Plenty of stuff on ECB - and of course the FED. As the major central banks are meeting next week, there is a not-so-slight chance of coordinated action. I will sleep over this and try to write something by US open. Just looking at the charts suggests the SPX is going for a test of the highs around 1370-1375, while EURUSD's rise will probably be capped around 1.2350. Next week will be very interesting.
I was kind of expecting a wild Friday and calm Thursday. Why did Draghi choose to come out in the open on Thursday - verbal intervention would have been much more effective ahead of the weekend. Were they worried about something? Did they want to hide the fact that Spain announced it will not apply for a bailout package, and wanted to contain the damage? Certainly today's statements were planned ahead. So why now? Your ideas are welcome.
I was kind of expecting a wild Friday and calm Thursday. Why did Draghi choose to come out in the open on Thursday - verbal intervention would have been much more effective ahead of the weekend. Were they worried about something? Did they want to hide the fact that Spain announced it will not apply for a bailout package, and wanted to contain the damage? Certainly today's statements were planned ahead. So why now? Your ideas are welcome.
Previously
on MoreLiver’s:
Markets – Between
The Hedges
The Closer
– alphaville / FT
Tyler’s European Summary 1 – ZH
Some
Context On Europe's Sovereign Rally This Morning
Tyler’s European Summary 2 – ZH
Europe 'Soars' To 4-Day High On Draghi 'Solution'
Tyler’s US Summary – ZH
Equities
Close Monday's Gap Down On Lowest Average Trade Size Of Year
Debt
crisis: live – The
Telegraph
The Euro
Crisis Blog – WSJ
FX Options
Analytics – Saxo
Bank
European
10yr Yields and Spreads – MTS indices
EUROPE
Implementation, implementation, implementation – alphaville
/ FT
Morgan Stanley: despite this progress in principle, many investors are still finding some dissonance in the message from the European policymakers, i.e., the bureaucrats in Brussels who proposed the plan, and the domestic politicians, i.e., the heads of state or government, who approved the plan... However, only partial – but meaningful – progress on banking integration was ultimately endorsed, while there was silence on fiscal integration.
Morgan Stanley: despite this progress in principle, many investors are still finding some dissonance in the message from the European policymakers, i.e., the bureaucrats in Brussels who proposed the plan, and the domestic politicians, i.e., the heads of state or government, who approved the plan... However, only partial – but meaningful – progress on banking integration was ultimately endorsed, while there was silence on fiscal integration.
Euro area: Banks continue to tighten credit
standards – Danske
Bank (pdf)
MMFs flee. Again. – alphaville
/ FT
Since end-May 2011, allocations to eurozone
banks have dropped by almost 80% on a dollar basis. This deepening
‘disengagement’ stems both from ongoing MMF risk aversion to this sector as
well as heightened caution by both some European banks and their regulators on
the use of this potentially volatile form of funding.
As A Matter Of Evidence – Mark Grant / ZH
Day by day and month by month the bills
accumulate and there is not enough capital left in Europe to pay them unless the Germans are
willing to have the same standard of living as those in Greece and that will not be
happening so that it can be foretold that the play will end badly. It is not
economics that will determine the end of the European fantasy but politics.
EUROPE: ECB
Verbatim of the remarks made by Mario Draghi – ECB
Speech by Mario Draghi, President of the
European Central Bank at the Global Investment Conference in London 26 July 2012
Goldman Interprets Draghi – ZH
such measures would probably provide only
short-term relief and a firmer commitment would be needed to have a lasting
effect on peripheral bond markets. Some form of refinancing of the EFSF/ESM
through the ECB would be a lasting solution, although there is some legal
uncertainty about whether this is feasible.
Citi: Expect Nothing From The ECB Before The
ESM Is Active (Sep earliest) – ZH
in our view, such action is only likely to be
taken after governments have taken action first, i.e. by activating the bond
market support facility for Spain and Italy."
Draghi Speaks; Markets Listen – MarketBeat
/ WSJ
Lately, investors have greeted these sort of
comments skeptically, claiming this is more rhetoric that has been repeated
time and again. But this time may be different.
Mario Draghi: ECB will do “whatever it takes to
preserve the euro”
– ASA
We wonder, however, if these are just talks in
hope to get through August without having to hold yet another summit so as to
not ruining everyone’s summer holiday
Draghi sends crowded shorts running for cover – Sober
Look
(includes
video clips) There are not many
"bullets in Draghi's gun", and threatening to do something major was
one of them. He just used it. If there is no follow-through, his credibility is
shot.
Draghi Means Dragon – Marc to
Market
This hints at new policy action and the ECB
meets next week. Second, he suggested
that if the premium on government borrowing damages the monetary policy
transmission mechanism, it is within the ECB's mandate to address it. This suggests the resumption of the sovereign
bond purchases program (SMP), which was the rationale for it in the first place, over German
objections
Analysts Skeptical About Draghi’s Comments – MarketBeat
/ WSJ
Bittles points out the timing of Draghi’s comments are telling. They come ahead of meetings of the ECB, the Fed, and the Bank of England, scheduled for next week. “This suggests that we may see a coordinated effort announced next week by the central banks including China,” Bittles says. “Anything short of that would likely be greeted with disappointment from the markets.”
Bittles points out the timing of Draghi’s comments are telling. They come ahead of meetings of the ECB, the Fed, and the Bank of England, scheduled for next week. “This suggests that we may see a coordinated effort announced next week by the central banks including China,” Bittles says. “Anything short of that would likely be greeted with disappointment from the markets.”
Many German officials, including Angela Merkel,
aren’t thrilled by the idea of the ECB intervening in the debt markets. They’ll
have something to say about this, no doubt. For the time being, then, all we
have are some ambiguous remarks by Mario Draghi, the one man who could, in
theory, put a stop to the euro crisis. That’s cause for some relief. But it’s
very far from a plan.
Until policymakers fundamentally rethink their
approach to the crisis, expect the optimisim-pessimism cycle to continue. Right now, the best case scenario I see is
that the ECB will act to hold the Eurozone largely together, but at the cost of
protracted recession.
Say hello to my little friend, again – The
Big Picture
A Quick Reminder On The Effectiveness Of The
ECB's Bond Buying –
ZH
EUROPE: PIIGS
Who’s bluffing about a Grexit? – alphaville
/ FT
The recent utterings from Europe’s political elite regarding a Greek
exit from the euro and reports that the IMF is ready to walk away have been
hard to read. To what extent are these warnings pure postulation? The timing is
rather suspicious, given that they have coincided with the Troika delegation’s
visit to Athens to assess how the austerity programme is coming along.
USA
Presenting The Good, Bad, And Nuclear Options
For The Fed – ZH
Bank of
America’s table and discussion of the options
Stephen Roach: Fed dangles QE3 ‘crack’ cocaine
as ‘raw meat’ for markets – Credit
Writedowns
So, the Fed is going to give the addict what it
wants because advocates of easy money are everywhere in both liberal and
conservative circles. Will it work though? No.
Another reason the Fed should do more – Free
exchange / The Economist
In the last rate cutting cycle (2000-2003) the
Fed cut its policy rate by around 5.5 percentage points. The rates firms had to
pay to borrow fell by 2.5 percentage points. This time (2007-2010) the Fed’s
cut was pretty much the same. But the rate solid American companies had to pay
to borrow in markets hardly fell at all
The point of further easing would not be to
alter the situation in Europe - THE POINT IS TO PREVENT THE SITUATION IN EUROPE FROM WASHING UP ON US SHORES.
One More Dance – PIMCO
We are witnessing a synchronized slowdown
worldwide that is beginning to affect corporate profits. The most likely
right-tail event is the Federal Reserve launching another round of quantitative
easing.
OTHER
Low Interest Rates Are Not Enough: El-Erian – PIMCO / CNBC
Great global interest rate convergence is not
happening for good reasons.
EMEA Weekly - Week 31 – Danske
Bank (pdf)