Google Analytics

Thursday, May 23

22nd May - US Close: Fed disappoints by meeting expectations

The Bernanke’s pre-written statement to the congress and his later Q&A session gave little new information. The statement was very dovish, emphasizing that the monetary policy will remain accommodative and asset purchase amounts can be varied both up and down. EURUSD and stocks took this positively, but right from the beginning of his actual Q&A sessions, Bernanke said the dirty word – TAPER. That was it. EURUSD and the stock market sold off. Later the minutes from the previous FOMC meeting (May-1) were published, and it was confirmed that some members would prefer slowing down the asset purchase programs as early as June – but the majority, Bernanke included, wants to wait for macro situation to improve. So no news, but for some reason markets were sorely disappointed.

Previously on MoreLiver’s:

Follow ‘MoreLiver’ on Twitter or Facebook

Roundups & Commentary
Markets – Between The Hedges
The Closer – alphaville / FT
US: Stunned Stocks Slide On Soaring Volume; Worst Swing Day In 5 Weeks – ZH

Can it be inflated away?Buttonwood / The Economist
Marco Valli, the euro zone economist of Unicredit, the Italian bank, has produced a very interesting 27-page note on the issue. To give the game away, the title is "Inflating away the debt overhang? Not an option". Mr Valli argues that a central bank trying to achieve this aim would face three challenges

Eurozone: The troika pulls its separate waysLe Monde / Presseurop
Hitched together at the outset of the Greek crisis, the three-part team of the IMF, the ECB and the European Commission did the heavy pulling in the bailouts of European countries in crisis. Since then, though, strains among the three institutions have grown more severe.

The Political Prospects for Europe’s Pro-EU PartiesPIIE
Despite the repeated warnings of commentators too numerous to mention, Europeans have declined to elect ultra-nationalist, anti-establishment majorities in their parliaments and hasten a repeat of 1930s era fascism or communism. This does not mean that the continent is without political problems as the next European elections approach, however.

Research Euroland: Fact Book FranceDanske Bank (pdf)

Foreign Borrowing in the Euro Area Periphery: The End Is NearN.Y. FED
Periphery countries have suffered painful contractions weaning themselves from foreign borrowing. The hope now is that the restoration of external balance in these countries will set the stage for meaningful recoveries. The debt burden from past borrowing remains, however, and argues for caution about the periphery outlook. Much will depend on the behavior of external investors.

What Women Want: Merkel Scoring Points With Female Voters Spiegel
The German left used to have a corner on the market when it came to progressive social issues. But Chancellor Merkel has transformed the conservatives, attracting huge quantities of women voters along the way. They've become a hot political commodity in this year's upcoming election, with the opposition struggling to catch up.

Central Bank Watch: New Governors at the RiksbankNordea (pdf)
We regard both candidates as skilled with judicious minds and integrity. Both will be voting already in the upcoming July meeting, but we don’t see any need to alter our repo rate forecast based on this. We still expect the Riksbank to stay on hold in July, although recent soft data indeed makes it a very close call.

  UK – IMF
IMF urges UK to spend more to fund investmentReuters
Britain's government should spend more now to fund investment and steer its economy back to recovery, the IMF said on Wednesday, a call unlikely to be heeded by finance minister George Osborne.

IMF Tells U.K. to Move Quickly on BanksWSJ
Alongside suggesting the U.K. government should slow its austerity drive, the IMF on Wednesday offered Chancellor of the Exchequer George Osborne another piece of advice: recapitalize your bailed-out banks.

UK Article IV Consultation Concluding Statement of the MissionIMF

US: The Ghost Of Divergences Past ArrivesZH

Four Reasons Housing Recovery Isn’t Yet Boosting EconomyWSJ

Analyzing Federal Reserve Asset Purchases: From whom does the Fed buy?FED

Chairman Ben S. Bernanke: The Economic OutlookFED
Before the Joint Economic Committee, U.S. Congress, Washington, D.C.

Bernanke offers no hint of pullback in Fed stimulusReuters
The Fed’s monetary stimulus is helping the U.S. economy recover but the central bank needs to see further signs of traction before taking its foot off the gas, Fed Chairman Ben Bernanke said on Wednesday.

The Fed Effect in One ChartWSJ

Market Reacts As Bernanke Promises "MOAR"ZH
Euphoria Cracks As Ben Drops Hint Of Tapering After AllZH

Bernanke: no cuts to QE yetNordea
Despite recent improvement in the job market, the Fed has still little appetite for a slowing of the central bank’s bond purchases. Nevertheless, we still believe tapering could start by the September FOMC meeting.

Fed Winddown Strategy Will Test Economy’s Reaction and AdjustWSJ
Federal Reserve Chairman Ben Bernanke made clear Wednesday in testimony to the Joint Economic Committee that the exit from the Fed’s $85 billion-a-month bond buying program will be much different than past Fed exits.

Bernanke to Congress: Seriously, guys, what are you doing?Wonkblog / WP
You’re the reason the economy isn’t taking off more. Of course, Bernanke is too polite to phrase things quite so bluntly. But to anyone versed in Fedspeak, that’s the gist of his message.

What *really* keeps the Fed up at nightMacroScope / Reuters
If the Fed fails to adequately prepare investors for a policy change – however small it may be – it runs the risk of undoing all the progress it has made lowering borrowing costs for Americans.

Bernanke says no change for nowEconbrowser
When asked specifically if purchases would be lowered before Labor Day (September 2), Bernanke answered "I don't know."

Fed Winddown Strategy Will Test Economy’s Reaction and AdjustWSJ
Bernanke made clear Wednesday in testimony to the Joint Economic Committee that the exit from the Fed’s $85 billion-a-month bond buying program will be much different than past Fed exits.

Is Congress the ‘enabler’ of a loose Fed?MacroScope / Reuters

Goldman: "Our View Is That Tapering Is Announced At The December FOMC Meeting"ZH

Bernanke Says Premature Tightening Would Endanger RecoverBB

Bernanke offers no hint of pullback in Fed stimulusReuters
The Fed's monetary stimulus is helping the economy recover but the central bank needs to see further signs of traction before taking its foot off the gas, Fed Chairman Ben Bernanke said .

Bernanke's Q&A testimony to congressional panelReuters
Highlights of the question and answer session of the testimony

Bernanke's leadership a critical factor for Fed policyCBS MoneyWatch

"Hawks, Doves, Owls And Seagulls" - Summarizing The Fed's Bird NestZH
An informative recap of the current roster of FOMC members via Bank of America.

The Fed Minutes FreakoutBespoke
What to Expect When You’re Expecting Fed MinutesWSJ

Minutes of the FOMC April 30–May 1, 2013FED (pdf)

Parsing Fed Minutes: Debating When to Pull BackWSJ
The Fed is heading toward some difficult debates on when to pull back its bond buying program.

Exit Strategy DiscussionCalculated Risk
Based on comments by Bernanke today, and NY Fed President Dudley yesterday, it sounds likely the Fed will allow the MBS to run off (a change from their previous thinking).

This Is What It Sounds Like When Doves Cry, And When Others Start To See An Asset BubbleZH

Fed Minutes Pull Plug on Stock RallyWSJ

Many on FOMC Said More Progress Needed Before Slowing QE PaceBB

The Fed Gives the Hot-Stock Boys a Lot to Think AboutWSJ
One key decision the Fed made during the depression, and what is regarded as a key mistake by most, was the decision in 1937-38 that it had done enough, that the depression was over, and it was time to change course. They were wrong, and the depression lasted for a few more painful years. Bernanke is well aware of this policy mistake, and determined not to repeat it.

FOMC minutes to the April 30 / May 1 meetingalphaville / FT
The reference to a possible tapering of asset purchases “as early as the June meeting” along with Bernanke’s comments on Wednesday will lead to speculation that the Fed is preparing to scale back its LSAPs relatively soon, perhaps in the second half of the year. But these sentiments can change quickly.

Flash Comment: FOMC - QE tapering is drawing closerDanske Bank (pdf)

How is the Abenomics economic experiment going in Japan?qfinance

Two Misunderstandings about Japanese TradeMarc to Market
First, the decline in the yen does not automatically translate into lower prices for foreign purchasers of Japanese goods. Second, Japan is not nearly as reliant on exports as many suggest.

A Keynesian Victory, but Austerity Stands FirmNYT

Derivatives trader: 'Trading can take over your life – but only if you let it'The Guardian

Russian Spy Games: Ryan Fogle and the New Cold WarThe Foreign Affairs
From wigs to dead drops, the espionage tussles between the United States and Russia are increasingly playing by the old Cold War rules -- including the public shaming of the unlucky spooks who get caught.

When We Held KingsGrantland
The oral history of the 2003 World Series of Poker, in which an amateur named Moneymaker turned $39 into $2.5 million and the poker boom was born

Eurokriisin hinta ja perustuslakiSoininvaara

Pelastaako talouskasvukaan enää meitä?Henri Myllyniemi / Piksu

Yrittäjä ihmemaassa - asennevamman valtakuntaJaakko Savolainen
Yrittäminen tässä maassa on uskomaton diili. Sitä kantaa kaiken riskin, ei nauti sosiaaliturvaa ja saa onnistuessaan vihan päälleen.

Museojohtajan esteellisyys Guggenheim-hankkeessaJyrki Virolainen