Quite an interesting paper from JP Morgan on how the Euro Zone is, as an Optimal Currency Area, even a worse choice than we have thought. Otherwise, mostly economics and few words on the talks on how, when and why the bank capital requirements are increased. The Milken Institute's video is hard on Europe and recommended.
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News – Between
The Hedges
Markets – Between
The Hedges
Recap – Global Macro
Trading
The Closer
– alphaville / FT
Debt
crisis: live – The
Telegraph
Europe Crisis Tracker – WSJ
FX Options
Analytics – Saxo
Bank
EURO CRISIS: GENERAL
Making eurozonians, or not – alphaville
/ FT
All the chart does is track how ‘different’ countries are from each other in a range of monetary unions which never existed, or are long dead, compared to the eurozone. ‘Different’ means scores on a hundred or so factors taken from the World Economic Forum’s Global Competitiveness Index, from GDP per capita to judicial independence to available airline seat kilometres. The result speaks for itself.
All the chart does is track how ‘different’ countries are from each other in a range of monetary unions which never existed, or are long dead, compared to the eurozone. ‘Different’ means scores on a hundred or so factors taken from the World Economic Forum’s Global Competitiveness Index, from GDP per capita to judicial independence to available airline seat kilometres. The result speaks for itself.
Also: Just about anything makes more sense than
the euro zone – Ezra
Klein / WP
Original
research note here
(pdf)
Milken
Institute 1h 13min video, for those on a busy schedule read this summary:
Bonjour Two Tier Euro? – Global Macro
Monitor
We’ve always held the end game in Europe will be the stronger northern
countries eventually pulling out of the Euro.
The path to the end game we do not know. Sunday’s election in France,
may, or may not, be the event that pulls the curtain and reveals the true
nature of the Wizard of Oz. The Germans
and their austere northern brethren will likely become increasingly isolated
with an Hollande victory, in our opinion.
This could trigger a political crisis in the north.
Why the World Should Care about the European
Debate on Bank Capital Requirements – PIIE
The European Union’s finance ministers are furiously debating a piece of legislation known as CRD4/CRR (the acronyms stand for the fourth Capital Requirements Directive and the Capital Requirements Regulation). The measure is intended to implement the Basel III accord on bank capital, leverage, liquidity and risk management, which was adopted at the global level by the Basel Committee on Banking Supervision in late 2010.
The European Union’s finance ministers are furiously debating a piece of legislation known as CRD4/CRR (the acronyms stand for the fourth Capital Requirements Directive and the Capital Requirements Regulation). The measure is intended to implement the Basel III accord on bank capital, leverage, liquidity and risk management, which was adopted at the global level by the Basel Committee on Banking Supervision in late 2010.
EURO CRISIS: ECONOMICS
(AUSTERITY DEBATE)
According to official statistics, the UK and Europe are heading for recession, while
the US is recovering. This has led some to suggest that European economies are
moving in the opposite direction to the US. This column, written
by the co-founders of Now-Casting, presents new now-casting estimates that put Europe and the US even further apart.
But is stimulus in Germany really more feasible?... I am going to make an optimistic claim here:
Hollande’s win in France will make Merkel
re-evaluate her policy options. Merkel in general does come around to what is
the right thing to do if the pressure is high enough – especially if she can
thereby steal the left parties’ thunder.
The euro-zone crisis: Call it a depression – Free
exchange / The Economist
Most everyone seems to have convinced
themselves that this sort of thing isn't so bad, so long as a Lehman-like
financial collapse is avoided. It isn't. Nothing good will come of a euro-zone
depression. If, when all of this is said and done, the euro zone descends into
a chaotic, costly break-up, many people will write that such a thing was
inevitable, unavoidable. They'll be wrong. We are watching causation this very
moment: institutions that know how and why to prevent things from falling apart
and which nonetheless sit back and do nothing.
All the while, the root problem has been the
same: the common currency without ECB support for sovereign debt has meant that
European governments lack the fiscal space afforded by sovereign currencies to
run countercyclical fiscal that partially offsets the private sector
deleveraging.
Self defeating European austerity – Macro
Matters
If peripheral nations are to reduce their
deficits in the longer-term, then there needs to be a much more balanced
approach to deficit reduction in the shorter-term that focuses more on jobs and
growth, otherwise the goal posts will be constantly moving.
ASSET CLASS VIEWS
Playing the CDS-bomb basis – alphaville
/ FT
Nomura: The probability of a unilateral strike from Israel on Iran over the coming months has now fallen, while global concerns are shifting back towards Europe. We think this presents an opportunity to buy Israel credit against low-beta Europe.
Nomura: The probability of a unilateral strike from Israel on Iran over the coming months has now fallen, while global concerns are shifting back towards Europe. We think this presents an opportunity to buy Israel credit against low-beta Europe.
An AUD tale of correlation lost – alphaville
/ FT
The Aussie dollar has fallen over 5 per cent against its US equivalent since the start of the year and suffered its biggest dive in six weeks on Tuesday when the Reserve Bank of Australia cut rates by 50bps. (Markets had only priced in a 33 per cent chance of the RBA cutting that aggressively.) That overall kick downhill since mid-February has broken the pair’s usual relationship with S&P 500 fairly dramatically
The Aussie dollar has fallen over 5 per cent against its US equivalent since the start of the year and suffered its biggest dive in six weeks on Tuesday when the Reserve Bank of Australia cut rates by 50bps. (Markets had only priced in a 33 per cent chance of the RBA cutting that aggressively.) That overall kick downhill since mid-February has broken the pair’s usual relationship with S&P 500 fairly dramatically
Are Currency Rates Fixed or Just Broken? – MarketBeat
/ WSJ
Trading foreign-exchange markets from a
buy-side point of view poses a different set of challenges from those faced by
traders on banks’ dealing desks, but both sides have come to a similar
conclusion: The FX market appears to be broken. They also agree the real
culprits are meddling central banks.
As Europe Re-Opens Spanish Stocks Close Near 9 Year Lows – ZH
EU bank stocks at the crisis lows, around same levels last seen in 1988…
EU bank stocks at the crisis lows, around same levels last seen in 1988…
OTHER
Japan's public sector has been the beneficiary of extremely low rates for
quite some time. With the central bank financing new debt issuance by
"printing" more yen, rates are expected to stay low in the near term.
The public sector however has become complacent about its ability to borrow at
these low rates (with the 10-year JGB now yielding less than 0.9%) going
forward.