A new addition to the regular morning links: Nordea’s morning brief in
Finnish. ECB's coming response seems to dominate the discussion, so expect headline-driven markets for the next couple of days.
Quick
reminder of what I posted during the weekend:
Weekender: Views & Off-Topics
(my thoughts)
Weekender: Weekly Support (updated!)
News
roundup – Between
The Hedges
The 6am Cut
London – alphaville
/ FT
Emerging
Markets Headlines – beyondbrics
/ FT
Debt
crisis: live – The
Telegraph
The Euro
Crisis Blog – WSJ
FX Options
Analytics – Saxo
Bank
European
10yr Yields and Spreads – MTS indices
While the EURUSD retreated from its 3-week
highs late in Friday’s NY session, it opened a tad higher at today’s Asian open
following weekend press in Europe. The move lasted a brief period and soon reverted back to the 1.23 NY
closing level.
Market Preview: EU business sentiment on tap – Saxo
Bank
European markets are expected to open in the
green Monday amid rising hopes of further easing ahead of the meeting between
Mario Draghi and Timothy Geithner. Markets are keeping an eye on the Eurozone
business sentiment index scheduled later today.
Danske Daily – Danske
Bank (pdf)
The markets today will likely focus on any signs
from ECB on when to expect some action. After apparently clear signals last
week from ECB president Mario Draghi that the ECB was preparing something, the
news over the weekend indicates it may
be too early to expect action already this week. Today we will also have
Italian auctions of 3, 5 and 10 year paper.
Japan's government is once more leaning on the BoJ to unleash more potent
policy. Will it comply?
Aamukatsaus (Finnish)
– Nordea
(pdf)
EKP:lta odotetaan
uusia toimia velkamaiden tukemiseksi - Espanjan valtio tarvitsee ulkoista apua?
- EUR/USD sahaili perjantaina ennen alkavan viikon korkopäätöksiä
EUROPE
Euro zone crisis heads for September crunch – Reuters
Over the past couple of years, Europe has muddled through a long series
of crunch moments in its debt crisis, but this September is shaping up as a
"make-or-break" month as policymakers run desperately short of
options to save the common currency.
EUROPE: ECB
Dos and Don’ts for the ECB – Project
Syndicate
ECB officials’ recent statements may have
reduced the pressure on governments to do those things, and, by reversing the
decline of the euro’s value, may have blocked the market response that is
needed to shrink current-account imbalances and boost GDP in the eurozone. Sooner or later,
the ECB will have to clarify the limits of its policy.
Last week they spoke comforting words, but I
saw only the frightening aspects of the euro-crisis – Fabius Maximus
Although entertaining as gallows humor, last
week’s statement by ECB President Mario Draghi illustrates important but seldom
discussed aspects of the euro-crisis. Here we read and annotate the text.
Welcome to the ECB – VOXeu.org
Financial market once again pushed Eurozone
leaders to act. European Central Bank President Draghi recently promised to “do
whatever it takes”. This column argues that Draghi made an implicit commitment
to act as lender of last resort to Eurozone governments. This means optimism
may be justified – if only because it suggests that the Eurozone has a great
central banker who is both a serious economist and an astute politician.
The Euromess Continues – Tim
Duy’s Fed Watch
When I read Draghi's remarks, I see a
policymaker in denial, not wanting to understand the root causes of the
crisis. Thus he sees the crisis in terms
of simply lack of confidence rather than one with important fundamental
factors. Moreover, he is trapped by the
austerity framework, not seeing that this is a failing strategy. I don't think he sees the ECB's complicity in
supporting the crisis. And I think
Draghi is representative of the average policymaker in Europe.
Here Bee Draghi – Krugman /
NYT
To keep the thing flying, you’d need something
like a reverse play along the same lines: an inflationary boom in Germany, so that the periphery can regain competitiveness without devastating
deflation…Nothing like that is happening.
Internal Devaluation, Inflation, and the Euro
(Wonkish) – Krugman
/ NYT
The difference between these two strategies demonstrates what a really bad idea it is for the ECB to have a mandate that only takes account of price stability, with no consideration for the real economy.
The difference between these two strategies demonstrates what a really bad idea it is for the ECB to have a mandate that only takes account of price stability, with no consideration for the real economy.
EUROPE: PIIGS
The escalation of the crisis in the Eurozone
calls for new measures to reduce yields on Spanish and Italian bonds. This
column succinctly lays out the options and finds them wanting. It argues that
sovereign bond purchases might not be sufficient to reassure investors. A
credible solution will also require a coordinated strategy to address Spain’s competitiveness
problem.
ECB could take haircut on Greek bonds in 'last
chance' plan – The
Telegraph
Central banks across Europe are facing more huge losses under
the terms of last-ditch efforts being made by EU authorities to keep Greece in the eurozone by
slashing the country’s debt exposure.
A market-friendly debt buyback – ekathimerini
ECB can transfer its Greek bonds to the EFSF or
the new permanent mechanism, ESM, at the average price bought by the EU central
banks, allegedly between 70 and 80 percent of the nominal value. This way the
ECB will not lose money on its Greek bond holdings. Moreover, the EFSF or the
ESM can extend a long-term loan to Greece at a reasonable
interest rate that will be used to buy the same bonds from them at the same
price or lower. This way the country will be able to cut its debt by cancelling
the bonds of a higher nominal value.
USA: FED
FOMC Preview: QE3 now or later? – Calculated
Risk
The data supports QE3 this week, but the data
also supported QE3 in June. One of the reasons I thought QE3 was unlikely in
June was the lack of foreshadowing from the Fed. There have been plenty of
hints since then, so QE3 is very possible this week - but still uncertain.
USA: STOCKS
Stagnating Corporate Profits… – PragCap
This earning’s season is starting to raise some
red flags. As expected, corporate
profits are starting to show some serious signs of deterioration. Q3 is expected to show a year over year
decline in earnings now and Q4 is expected to show a sharp bounce back.
Biggest EPS Miss Since Lehman – ZH
Citigroup: earnings surprises have been about as bad as
the third quarter of 2011, which were impacted by the Japanese earthquake and
the debt ceiling debate.
Bad Guidance Continues – Bespoke
Roughly 1,000 companies have reported second
quarter earnings so far this season, and while the earnings beat rate has been
average relative to prior quarters, guidance has been negative to say the
least.