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Monday, September 10

10th Sep - US Close: QE? Sold the News

Today plenty on the QE, fully priced in and probably that’s why markets tanked. In the old days you bought the rumor and sold the news. Apparently nowadays you have to buy on nothing and sell on rumor. Or perhaps today's market action was just a risk-off move ahead of the big events. Dutch elections, ESM vote and the ECB plan were other topics. EDIT: by the way, I noticed this is MoreLiver's 1008th post. Wow...

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Previously on MoreLiver’s:
8.9. Weekender: Weekly Support (last week’s review, next one previewed)

All the coverage on ECB’s decision is in my ECB Watch-post (continuously updated).

Roundups and Commentary
Markets – Between The Hedges
The Closer – alphaville / FT
European Summary: Leaking – ZH
US Summary: Market Realizes It Has Already Priced In QE – ZH 
Tomorrow’s Tape – MarketBeat / WSJ 

  It’s Not Apple Day, or FOMC Day, or German Court Day

TV: Bloomberg, BBC
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

View roundup on German constitutional courtZH

New Twists in the Plot (German Court and Greece)Marc to Market
It is difficult to imagine that German Constitutional Court would rule that the ECB's OMT violates the German constitution…decide whether to grant an injection delaying the formal establishment of the ESM and the fiscal compact, while they decide the legality of it at a future date.

Actual Constitutional Case Against OST and ESM; Why Bond Buying Undermines Democracy; Is Draghi Above The Law?Mish’s

German domino theory and book-cookingalphaville / FT
One, that Merkel wants to avoid a Grexit for the time being and two, that the upcoming Troika report might be massaged to make that a reality.

Sterilisation (or not) in Brazilalphaville / FT
The idea that the consequences of sterilisation aren’t always straightforward is well worth making and has obvious resonance in Europe right now.

How Draghi opened the door to hyperinflation and denied the Fed an exit strategyA View From The Trenches

The ECB Thumbs Its Nose At The LawFibs and Waves

Merkel Changes Her Mind on Grexit RisksSpiegel
Angela Merkel has made a surprising U-turn in her policy on Greece. The German chancellor now wants to stop Athens from leaving the euro zone at all costs -- even if it means massaging the figures in the upcoming troika report. For the German leader, it is essential to avoid the consequences of a Grexit before national elections next year. (also Wonkblog / WP)

What the Dutch elections could mean for Europe and the euroOpen Europe
…unlikely to radically change the immediate political dynamics of the eurozone crisis in the short-term. The country is likely to continue to oppose more bailout cash for Greece or any topping up of the eurozone’s bailout funds and remain a steadfast supporter of austerity in the struggling eurozone economies. In the medium to long term, however…

Germany to lose another ally?Nordea
Since the collapse of the Dutch government last April due to the withdrawal of support by the euro-sceptic Freedom Party (PVV), there have been growing fears that the Netherlands would not support any more rescue packages to troubled Euro-zone countries. These fears only escalated, as the Socialist Party (SP), critical towards further Euro-zone integration and bailout packages, gained in the polls.

Portugal’s bond yields and CDS prices have improved alphaville / FT

Ireland: IMF Executive Board Concludes 2012 Article IV ConsultationIMF
strong ownership and steadfast implementation of the program, particularly financial sector reform and fiscal consolidation. The economy has resumed modest growth, but downside risks remain high, and substantial and difficult further policy efforts are needed to promote a sustained economic recovery. (full pdf)

Ireland: Selected Issues / Country ReportIMF

Breaking a sovereign-bank loopalphaville / FT
forecasting the path for Irish debt to GDP if a deal is reached with the ECB to reschedule those promissory notes, and if direct ESM equity replaced bank recaps under the bailout.

QE3: What Everybody That Matters On Wall Street Expects MarketBeat / WSJ
Roundup of bank views (GS, DB, B, MS,

UBS: Bernanke Will Unleash QE3 This WeekMarketBeat / WSJ
The QE3 parameters will likely entail a six-month program of at least $500 billion, primarily focused on buying Treasurys, UBS predicts, while also anticipating the Fed will extend its ultra-low rate guidance into 2015.

Credit Suisse: The Fed in election seasonZH
More often than not the policy move inside of the two-month window prior to the election has been an extension of the prior regime.

Goldman On The Fed: Perception Over SubstanceZH
We are pretty sure that any new program would be primarily focused on agency MBS purchases. These should have a somewhat bigger per-dollar effect on private-sector demand and are probably less controversial with the public than Treasury purchases. They can be framed as help for homebuyers to achieve the American Dream, which sounds better than help for the government to run large budget deficits.

On Sub-Zero and DecouplingBruce Krasting
Bernanke has to do something this week. Most pundits are suggesting it will be more LSAPs (QE). I have trouble with this scenario. To be of any benefit, a new QE would have to be for $600Bn. If QE3 were to be only a paltry $200Bn, it would be received very poorly. I don’t see Ben shooting off a pop-gun this week. He would be better off doing nothing, than something that will fall flat. I think he knows that.

QE3 will spark risk-taking and push oil and gold higherNordea
We now see it as likely that the Fed will launch a third round of QE3… If the Fed does not ease policy this week, we expect to see risk sentiment take another beating and oil and gold prices can fall markedly in the short term.

Is the 2012 China stimulus some kind of unicorn?alphaville / FT
Roundup of views on the “1trn stimulus”.

The growing risk of shorting China stocksalphaville / FT
Arrest in December of a Canadian citizen, Huang Kun, in Beijing. Huang had helped compile a report into a Vancouver-based company called Silvercorp

How technology is killing the Asian growth miraclealphaville / FT
George Magnus of UBS has a 29-pager out on Monday questioning if the Asian miracle may finally be over (full report here, registration required)

China’s political risk and the economy ASA
China has never been as stable as it looks, yet it is not easy either to have a truly catastrophic political crisis either.

The fifth wave Steen’s Chronicle / Saxo Bank
Extend-and-Pretend continues – now in the phase of Maximum Intervention but it’s the wrong medicine at the wrong time…We are in the fifth wave of all major macro benchmarks: the stock market (high), yields (low), economics (low), intervention (high), hope (high) and politics (low). This will lead into an ABC correction phase for valuation.

UBS: PMIs and Global EquitiesZH
Given the recent rally, in addition to underlying macro weakness, policy action - and effective action at that – has become increasingly important for investors. Without it this recent rally could end up looking more like a false start than a head start.

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