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Wednesday, October 10

10th Oct - US Open: Weak weeks?

Surprising numbers.
Just updated the IMF post. The recent negative market reaction can be attributed to the growing vision that Europe cannot seem to solve its problems, partly based on the IMF's latest publication. Couple of comments on the USE (United States of Europe) and Saxo Bank published its quarterly outlooks. My posting will be erratic in the coming days, please bear with me. Markets bouncing somewhat from the previous lows, but I guess pushing all the way to upside again would require some really good newsflow - and that is not coming. Current best guess "descending triangle".

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Previously on MoreLiver’s

Roundups & Commentary
US Opening News And Market Re-Cap – Ransquawk / ZH
Frontrunning – ZH
Overnight Sentiment – ZH
The Lunch Wrap – alphaville / FT
Emerging N.Y. headlines – beyondbrics / FT
Today’s front pages – presseurop
Daily press summary – Open Europe

Morning MarketBeat: Alcoa’s Good News Comes With Warning Signs – WSJ
Broker Note Briefing – WSJ
The Euro's Decline and a New FrontMarc to Market
Four Points on Hump DayMarc to Market

US session ahead
Pre-market Commentary – Marketwatch
Pre-Market Trading – CNNMoney
Pre-Market – NASDAQ
US Equity Preview – Bloomberg
Earnings & Events – The Street
MarketCurrents – Seeking Alpha

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

Chart of the week: the ECB’s power on Spanish and Italian bond yieldsbruegel
Therefore, some ECB announcements had strong impacts on the government bond markets, but for not too long. Only time will tell the medium term impact of the most recent announcement of the OMT, which will primarily depend on the progress with other aspects of the euro-crisis.

Sherlock Holmes (herein played by Buchheit) says: debt reprofilingalphaville / FT
Buchheit (who helped mastermind the Greek restructuring at Cleary Gottlieb) and Gulati on the options now facing the eurozone’s sovereign debtors and those holding the purse strings.

What kind of euro-area budget?bruegel
Discussions about a euro-area budget are gaining momentum, not least because of the threat to veto any EU budget increase by David Cameron.

Back to the Brink for the Eurozone?Project Syndicate
Inflicting excessive austerity on the southern European countries while limiting their exports by restricting effective demand in the north is like administering an overdose to a patient while withholding oxygen. The political and economic success of southern Europe’s much-needed structural reforms requires the proper dose and timing of budgetary medicine and buoyant demand in the north.

ESM: a debt making machineFrankfurter Allgemeine Zeitung / presseurop
With the launch of European rescue fund the ESM on October 9, the EU is betraying its founding fathers and their treaties. That it will stabilise the monetary union is also in doubt, laments FAZ, which strongly backs Germany’s policy of stability.

Leaked summit conclusions: A tweak at Britain?Brussels blog / FT

Nordic UpdateMarc to Market
The weakness of the Swedish economy materialized faster than investors and policy makers expected.

Groundhog day! Need change mandate with micro focusSaxo Bank
The Groundhog theme for this Q4 Outlook is shown in how we keep cycling back and forth between denial and protest with a real mandate for change neither given nor taken. Unfortunately, we remain trapped until the current macro policies are abandoned.

Equity: Go small cap for large returnsSaxo Bank
We foresee subdued economic growth going forward as the financial repression continues and in that environment small niche companies with comparative advantages will do well compared to larger companies.

FX: Market nerves will lead to volatility expansionSaxo Bank
As we head into Q4, the global spirit of central bank interventionism has imposed tremendous losses on the macro “bears” particularly in the EU’s case, as a EUR bear squeeze ruined the best trend going in FX in September.

Monetary PolicySaxo Bank
The Fed and ECB are pretty much done in terms of quantitative easing for 2012. It is perhaps another story in Japan where further QE is perfectly possible before year-end. Likewise in the UK too where up to GBP 50 bn in QE could come in November.

Macro Feature: Japanisation of the global economySaxo Bank
Despite the lack of results from Japan’s two decades of QE and Ultra-Easy Keynesian stimulus the Japanese experiment has been a complete and utter failure and yet, our Western central banks are almost unanimously leading us down the Japanese path.

Asia: Who follows hu?Saxo Bank
The guard change in China will hardly result in leaders with the courage to re-invent China’s “old” business model with a shift to domestic consumption, creating a healthcare system, encouraging competition and deepening financial markets.

Commodity: Weak fundamentals create headwindsSaxo Bank
Into the fourth quarter the impact of the latest round of quantitative easing will fade and the dollar should find some support which in turn will create some headwinds for the commodity sector as a whole.

Emerging Markets FX Monocle – A bird in hand…Nordea (pdf)

Nordea Risk Perception PublicationNordea (pdf)
Sideways trading across financial asset classes as markets continue to acknowledge 1) European politicians becoming more vigorous and 2) central banks showing their ammo * The tendency with seeping vols is clearly reflected in Nordea Risk Perception Index * Movements however still muted and correlations are high between asset classes * Going forward, vols can easily loose further ground on the back of ECB and continued weak economic data that keeps markets in tight trading ranges * With only the past year in mind, risk sentiment can quickly shift and timing may be apt for entering tail risk hedges at current historic cheap levels

Magnus, on spending our way out of the Mumpsalphaville / FT
According to George Magnus of
UBS, most of the western world has now been struck by the latter. And — contrary to popular belief — the disease is underpinned not by western profligacy, but possibly the very opposite phenomenon. Too much thrift.

Australian overnight rate expected to hit the lowest level in the RBA's historySober Look

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