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Wednesday, October 17

17th Oct - US Close

Back from blogging holidays! Plenty of stuff going on - Spanish bailout waiting game, summit and more time for Greece. Someone asked for updated views on EURUSD, after my view from last Sunday. Here it was. It seems currently all the issues appear to be solved. It will not be long before we see the cracks appear, so I will update views and comment on Thursday. I guess that tactical shorts or at least an opportunity to get long in EUR or SPX will soon become available.

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

Tomorrow’s Tape: Microsoft, Google Lead Earnings Parade – WSJ
US Summary: AAPL At Lows, S&P At Highs And Bonds Catch Up To Stocks – 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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Once "Jollying The Markets" With "Faith, Hope And Charity" Fails, What Comes Next: A Primer On Europe's Next StepsZH

Grexit: First Borg, then Buiter, now JakobsenSaxo Bank
The main macro input on Europe is now the German election (September 2013) and the total apathy left behind by the discussion on fiscal multipliers from the IMF has left the central planners 'rudderless on the open sea of debt crisis'. The EU Commission will try to find a compromise on extend-and-pretend for Greece but...

George Soros: Germany Leaving Eurozone Would Solve Crisis Huffington Post
Germany could leave the euro, "and the problem would disappear in thin air," as the value of the euro declines and yields on the bonds of debtor countries adjust.

What’s the German for ‘property porn’?alphaville / FT
German house prices: heading for a bubble?The World / FT
…there may be a bubble building in the German property market with Berlin in particular looking peaky, although that must be caveated with the relatively sedate nature of the market previously.

The euro zone: choose your own adventureMacroScope / Reuters
predictions about the euro zone are coloured heavily by whether someone works for an employer based inside the currency union or not.

Swiss army prepares for euro unresteuobserver

EU commissioner pleads innocenceeuobserver
EU freezes tobacco law after lobbying scandaleuobserver

Another euro zone summit MacroScope / Reuters
The day before an EU summit that probably won’t come up with anything decisive in crisis management. If that sounds rather underwhelming beware… In the end, the euro zone finance ministers’ meeting on Nov. 12 looks like the more likely forum for decisions

Low expectations ahead of this week’s EU SummitNordea

EU-Summit preview: don't expect too muchDanske Bank (pdf)

The Hand of Draghi (aka Mariodona)alphaville / FT
…hopes that the markets will effectively bail out Spain and do the ECB’s job for it are, in our view, very unlikely to be met.

How would ECB bond purchases affect the level of interest rates?Nordea

A new weapon to tackle the crisis? On the euro area fiscal capacitybruegel
Van Rompuy published a report that dedicates two of eight pages to a “fiscal capacity for the EMU”, going beyond the EU budget.

The eurozone budget and the maze of EU moneyeuobserver
[Opinion]  In their efforts to address the economic crises, political leaders risk to create a mishmash of non-transparent institutions and money flows.

A New Year’s Banking UnionProject Syndicate
In June, European heads of state and government committed themselves to the creation of a single European supervisor for banks in the eurozone. Now they have to resolve several remaining questions in order to establish Europe-wide bank supervision by January 2013.

Banking union for Europe - risks and
An EZ banking union is on the way, but nobody yet knows what it will look like. Which banks are to be regulated, by whom and how? Regulation goes hand-in-hand with bank rescue (in cases of illiquidity) and bank resolution (in cases of insolvency). But who pays for the rescue? Who organises the resolution and under whose law? This column introduces a new Vox eBook in which the world’s leading experts examine the issues and make concrete recommendations.

The first step in Europe’s banking union is difficult but achievablebruegel
Creating Europe’s single supervisory mechanism is only one step on a much longer path towards crisis resolution and banking union. Compromise on it will be difficult but possible.

Eurozone Bank Supervisor Plan Found To be "Illegal"ZH
FT: A plan to create a single eurozone banking supervisor is illegal, according to a secret legal opinion for EU finance ministers

Euroland's debt strategy is an economic and moral disgraceThe Telegraph
The International Monetary Fund has demolished the intellectual foundations of Europe's debt crisis strategy.

IMF Breakthrough Is FundamentalEconoMonitor
Over the past week there has been a fundamental recalibration in understanding about the current economic crises afflicting Europe, the USA, Japan, the UK and some other countries.  The IMF analysis of the likely magnitudes of budget multipliers (see “World Economic Outlook,” October 2012) has raised the stakes dramatically in the debate about the relative merits of fiscal austerity versus fiscal stimulus.

The maths behind the madness: interactive guide to government-debt dynamicsThe Economist
Spain has lots of work to do. Keeping all things equal, the country would need to grow by 7.7% a year, or nominal bond yields to fall to a Teutonic 0.5% to stabilise government gross debt at its 2011 level of 70% of GDP. Fat chance: the IMF forecasts GDP growth to average just 0.5% a year and bond yields of 7.7% between 2012 and 2017. A bail-out for Spain it seems, is not a case of if, but when.

Enough Already With the Strict Austerity in EuropeView / BB
Europe’s economy is likely to shrink this year and to see little or no growth in 2013. Please note: That’s if all goes well. The IMF’s dismal new forecasts assume -- or let’s say hope -- that Europe’s plan for restoring stability will soon take effect. Don’t take this for granted.

Waiting For Rajoy: Theater of the Absurd in SpainPIIE
Waiting for Prime Minister Mariano Rajoy to ask for lending assistance to Spain is enough to make you ask: Where are the bond vigilantes when you need them?

Spain Considers EU Credit LineWSJ
Spain is considering a request for a line of credit from the European Union's new bailout mechanism, a senior Spanish Finance Ministry official said Monday

Spain might be ready to jump through well-positioned hoopalphaville / FT
Spain did not require any money from the European Stability Mechanism, the eurozone’s state rescue fund, but would be comfortable making a request for a credit line only in order to satisfy the conditions of the ECB to begin buying bonds.

Spain's exposure to the rating agenciesSober Look
The recent downgrade of Spanish debt by the S&P is not going to have a significant effect on the bonds' eligibility as collateral at the ECB. The ECB takes the best of the four ratings of Moody’s, S&P, Fitch, and DBRS to determine the eligibility for repo collateral.

Moody's Refuses To Junk Spain Ahead Of US Election, Raffirms Baa3 Rating - Full TextZH
…the maintenance of market access is critical because the risk that some form of burden-sharing will be imposed on bondholders is material for those countries that rely entirely or to a very large extent on official-sector funding for an extended period of time.

The Ultimate Presidential Election Guide For InvestorsZH
Credit Suisse’s deep look – 42 pages

What to make of the latest round of Chinese dataalphaville / FT
Such a lot of data has come out since Friday that we wanted to wrap it all here. The short version is, it’s not great but not terrible either.

China’s GDP MessageMarketBeat / WSJ

Understanding The Bond BubbleThe Short Side of Long
A look at both the stock and bond markets

What's Driving This Bounce?Bespoke
The stocks that fell the most during the pullback have rallied the most so far this week.

The Best and Worst of Earnings Season (So Far)Bespoke
It's still early, but this earnings season is so far looking a lot like last earnings season. 

Global Equity Rally Hangs By A ThreadThe Big Picture
This is a critical week for most major global equity indices.   Many are right at or just through their trend support lines and ironically have been selling off since the September 13th announcement of further quantitative easing. With the Fed now all in we’re a bit concerned the markets may perceive Mr. Bernanke is out of bullets, which could result in a decent short term correction if the trend breaks are confirmed this week.

Equity Review: US fiscal cliff - 2-3 months of uncertainty ahead?Saxo Bank
The US election will take precedence over the next 6 weeks, so expect the market uncertainty to grow due to the ’fiscal cliff’, which will undoubtedly impact market sentiment and therefore performance. Expect rough and volatile markets for the next couple of months, until we see a light at the end of the fiscal tunnel in the US.

Yield Forecast Update - Bouncing at the bottomDanske Bank (pdf)

EM Bond Snapshot – Oct 2012Danske Bank (pdf)

FX Forecast Update: October: USD weakness to continueDanske Bank (pdf)

New Financial Forecasts: Another EU summit, another clearance?Nordea (pdf)
Next weeks EU Summit is not expected to reveal much new. More discussion of Greece, Spain and perhaps Cypress and Slovenia but if anything expect more defensive clearance. The fact that Spanish bonds managed to rally after the S&P downgrade indicates the risk-on crowd is still here. Hence, we still believe investors on balance are looking to take on more risk going into the end of the year but it’ll not be a straight line and volatility will continue to be rather high.)

The idea that central banks might cancel their government debt holdings, or restructure them into zero coupon debt, is gaining traction.

Emerging Markets Briefer - Oct 2012Danske Bank (pdf)

Russia - Slow and steady wins the raceDanske Bank (pdf)

Kenestä Raimo Sailaksen seuraaja?Jyrki Virolainen

mielenkiintoinen blogi – hyvä, että tämmöistä tehdään

Kohti "todellista" talous- ja rahaliittoa Sampo Terho / US Puheenvuoro

Game-changer ei taida vieläkään tulla Henri Myllyniemi / US Puheenvuoro

Teollisuuden sähkönkulutus laskussa syyskuussaeuroetana

Irlannin pankeissa odotellaan ja katellaaneuroetana

Talvisodan henki ei syntynyt isänmaallisuudestaYLE
Uuden talvisodasta tehdyn tutkimuksen mukaan Neuvostoliiton armeija kohteli suomalaisvankeja ja -siviilejä yllättävän hyvin. Sen sijaan omia kuolleitaan venäläiset kohtelivat kuin jätettä.

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