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Tuesday, October 28

27th Oct - Post-traumatic Stress Test Disorder

Previously on MoreLiver’s:

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Brussels seeks compromise in budget rowFT
EU Commission must decide by Wednesday whether French and Italian budgets are in “particularly serious non-compliance”.

The Resistible Return of Nicolas SarkozyProject Syndicate
While only 20% of the French electorate view President François Hollande favorably, and nearly two-thirds do not wish to see Nicolas Sarkozy return, more than two-thirds hope that former Prime Minister Alain Juppé will. That makes the 69-year-old Juppé the most popular political figure in France.

France bows to EU pressure on deficitFT
Paris to cut an additional €3.6bn in effort to avoid budget fight

Renzi under fireFT
Gideon Rachman: Nobody ever said that reforming Italy would be easy. But Matteo Renzi, the Italian prime minister, is going through a series of brutal tests this month – as he fights on two fronts, in Brussels and in Rome.

Italy’s in terminal decline, and no one has the guts to stop itThe Spectator
Everything that’s wrong with France is worse here

Departing Barroso sees EU stronger after euro debt crisisReuters

Europe must act now to avoid ‘lost decade’FT
None of the tools currently on the table will get the job done

Why the Eurozone suffers from a Germany problemmainly macro
I think the current Eurozone problem makes much more sense if we focus less on divergent national interests, and more on different macroeconomic points of view. The German perspective which sees the Eurozone problem in terms of profligate governments and lack of ‘structural reforms’ outside Germany is utterly inappropriate in understanding the Eurozone’s current position. Yet it is a point of view that too many outside Germany also share.

Despite Good News From ECB Tests, German Banks Still Face ChallengesWSJ
German banks face challenges despite receiving a clean bill of health from the ECB’s review of bank assets, in particular through risks stemming from super-low interest rates in Europe, a top official from Germany’s central bank said Sunday.

An appetizer ahead of Riksbank’s rate decisionNordea
The Riksbank’s Executive Board meets Monday 27 October at 09.00. The chart below, with a scenario with unchanged fuel prices as from last week, gives a hint on the near term inflation outlook that will be discussed at the Riksbank’s meeting. This is the main reason to why we expect a very soft Riksbank.

Riksbanker Who Left in Protest Says Untried Steps Only HopeBB
Lars E. O. Svensson -- a man who has devoted his career to understanding inflation and who last year left the Riksbank’s board in protest -- says interest rate cuts alone may not be enough to save Sweden from deflation.

Draghi Sets Stimulus Pace as ECB Reveals Covered-Bond PurchasesBB
At 3:30 p.m. in Frankfurt, the ECB will reveal how much it spent on covered bonds last week after returning to that market for a third time as part of a renewed bid to stave off deflation.

Size Matters to Traders Awaiting ECB Lowdown: Chart of the DayBB
The chart of the day shows the ECB’s two previous rounds of covered-bond buying started slowly and gradually increased in size.

ECB Bought Just EUR1.7 Billion Covered-Bonds Last WeekZH

Stocks Spike On Reuters' "ECB Does QE" Leak Du JourZH

German Ifo Business Climate Index Continues to Fall – CESifo
Germany: Close to recession – Nordea
German IFO declines yet again in October – TradingFloor
German Ifo Business Confidence Drops for Sixth Month – BB

Monetary developments in the euro area (Sep 2014) – ECB
Still positive signs from bank lending and money supply – Danske Bank
ECB money supply accelerates for fifth straight month in September – TradingFloor

FOMC: End of QE3, Shorter StatementCalculated Risk

US: Fed to end QE – FOMC previewNordea
Despite the recent market turmoil, we expect the Fed to end its QE programme at this week’s FOMC meeting, which concludes on Wednesday. However, we expect the Fed to make it clear that there are no plans for tightening yet. A more direct acknowledgement of downside risks posed by global factors is likely. Treasuries look set to record modest gains after the Fed’s statement, while the curve could flatten a bit. Dollar bulls should not worry much either.

Fedspeak Cheatsheet: What Are Fed Policy Makers Saying?WSJ
What Fed officials have said about the outlook for the economy and monetary policy since their meeting September 16-17.

Worried on low inflation, Fed seen offering soothing wordsReuters
The U.S. Federal Reserve this week will likely reinforce its stated willingness to wait a long while before hiking interest rates after a volatile month in financial markets that saw some measures of inflation expectations drop worryingly low.

US Federal Reserve set to halt asset purchasesFT
The end of US Federal Reserve asset purchases this week marks the climax of an unprecedented monetary campaign, but there is no room for a triumphant declaration of victory.

The largest economic experiment in history is endingFinansakrobat

Fed Touchy About Touching Rate GuidanceWSJ
Fed policy makers meeting Tuesday and Wednesday are likely to debate whether to keep the language in their previous policy statements pledging to keep their benchmark rate near zero for a “considerable time” after their bond-buying program ends.

Markit Flash US Services PMI – Markit
U.S. services sector activity growth slows in October: Markit – Reuters
Service PMI Slides To 6 Month Low, Implies Slide In Q3 GDP To 2.5% – ZH
U.S. pending home sales gain misses expectations in September – Reuters

Daily MacroWSJ
Germany’s Ifo index of business sentiment showed that the country’s industrial leaders are feeling gloomy, but what could we expect from a survey taken this month…welcome results of the European Bank Authority’s stress tests, released on Sunday. They proved to be tough enough to be credible but not too alarming to cause any sort of systemic distress….The only thing they have to worry about is the Federal Reserve’s policy meeting, the results of which will be out on Wednesday.

Daily Central BanksWSJ
Hilsenrath’s Take: European Banks Pass Test, But Are They Ready to Lend? * ECB Says Most of Europe’s Banks are Healthy * Fedspeak Cheatsheet: What Are Fed Policy Makers Saying? * Janet Yellen’s August: Lots of Meetings — And Vacation * BOJ Likely to Stick to Bullish Inflation View Despite Cutting Growth Forecast

FI Eye-Opener: No time to linger on the stress test resultsNordea
Bond yields with marginal fall on Friday – intra-Euro-area spreads widen. Some relief today after ECB stress tests: higher core yields, Spain to perform vs Italy, France vs Belgium. Stress tests behind – not the stress. A far-left regional government to cause worries in Germany? ECB’s covered bond purchase announcement not that exciting. An interesting week ahead: Fed, US GDP, Euro-area inflation. German, Italian and US supply – coupon and redemptions boosting Spain and Italy.    

The distributional effect of quantitative easingBruegel
The notion that ultralow interest rates and central-bank asset purchases have fueled a surge in asset prices, which mostly benefits the wealthy, has become quite prevalent. While the question of the redistributive impact of monetary policy is not new, it has taken on a whole new dimension with the renewed interest in inequality and the unprecedented scale of unconventional monetary policies.

FX: deleveraging over?Nordea
With the European bank stress test results out, the banks, if anything, have one minor reason less not to increase lending. End of deleveraging is good news for the euro area economy, but... EUR?

Strategy Sweden: On the radarNordea
Riksbank: time to re-gain credibility and control * Riksbank: survey points to 15-20bps cut * SEK rates: Sweden most out of sync with the economy * Sweden macro: skewed probability distribution for government´s debt * EUR rates & FX: QE – perspectives on what´s priced in * AQR & stress tests: the golden mean
EKP, Saksa ja Suomi joustavatHenri Myllyniemi / US

Eurouskovien saarnat eivät muutuReijo Paunonen / US

Stressitestit tuoneet esiin ilmoittamattomat riskiluototSirba Abdallah / US

Barroson ex-neuvonantaja: pankkitesti käsien pesuaPS

Systeemiriski pankkiriskiä suurempiElina Lepomäki / US

Sveitsiläisestä velkajarrustaAkateeminen talousblogi

Kuluttajien luottamus ennallaan lokakuussa – Tilastokeskus
EK:n luottamusindikaattorit eivät vielä povaa parempaa – YLE
Ehditkö jo iloita luottamuksen noususta? "Ei käännettä parempaan" – TalSa
Consumer confidence marginally up, but remains very weak – Handelsbanken