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Tuesday, June 26

26th Jun - US Close: Best Content Since...

Plenty of articles on the EU summit... It does not look good – so perhaps the chance of a positive surprise is there? My views: PIIGS yields to go higher, stocks lower, but the important levels are close by and the chance of a policy response either from Germany or the central banks is there. So just a little bit more in this direction, please, and then initiate risk-on trades.

Content-wise, this is among my best posts. I live for moments like these. This is what makes this the ultimate chess, combat sport or poker game. For more see today’s earlier EU Open: Conservation is just conversation and US Open: Expected expectations. Keep the gammas long.

Joke of the Day: Spain has reached it budget deficit target of 3.5% of GDP. The problem is, Spain did it in 5 months, not 12 – Mish’s
Markets – Between The Hedges
The Closer – alphaville / FT
Market Commentary – A View From My Screens
Morning Briefing AsiaBNY Mellon
Tyler’s European Summary – ZH
  Peripheral Sovereign Yields Spike On Spain 'Junk' Rumors
Tyler's US Summary – ZH
  Equities Rise On Low Volume Tide As Broad Risk Assets Tread Water

Debt crisis: live – The Telegraph
The Euro Crisis Blog – WSJ
Tracking Europe’s Debt Crisis – NYT
FX Options Analytics – Saxo Bank
European 10yr Yields and Spreads – MTS indices

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Divergence in the Euro-Zone: Famous, Obscure and Predictable FactsPlace du Luxembourg
As it stands, the Euro-Zone temporarily benefits the core at the detriment of the periphery. However, as the dominos fall one after another our interdependeces should come home to bite the hubris of Germany and the chauvinism of the French that are threatening European peace and prosperity.

Groupthink on Carry, Subordination, and Secondary Market YieldsTF Market Advisors
If Buffett wouldn’t do it, why should the governments. That should be the motto, and I’m not even a fan of Buffett, but he did extract good value for himself, with lots of protections, when he stepped in. The same thought process needs to go on now in Europe.

Banking DisunionProject Syndicate
The naive belief that integrated European regulation and supervision would follow financial integration has proven to be false. There are now only two options: integrate ahead of markets – that is, give the ECB supervisory powers for systemically important and cross-border institutions, unify prudential rules, and create an RA with money from the ESM – or permit the current disintegration process to continue and await the euro’s relatively quick demise.

Eurozone's banking union will not be credible; FDIC-type fund seems out of reachSober Look
With analysis by Barclays

Cecchetti Says European Banks Need Realistic AccountingBB (mp3)

Rabobank’s Jane Foley Sees Further Risk for EuroBB (mp3)

Why Not To Expect SMP or LTRO from ECB Next WeekMarc to Market
LTRO funds still remain, more would only increase doomloop. SMP opposed by the ECB and Germans, and any purchases should be done through EFSF or ESM instead.

ECB’s balance sheet expands, indicates fair value EURUSD around 1.16ZH

Summit scenarios by Morgan Stanley
Italy's Unelected PM Mario Monti: "Eurobonds, Or I Resign"ZH

The EU Summit Scenario MatrixZH
Morgan Stanley’s scenarios and text

The Rube Goldberg solutionFree exchange / The Economist
And in the meantime, of course, euro-area governments must remain committed enough to firefighting to prevent a chaotic collapse of the single currency while the mechanics of further integration play out. And progress must also occur quickly enough to ensure that sustained crisis and deepening recession don't push citizens of member states to decide the whole mess isn't worth it.

Another European Summit, Another Beggars At The Feast Spectacle?The Daily Capitalist
There is absolutely nothing that even suggests that Europe’s leaders are even close to agreeing on something with regards to a rational plan to address the Eurozone’s systemic problems... The only thing Europe has managed to accomplish this far is to extend its monetary union’s survival through a series of circular debt-piling rescue schemes.

Things To IgnoreThe Daily Capitalist
The EC’s bureaucrats are wetting their pants over the renewed talk of a greater fiscal union between EU member states. This is the moment they have dreamed of. Instead of being useless functionaries (as seen by most EU citizens), they could have more importance by having control on a supranational basis over member states. Sorry but that isn’t going to happen soon and if it did, the member states would be making a colossal error by giving up that much sovereignty.

EU Roadmap to Fiscal, Bank Union Runs Into German RebuffBB

A solution to the euro debt crisis: Back from the
The next meeting of the European Council takes place on 28 and 29 June amid growing fear and uncertainty over the Eurozone’s future. This column proposes a solution to the crisis – one that is bold and challenging, and that cannot wait.

Italy's Monti says pre-prepared EU declarations unacceptableReuters
...would not rubber stamp conclusions for this week's EU summit that is supposed to map out the future of the euro but would fight for concrete measures to help growth and contain market turmoil. (Also Mish’s)

CFR’s Mallaby `Not Optimistic’ on European SummitBB (mp3)

Deutsche Bank: "The Next Recession Should Start By The End Of August"ZH

Gluskin Sheff’s Rosenberg Sees Growing Recession RiskBB (mp3)

Standard Chartered’s Semmens Sees Weak Jobs ReportBB (mp3)

Housing markets: Primed againFree exchange / The Economist
Fist signs that US markets are stabilizing, which would be a good thing – unless the Fed starts to tighten too soon.

Of housing booms and bustsalphaville / FT
Deutsche Bank’s very good charts. Norway looks terribly overvalued, but many other “good” countries look extended as well.

The Worldwide QE QuagmireTestosterone Pit
Certain central bankers are now coming out of the closet admitting that their favorite shenanigans—ultralow interest rates and printing money with utter abandon—can’t solve the very problems they were designed to solve

The twilight of the central bankerFree exchange / The Economist
If the world is lucky, central bankers will discount the recommendations of the BIS, will instead engage in a bit of self-examination, and will go back to figuring out how best to use their tools to shepherd demand toward potential. If the world is unlucky, central bankers will embrace the BIS' excuse-making and opt instead to place unnecessary pressure on politicians that are already facing plenty of it.

Systemic Banking Crises DatabaseThe Big Picture
Select charts from a recent IMF paper

S&P 500 Q2 Earnings Growth Estimates TankBespoke
Nice look – materials, energy and financials look especially bad.

Summary of Hedge Fund Bearish China Thesis market folly
Views from Kynikos, Corriente, Pivot, Eclectica, Greenlight & more

As goes the eurozone, so goes the cosmosThe World / FT
WTO’s head announces he is leaving, because “the difficulties we are observing in the EU mirror the troubles of the multilateral system”

Houston, we have an overcapacity problemalphaville / FT
86 pages of pure unadulterated oil porn focused on why we are not, contrary to popular belief, running out of oil.

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