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Saturday, April 12

12th Apr - W/E: Best of the Week

Here are the ”best” from my posts of the ending week. Last week’s edition here.

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Europe’s Bogus Banking UnionProject Syndicate
Europe's banking union may soon exist on paper. In practice, the eurozone banking system is likely to remain fragmented along national lines and divided between a northern “core,” where governments continue to stand behind local banks, and a southern “periphery,” where governments have run out of cash.

ECB models trillion euro asset purchase program: newspaperReuters
ECB has modelled the effects of buying a trillion Euros of assets to ward off deflation, a German newspaper reported on Friday, a day after the ECB's president said radical policy action might be needed.

Draghi Deflation Fight Seen on Different QE Path to FedBB
While U.S. firms tap markets for about three quarters of their lending, companies in the euro region rely on loans from banks for the same proportion of their borrowing. That makes it harder for the ECB to use asset purchases as a way to improve credit conditions for small-and-medium sized enterprises

A note on the Feasibility ECB Quantitative EasingPlace du Luxembourg
If the idea is to increase consumption and investment where it is most needed, it would make most sense to purchase Greek, Slovakian, Portuguese, Spanish, Irish, Italian, Slovenian, Dutch and French assets, rather than German, Belgian, Austrian or Finnish.

Has the ECB actually moved closer to QE?Open Europe
While there may be ‘unanimous commitment’ to using such measures when needed, it’s still not clear what the criteria are for such action and it is even less clear that all members of the GC agree on when such action would be needed.

The €1,000,000,000,000 question, revisitedFT
Just because there is unanimity about being prepared to use nonstandard tools does not mean that ECB governors agree on how bad things need to get to trigger a policy response

Draghi’s Hunt for QE Assets Leaves ECB Scouring Barren MarketBB
The ECB’s focus on ABS for monetary easing risks guiding it toward a policy that might be slow to evolve and far smaller than the 1 trillion euros ($1.4 trillion) in bond purchases it has already simulated. Draghi has said international regulators must change the rules on ABSs, yet those officials are steering against the easy creation of complex products because of the role they played in the global financial crisis.

So What Exactly Can The ECB Do, Anyway?Forbes
Frances Coppola: Like monetary easing, credit easing in the Euro area is not as straightforward as it appears. The ECB’s hands are tied by the institutional construction of the Euro, the lack of fiscal and banking union, and above all by political intransigence. Unless there is a significant change in attitude on the part of Euro area governments, I remain unconvinced that the ECB can do much to ease either monetary or credit conditions in the Euro area.

Draghi Seen Easing Policy by June as ECB Readies Rate CutBB
Almost two-thirds of respondents in the Bloomberg Monthly Survey predicted the European Central Bank president will ease policy by June. Of those economists, just under half said he may implement multiple measures ranging from interest-rate cuts to asset purchases and long-term loans.

Hilsenrath: Fed Worried About Misleading on Interest Rates at Policy MeetingWSJ

China says no major stimulus planned; March trade weakReuters
Chinese Premier Li Keqiang ruled out major stimulus to fight short-term dips in growth, even as big falls in imports and exports data reinforced forecasts that the world's second-largest economy has slowed notably at the start of 2014.

Profit Margins: The Death of a ChartPhilosophical Economics
Killing a chart, but not the margin questionFT

Pivot Points, Tick and Vwap in Day TradingFat Pitch
Simple is essential, because timeframes are short and decisions have to be made quickly. There are a lot of ways to day trade; this post is about just one of those. We can do everything with just three tools: pivot points, tick and vwap.

The Modern View of the Stock MarketMorningstar
The great insights of the 1960s, half a century later.

Mind the European Equities GapWSJ
European equities have performed strongly over the past year. Unlike earnings, which have broadly flattened out after drifting lower since 2011. The result is a widening gap

Guide to the Markets Q2 2014 J.P. Morgan

Worldview 1Q 2014J.P. Morgan

Blogs review: High frequency tradingBruegel
Michael Lewis’ new book “Flash Boys: A Wall Street Revolt” has unleashed a huge controversy about the economic benefits and costs of high frequency trading (HFT). For the author, this new breed of traders use sophisticated algorithms and fast computers to effectively front-run trades, a practice that is illegal if performed by humans but which remains legal if performed by computers.

World Economic Outlook: Recovery Strengthens, Remains UnevenIMF

Unconventional Monetary Policies Spell Success in Any Language, Fed Paper SaysWSJ
Central banks in the U.S., Japan, the U.K. and Europe all have resorted to unconventional policies in recent years to combat the global financial crisis and recession. The details have differed across international borders, but in all four cases, they’ve proven successful in terms of easing overall monetary conditions, according to new research from the Federal Reserve.

Minkä hintojen soisitte nousevan, pääjohtaja Liikanen? – Jan Hurri / TalSa
Arkielämän alituinen kallistuminen ärsyttää tavallisia kuolevaisia mutta ei keskuspankkiireja. Heistä hintojen on syytäkin nousta, jotta "hintavakaus" säilyy ja talous pysyy vauhdissa. EKP harkitseekin inflaation kiihdyttämistä "kysyntää kannustavaan" nousuun. Se on jäänyt kertomatta, minkä hintojen olisi hyvä nousta – ja mitä iloa siitä olisi kansalaisille.