Summary: Asian and European stocks down, European stocks slightly recovering, but Italy/Spain bond yields, CDS’s are again up. U.S. payrolls coming later today – should be only a side-show, but could launch another wave of panic selling before the weekend, especially as markets have recovered somewhat.
Merkel and Sarkozy have a telephone chat later this evening on the euro crisis. Sarkozy will also give a ring to the Spanish PM. They can do nothing, but will probably try to persuade all EU parliaments to pass the ESF Earlier, at 12:20 p.m Brussels time, Olli Rehn will hold a press conference. Expect words of wisdom from Finland’s gift to the global economy.
Views: bad news already in the markets. I expect a pullback in stocks, and previously advised to close shorts and sell the bounce, we’ll see.. EURUSD short’s take profit-level met, pat on my back, JPYUSD’s stop-take profit hit. Sorry about the too tight stop, but still, profit is a profit. Keep Brazil short, as the market could go on and on.
Joke of the Day: “There’s been a worsening in the international situation, which has reached markets around the world, including here in Brazil. This reflects the weakening in the US and the European situation, which isn’t being solved” – Guido Mantega, Brazil’s finance minister
Oh how much I hate politicians who always take the crazy bull markets and bubbles as a proof of their own competence and when things finally get nasty, blame everyone else.
Joke of the Day 2: “Our judgment is very much the same as in the previous meeting a month ago. We consider that we’re still in a situation where the risks are more on the upside… and that we will have to monitor the situation very closely.” – Jean Claude Trichet, ECB chair on a television interview for Dow Jones Newswires
“Debt Worries Trigger New Bond Purchases Despite German Opposition, as Trichet and Top EU Official Urge National Governments to Take Bigger Role”
RBS’s dim view that ECB is resorting to what constitutes ‘jedi mind tricks’, and a possible huge bond-buying operation, after all member countries agree to it, is in the works.
Shock and awe in the Eurozone – alphaville FT
Trichet – the verdict – alphaville FT
“Reform of the eurozone’s governance must use democratic mechanisms – and the logic of the internal market – to prevent some EU states from imposing externalities on others.”
The Euro’s Crisis of Democracy – Maduro / Project Syndicate
ECB and Bundesbank are having a policy face-off
Another Major Feud Between the German Central Bank and the ECB Over Resumption of Bond Purchases; Will Germany Leave the Euro? – Mish’s Global Economic Trend Analysis
“Which suggests the next obvious step for the Fed is to declare an official negative interest rate policy, or a national imposed tax on deposits of a certain sum.”
Introducing the 2011 deposit crisis – alphaville FT
“no collateral, no covenants, no prison time for fraud, no bankruptcy, debasing risk”
The Root of All Sovereign-Debt Crises – Bhidé & Phelps / Project Syndicate
Sudden realization by markets that economies tanking, fiscal mess everywhere, euro crisis unsolved and apparently no political will to do “whatever it takes”.
Suddenly it all matters – Pragmatic Capitalism
Nice article, featuring interactive view on the evolution of global rates policy
"If there is any lesson China can draw from the U.S. debt ceiling crisis, it is that it must stop policies that result in further accumulation of foreign exchange reserves,"
EM equity investors: get your tin hats on – alphaville FT
Brazilian equities: hammer time – alphaville FT
Notice the theme in all emerging countries: see no evil, hear no evil.
Chile predicts moderate economic growth – xinhuanet
S.E.C. Drops an Insider Proceeding Against Rajat Gupta – Dealbook / WSJ
“..market cap at $89.5 billion, which is a mere 41.6% of common equity (total equity less book value of preferred) of $215 billion. That means if the bank is under pressure to raise its capital levels, it will be so dilutive as to be problematic..”
Bank of America Death Watch – naked capitalism
Attorney General Schneiderman Drops Bomb on BoA Settlement and BoNY – naked capitalism
Dreman’s Contrarian Investment Rules – World Beta
Very funny. Must read
They are NOT Alone – Macro Man
A rant on how the current practice of discounting future payoffs is suboptimal.