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Tuesday, February 4

4th Feb - Trouble brewing, hopefuls wait for ECB

Previously on MoreLiver’s:

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German Foreign Minister welcomes discussion on EU Treaty Change Open Europe

Why the Eurozone output gap could be a chasmalphaville / FT
The ECB and the European Commission are wrong to think that the Euro area output gap is modest or that the growing unemployment rate is structural, given there is so little wage pressure in the region.

Why German-style labour reform isn’t for everyoneThe World / FT
“The policy recommendation from Germany for the rest of continental Europe should not be the Hartz reforms,” they conclude, “… but reforms that would target the system of industrial relations by decentralising bargaining to the firm level, while keeping workers’ representatives involved to [ensure] that employees benefit again when economic conditions improve.”

Portuguese Debt About to Implode? What About Spain?Mish’s
One certainly could have made a fortune plowing into 10-year Portuguese bonds. Does that mean Portugal is out of the woods? I don't think so, and neither does Tortus Capital hedge fund manager David Salanic.

European banks have $3 trillion of exposure to emerging marketsReuters

Europe Stocks Drop After Asia Rout as Lira Rebounds – BB

ECB preview: Another refi rate cutDanske Bank
At the ECB meeting last month, Mario Draghi described two scenarios that would lead to action. We saw both of these triggers materialize in January. Therefore, we expect the ECB to ease again on Thursday

Are further falls in inflation putting more pressure on the ECB to act?Open Europe
The data suggests to us that the ECB will wait until its March meeting and its updated inflation forecasts to make a judgement – but then again it went a month earlier than expected in November. As for how, the most likely tools remain some form of targeted LTRO and/or purchases of bank loans but both programmes would require significant work and have numerous shortcomings

Euro zone inflation falls again; economists base ECB rate cut calls on déjà vuMacroScope / Reuters
Only two of 76 analysts in a Reuters poll conducted before news on Friday that January euro zone inflation fell to 0.7 percent said the ECB would trim its refinancing rate below 0.25 percent this week. Now a few more say they will. While many economists say the decision is a close call, most lack conviction over whether it will do any good.

ECB to reveal strategy for bank health checks by end-MarchReuters
The ECB kept the euro zone's top lenders on tenterhooks as it promised to reveal the strategy for its unprecedented review of bank balance sheets by the end of March, giving only scant detail on Monday.

Markets Tumble. How Will the Fed React?Tim Duy’s Fed Watch
The Fed is once again in a familiar place.  They try to pull back on policy, and markets tumble.  Tightening has repeatedly proved to come too early; one wonders if the Fed would have had to keep doing more if they didn't keep promising to do less.  If history is any guide, they will eventually reverse course.  But that same history would suggest that they need to see conditions deteriorate further before they act.

Fed’s Lacker Sees Continued Reduction in Bond Purchases – WSJ

Welcome Janet: Worst February Start For Stocks In 32 Years – ZH
Goldman Summarizes Today's "Serious Pain In Risk Assets" – ZH
Is the Stock Market Cheap? – dshort

CoreLogic: House Prices up 11% Year-over-year in December – Calculated Risk

Wonkbook: Will there be another debt-ceiling fight?WaPo

US could start defaulting on debt 'very soon' warns LewThe Telegraph
US Treasury Secretary calls on Congress to raise debt ceiling immediately to prevent the issue from harming the economic recovery

Citigroup, And Former Fed, Economist To Take Top Treasury PostZH

RBA Moves to Neutral as It Signals Comfort With Aussie LevelBB
Australia’s central bank signaled the end of a two-year easing cycle and foreshadowed stronger economic growth, sending the nation’s currency higher.

USDJPY banging on key support as AUD jumps on RBA shift – TradingFloor
Japanese Stocks In Freefall - TOPIX Almost -5% To 4-Month Lows; Down 15% In 2014 – ZH
Carnage Continued in AsiaMarc to Market

Emerging Markets Play an Unsettling TuneWSJ
This bout of volatility was triggered by two fundamental, and long-lasting, shifts: the “tapering: in the Federal Reserve’s bond-buying program; and concerns over China’s economy and banking system.

Emerging markets risk repeating eurozone blunder of synchronised tighteningThe Telegraph
Where have seen this screenplay before? A string of countries tighten policy at the same time – some drastically – in order to prevent capital flight and show investors how tough they can be.

Capital controls or cooperation?Pieria
It is not beyond the bounds of possibility that, faced with currency collapse and/or unsustainable rises in debt burdens, some countries may resort to direct restrictions on capital movements. Would this be an appropriate course of action?"

It’s the hot money, stupidalphaville / FT
All of which begs one question. Should some of the blame associated with what happens when false friends leave be directed to those who sent them your way to begin with?

Don't confuse a temporary shock with a trend in emerging marketsTradingFloor
EM equities down 11 percent since October * Developing countries embracing technology * Strategic view remains with long equities

Frontier markets have dodged the EM bulletTradingFloor
Not all equity markets are bleeding in tandem with the rout in emerging market equities. Few people are talking about how frontier markets have actually dodged the EM bullet but some it has to do with less access for foreign capital.

Frontier markets have dodged the EM bulletTradingFloor
Emerging markets are the talk of the street today but few people seem to be discussing how frontier markets have dodged the bullet and are 1.1 percent higher year-to-date (see table) compared to the sharp declines in developed and emerging markets.

Brazil’s trade deficit: wrong kind of improvementbeyondbrics / FT
Brazil’s exports overall may in fact be improving, but thanks in no small part to selling raw stuff to China. That’s not a hugely secure prospect at this point.

Emerging Stocks Fall on Data as Brazil Leads World Losses – BB
Emerging-Market Rout Seen Enduring on Low Real Rates – BB
Citi Fears The Emerging Market Volatility "May Just Be The Beginning" – ZH
Contagion from emerging markets to global stocks: SocGen’s Juckes – MarketWatch
Latin American Currencies Plunge To 2003 Lows, Argentine BONARs Shrink – ZH

Goldman Warns Global Slowdown Getting "More Serious"ZH
The January reading and the latest revisions to previous months paint a significantly softer picture of global growth and the GLI now locates the global industrial cycle clearly in the ‘Slowdown’ phase.

Bank Of America Warns: "Investors Not Prepared" For SelloffZH
Sentiment an equity market risk: II % Bears dropped to 14.1% = too few bears * Put-call ratios are complacent & contrarian bearish

Interesting Stock Market ChartsShort Side of Long
Despite optimism, the Dow has made no progress in 8 months * Five out of nine major stock market sectors have broken down * Stock market breadth has started to deteriorate rapidly * Yes, markets can go down… even when CBs endlessly print! * Emerging Markets peaked in October and have lead the sell off * Retail investors aren’t bothered as cash levels remain super low * Stock market has only been more expensive a handful of times

Global shares plunge as U.S. slowdown adds to emerging markets woes – Reuters

Elinkeinoelämä ja euron puolustusTyhmyri
mutta nythän on jo jonkun aikaa kuulunut elinkeinoelämän ääniä euroa vastaan

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