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Wednesday, April 24

24th Apr - US Close: Europe is getting interesting

Skim the headlines. Something is definitely happening. My wild guess: they are removing austerity measures, planning to bail-in some banks in too-large crisis countries and easing monetary policy. Actually might work. But they still have to fix the euro.

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Roundups & Commentary
Markets – Between The Hedges
Daily Interest Rate Monitor – Global Macro Monitor
The Closer – alphaville / FT
Europe: "Bad Is Good" Stock Exuberance Continues But Bonds Reverse – ZH
US: Oil Surges Most In 5 Months With eMini Volume Near Lows Of Year ZH

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Austerity absurdity?Presseurop
“The policy of austerity has reached its limits”, says Barroso, the first time Brussels has questioned its own policy. It’s time we grasped that one path for such varied countries doesn’t work, writes Süddeutsche Zeitung.

Europe and Depositor PreferenceWSJ
When banks fail, should depositors be burned alongside holders of senior bank debt or should debt holders lose money before depositors are touched?

Sympathy For the DijsselbloemIt’s Not That Simple
It’s about Spain. It’s always been about Spain. This whole sorry spectacle has always been about Spain. Greece and Ireland, forgive me, are small. So’s Portugal. But Spain and Italy are too big to be successfully yaddayadda-ed. And the way that the contagion dominoes have stacked up, it has been clear for a few years that if you win the battle in Spain, you won’t have to fight it in Italy, while if you lose the battle in Spain, you’re probably not going to get a chance in Italy. And Spain (unlike Italy) has always been a case where it’s basically a banking sector problem that has infected the sovereign, rather than basically a sovereign problem that has infected the banks.

A Slovenia Q&Aalphaville / FT
Shouldn’t be worried? Hey now, that’s not at all what I said. That a problem is solvable is no assurance that it will be solved — especially in Europe, where casual disregard is a leading contrary indicator.

Christian Noyer: The euro area is getting strongerBIS (pdf)
Governor of BoFrance and Chairman of BIS, at the Paris Europlace International Financial Forum, "Post-crisis growth and investment opportunities in Europe", New York, 22 April 2013.

Germany’s Trial Balloon Of A “Plan B”Testosterone Pit
Euro may only last five years, says senior German government advisorThe Telegraph
The euro has a “limited chance of survival” and may only endure another five years, Kai Konrad, one of the German government’s closest economic advisers, has claimed.

FX HORIZONS: C’mon ECB, Tell Us What You Really ThinkWSJ
The ECB is less transparent than the FED, and for little reason.

ECB says ditching austerity would not help euro zoneReuters
ECB policymakers rebuffed suggestions that Europe should ease up on austerity and said that while the central bank has room to cut interest rates, such a move would not necessarily help the economy much.

The Frankfurt vetoFree exchange / The Economist
Soaring borrowing costs apparently weren't about indebtedness at all, but about uncertainty over the ECB's willingness to act as lender of last resort. That, of course, means that any pivot away from fiscal consolidation in the euro area will require approval from Frankfurt

Annual Report 2012ECB (pdf)

What Next For Italy?Marc to Market
Italy has a new Prime Minister. And it's a surprise one... – Open Europe
Letta Named Italian Prime Minister as Impasse Ends – BB
Italy president names center-left's Letta as new premier – Reuters
Italy's new Prime Minister: Pro-EU integration, anti-austerity? – Open Europe

Mediocre Earnings and Revenues Bespoke
As it stands now, 56.9% of the 458 US companies that have reported have beaten earnings estimates.  This would be the lowest reading seen since the bull market began, so the remaining companies that still have to report have some work to do!

US Business Cycle Index Plunges Most In 22 MonthsZH

Weak orders point to sluggish economy – Reuters
Decline by Most Since August – BB
Plunged in March, Worse Than Expected – dshort
-5.7%; CapEx Recovery Put On Indefinite Hiatus – ZH
Spring Swoon Hits Factories – WSJ

China’s growing debt, and Magnus on where it might be headedalphaville / FT

IMF: Evidence does not support the ban on naked SCDS purchasesSober Look

What to Do about High-Frequency TradingCFA Institute

Man vs. Machine: Squawk Box Trumps TwitterWSJ

Juhana Vartiainen tyrmää kolme myyttiäTalSa
Eihän talous voi kasvaa kun ollaan kriisissä, ja iäkkäät vievät nuorten työpaikat. Tai sitten eivät. Valtion taloudellisen tutkimuskeskuksen VATT:n ylijohtaja Juhana Vartiainen lyttäsi yleisimmät kohtaamansa vastaväitteet uuden tutkimuksensa julkaisutilaisuudessa. Tehoaako sitten työpaikkojen luominen?

Urpilainen: Suomi kulkee talouskurikiistassa kultaista keskitietä HS
Valtiovarainministeri Jutta Urpilainen (sd) tapasi eilen päättyneellä Yhdysvaltain-matkallaan kaksi talousnobelistia, kuripolitiikan ärhäkän arvostelijan Paul Krugmanin ja globalisaatiokriittisistä ajatuksistaan tunnetun Joseph Stiglitzin. "Nobelistien näkemys Euroopasta oli hyvin pessimistinen", Urpilainen kertoo.