitäisi olla yllätys, sillä se on seurausta EU:n ja Suomenkin varta vasten harjoittamasta masokistisesta talouspolitiikasta. Samaa talouden temppurataa on kuitenkin tarkoitus jatkaa.
Stubb: Valtion budjetti pienenee taas – TalSA
Budjettiriihen ensimmäisen päivän tiedotustilaisuudessa ei saatu tarkkoja tietoja ensi vuoden budjetista ja rakennepaketista, vaan niitä joudutaan odottamaan huomiseen. Venäjä-pakotteista sen sijaan esitettiin huojentavia arvioita.
EKP jatkaa ajanpeluuta – Vesa Varhee / TalSa
Euroopan keskuspankin pääjohtaja Mario Draghi antoi viikonloppuna selvän viestin. EKP jatkaa elvyttävää rahapolitiikkaa ja on valmis erityistoimiin taloutta uhkaavan deflaation torjumiseksi.
Palkansaajien ansiot Q2 +1,2% – Tilastokeskus
Myönnettyjen rakennuslupien kuutiomäärä Q2 -11% – Tilastokeskus
Kuluttajien luottamus heikkeni elokuussa – Tilastokeskus
Konkurssien määrä tammi-heinäk. -4,5 prosenttia YoY – Tilastokeskus