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Thursday, October 11

11th Oct - US Close

Quote of the Day: Did you know that Ireland and Spain were once rated AAA? For Ireland, Oct 2001 to March 2009; and for Spain, Dec 2004 to Jan 2009. – Rebecca Wilder / EconoMonitor
Joke of the Day: EU commission chief Jose Manuel Barroso has come to the defence of more budget cuts to bring confidence back to southern economies, even as the IMF said the effects of austerity may have been underestimated.euobserver

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Previously on MoreLiver’s

Roundups and Commentary
Markets – Between The Hedges
The Closer – alphaville / FT

Tomorrow’s Tape: J.P. Morgan, Wells Fargo Kick Off Bank Earnings – WSJ
US Summary – ZH

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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Monetary union continues its painful progressLe Monde / presseurop
With the entry into force of the stability mechanism and the consensus on plans for a banking union, the Eurozone has compensated for the “birth defects” of the single currency, albeit at the price of a widening rift with other member states.

The Bump In The NightMark Grant / ZH
We have no solution for Cyprus, no answer for Spain and no plan for Greece as the IMF has made two things quite clear. Number one is that they will not give Greece any more money and number two is that they expect Europe to take the unavoidable financial hit and that it will not be them that is going to get left holding the proverbial bag.

S&P Will Downgrade France And Italy Next, CDS ImpliesZH

Basel III joke in here*alphaville / FT
European bank stocks rallying after news that Basel III requirements might be postponed.

The Eurozone's commitment to supporting Spanish banks questioned by S&P, othersSober Look
The good news is that Spanish banks' borrowings from the ECB fell in September, following the ECB's commitment to do "whatever is necessary" to make sure Spain (and others) stay in the Eurozone - reducing the redenomination risk. Nevertheless the latest data from the nation's banking sector still shows declines in lending and losses associated with rising bad loan balances.

An overlooked currency war in EuropeDaniel Gros /
Switzerland has pegged its currency to the euro at a level that helps it sustain a 12% current-account surplus and one of the lowest unemployment rates in Europe. This column argues that the Swiss peg involves currency manipulation that is, as far as Europe is concerned, the same order of magnitude as China’s intervention. It has had a significant impact on the euro exchange rate and a non-negligible effect on the EZ economy.

Focus: EU commission to tighten rules on regional state aid to regionseuobserver
Competition and regions have always been uncomfortable policy bedfellows, but scarce public money is making it harder to draw up guidelines on how state aid should be invested.

EU chief defends austerity as criticism mountseuobserver
EU commission chief Barroso has defended more budget cuts in the south, despite IMF doubts on the policy.

Monthly Bulletin, October 2012ECB (pdf)
Statistics Pocket Book, October 2012ECB (pdf)

Housing Recovery in PerspectiveThe Big Picture
Two charts – shorter looks good, while longer says not much has changed.

Stock Market TroublesThe Short Side of Long
When I look at the current condition of US stocks, it definitely reminds me of previous cyclical bull market tops just as the business cycle expansion was coming to an end. Be it overbought prices, narrowing breadth participation, tightening credit spreads, extremely prolonged complacent volatility,  overly bullish sentiment readings without a bear in sight or the fact that the Long Bond refuses to sell off - it all links to the economic fundamentals deteriorating rather rapidly.

A tinhat-full of dollarsalphaville / FT
HSBC: Many will still argue that the USD will retain its safe haven allure, especially given the constraint intervention will place on the JPY and CHF as alternative safe havens. However, the environment for the USD is changing, with the market increasingly having to question its value and not relying on its safe-haven role during this crisis.

Australian Dollar Hops Higher on JobsMarc to Market
The Australia’s jobs data surprised on the upside and is spurring some second thoughts about an RBA rate cut next month.

Yen Bulls SpookedMarc to Market
The dollar initially fell against the yen in the immediate knee-jerk reaction to S&P two-notch cut of Spain’s sovereign rating.  It dipped briefly below JPY78.  However, it has rebounded smartly and is holding above yesterday’s highs.  There are four considerations today.

The IMF game changeralphaville / FT
IMF has played bad cop to the global economy for generations now, enforcing austerity, conditionality and accountability wherever it goes. And, for the most part, it’s the emerging world that’s suffered most. Recanting on some of these closely held beliefs, especially now that the bitter medicine is predominantly being applied to the developed world, is awkward to say the least.

IMF Suddenly Decides It Might be OK to Loosen Austerity Tourniquets Now that Gangrene is Setting Innaked capitalism

The IMF and the GOPKrugman / NYT

G10 Weekly: Severe headwinds facing the Swedish economyNordea
In this week’s edition of G10 weekly we elaborate on the severe headwinds facing the Swedish economy. We also address the process of global deleverage, which appears to be far from over.

Perspectives Oct 2012: A new monetary eraPictet

EMEA Weekly, Week 42Danske Bank (pdf)