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Monday, November 19

19th Nov - EU Open: Short week with heavy events

Lots of stuff to kick off the US holiday-shortened week. Check my most excellent and recently updated 'Weekly Support' for the weeklies. Short version: US holiday on Thu, Fri probably a dead day as well. Important European macro on Thu&Fri, EURUSD again trying the 1.28 resistance level. Friday's US close seemed a bit more positive, so a possibility of a minor rally. BoJ meeting ahead - probably on pause ahead of elections.

Consensus on US: no quick fix but an eventual compromise on fiscal cliff. Risk: a good solution will be found -> positive for risk assets.

Consensus on Japan: demographics, trade balance, Japan is 'over'. Risk: BoJ turns into inflation targeting -> positive for risk assets. BoJ will probably sit tight this week - but that would only push expectations to December.

Consensus on Europe: Greece will get the additional funding, Spain will eventually apply for the bailout after elections or latest when bond rates start to peak. Risk: Troika and Spain will not come up with a mutually agreeable bailout term -> negative for risk assets, but this realization is still weeks away.

Consensus on ME: Regional ground war is probable, lessening appetite for risky assets and keeping oil high. Risk: slightly higher oil and gold push quant models to buy risk assets based on recent correlations. Either situation is solved by last-minute concessions or a limited war starts, but it will not have much effect on the larger scale.

Previously on MoreLiver’s:

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News roundupBetween The Hedges
The 6am Cut London – alphaville / FT
Emerging Markets Headlines – beyondbrics / FT

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
Economic Calendar – Forexpros

3 Numbers to Watch: US Home Sales & Housing Index, IT Ind OrdersSaxo Bank
US housing updates offer new perspective on whether last week's weak economic data was distorted by Hurricane Sandy, and Italy's new industrial orders set us up for anticipating manufacturing news later in the week from Germany and France.

Asia Today: Mildly risk positive after Friday’s firmer NY closeSaxo Bank
It was a quite orderly start to the week as trading got underway in Asia. The positive end on Wall Street saw a mild risk bid emerge throughout the morning, but not aggressively so. 

Market Preview: Eyes on US existing home sales dataSaxo Bank 
European markets are expected to open higher Monday amid optimism that US lawmakers might reach an agreement to avoid the fiscal cliff. Meanwhile, markets will track EU construction output and US existing homes sales data slated today. 

Danske DailyDanske Bank (pdf)
Key news: US fiscal cliff negotiations bolster risk appetite. The conflict between Israel and Hamas escalated Sunday. Danish refinance auctions kick off today. Market movers today: US housing data, developments in the Israel-Gaza conflict

AamukatsausNordea (pdf)
Kreikalle vihdoinkin seuraava tukierä? * USA:n teollisuustuotanto heikossa vedossa * Öljyn hinta jatkoi nousussa Israelin ja Palestiinan välisen konfliktin myötä 

AamukatsausTapiola (pdf)
Osakemarkkinoilla positiivinen käänne viikon lopuksi, kun USA:n poliitikot luonnehtivat budjettikeskusteluja rakentaviksi (ns. Fiscal Cliff ongelmaan ehkä löytymässä ratkaisu). Perjantain heikot makroluvut USA:sta eivät haitanneet markkinoita. Osakefutuurit selvästi plussalla, indikoiden nousuavausta. Viikon tärkeimpiä tapahtumia neuvottelut Kreikan tilanteesta tiistaina ja euroalueen ostopäällikköindeksit ja Saksan IFO -indeksi viikon loppupuolella.

Morning Briefing (EU/US): – BNY Mellon


European Finance Chiefs Seek to Close Greek Gap Amid IMF Spat BB
The finance chiefs are due to meet in Brussels tomorrow for the second time in a week after they agreed seven days ago to keep Greece’s bailout aid flowing. In addition to a disagreement between the European Union and IMF over softening Greece’s debt target, the ministers will attempt to re-engineer the current bailout without asking taxpayers to put up more money.

Merkel's day of reckoning as taxpayer haircut on Greece looms The Telegraph
Germany, Holland, and the creditor states of northern Europe have not lost a single cent on eurozone rescue packages, so far.

The euro has become Germany’s new DeutschemarkThe Telegraph
"You must tell your readers,” says Prof Gunther Schmid, one of Germany’s leading labour market experts, leaning forward over the Berlin brasserie dining table to emphasise his point. “It will be a disaster if Britain leaves the European Union.”

Should the Eurozone’s fiscal rules be abolished?mainly macro
Eurozone governments still do not know what to do if a future Greece emerges. How does it differentiate between a future Greece (where default is required) and a future Ireland (where it is not)? The answer at the moment seems to be that the fiscal rules will ensure there will never be another Greece. 

Putting the fiscal cliff in perspectiveSober Look

Fiscal MadnessTim Duy’s Fed Watch
Such worries have been repeatedly proved unfounded, but Greenspan and Fisher have no other intellectual framework to fall back on.  When you only have a hammer, everything is a nail.  For them, any question of fiscal policy always needs to be twisted into their version of the world, even when the opposite is so completely obvious to just about everyone else at this point.

If August 2011 Is The "Fiscal Cliff Resolution" Template, Then Watch Out Below ZH
Goldman: We believe the proverbial ‘fiscal cliff’ ultimately will be avoided, but precedent suggests any resolution will not happen until mid-to-late December…Last year the S&P 500 fell by 17% between July 25th and August 8th as the US debt ceiling deadline approached.

Will the Japanese election stall the next BOJ move?Saxo Bank

Research Japan: Bank of Japan is turning into a doveDanske Bank (pdf)
Election will increase pressure on BoJ for more easing * BoJ has already stepped up easing substantially * Reshuffle of BoJ board gives ample room to influence next year *

Abe threatens to turn BOJ into an unlimited piggy bank for the governmentSober Look

Yen Bears See Vindication in New BOJ Under Abe Watch: CurrenciesBB

Xi Jinping Assumes Reins of Restive ChinaSpiegel
China's once-a-decade transition of power is complete. The country's new supreme body, the Politiburo Standing Committee, will now be led by Xi Jinping. The charming 59 year old almost seems like a Western politician, but he is firmly committed to preserving the core dogma of the Communist Party.

Chinese No Longer Bow to Autocratic RuleSpiegel
The time of autocratic rule has passed for China's Communist Party. At one time it was understood that the people would obey, and everyone would get rich in return. But economic success will no longer suffice. Now the Chinese are demanding freedom and security too.

Monday: Existing Home Sales, Homebuilder ConfidenceCalculated Risk

HY markets hit by outflows; correction likely short-levedSober Look

Betting with Trillions Prison of Debt Paralyzes WestSpiegel
Be it the United States or the European Union, most Western countries are so highly indebted today that the markets have a greater say in their policies than the people. Why are democratic countries so pathetic when it comes to managing their money sustainably?

The Three "Financial Structure" Paradigms Of Modern FinanceZH

Key Global Event Risks For The Next Five Years (The Known Unknowns)ZH

Ray Dalio on the Global Economy – Foreign AffairsGlobal Macro Monitor

Hamas' Miscalculation: Why The Group Thought It Could Get Away With Striking IsraelForeign Affairs
Two factors pushed Hamas to ramp up its bombing campaign: belief that its strategic environment had improved in the wake of the Arab Spring and competition from Salafi groups.

Raimo Sailas ja Osmo Soininvaara peräänkuuluttavat säästöjä ja sisäistä devalvaatiotatyhmyri
Ilmeisesti itseaiheutettu katastrofi on mieluisampi vaihtoehto kuin typerien päätösten peruminen

Japani ensimmäinen uuden rahapolitiikan virallisesti käyttöön ottava maa – jos LDP voittaa vaalit tyhmyri

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