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Monday, June 13

13th Jun - Post-Terror, higher Brexit odds

Previously on MoreLiver’s:

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The EU's greatest achievement Frances Coppola
"The EU's greatest achievement is the Euro", said Michael Portillo on the BBC's This Week programme last Thursday. No, Michael, it isn't. It is the EU's worst mistake.

Mark Gilbert: The Unloved Euro View / BB 

Brexit and sterling: Movements of between 5% and 15% seem plausible – voxeu
Brexit Monitor No. 7: Less than two weeks to go – Danske Bank
Will Brexit Hurt the Euro? The Market Seems to Think Not – WSJ
David Cameron: ‘I’ll pull UK out of the single market after Brexit’ – Politico
Ambrose Evans-Pritchard: Why I am voting to leave the EUThe Telegraph
Paul Krugman: Notes on BrexitNYT
Saxo on Brexit: Britain enters the final lap – TF
Leave opens up gap on Remain in Brexit poll – Politico
European leaders hammer post-Brexit uncertainty – Open Europe

Helicopter money and fiscal rulesvoxeu
The ECB now faces a fundamental contradiction in its mandate between the Lisbon Treaty’s Article 127 (price stability, plus the ECB target of under but close to 2% inflation) and Article 123 (no overt monetary finance of governments). This article discusses three options – two ways in which the fiscal rules could be improved; and the temporary abeyance of Article 123, making it ‘state-dependent’. It also explains why recent arguments against the effectiveness of ‘helicopter money’ are mistaken.

TLTRO: Bazooka or water gun?Nordea
On 24 June the ECB will announce the take up in its most recent policy measure, TLTRO II. While there is ample liquidity in the Eurosystem, the Targeted Longer-Term Refinancing Operations (TLTROs) will attempt to revive growth by offering very cheap funding for banks to lend on to the real economy. We estimate the total take up over the four operations will be around EUR 650bn, while the June TLTRO take up will be around EUR 400-500bn. Therefore, a respectable weapon but not a game changer.

Buying Junk Shows ECB Is Getting DesperateView / BB

Euro Corporate Watch – ECB gets off to a flying start Pictet
The ECB exceeded market expectations with EUR 348mn of CSPP purchases on the first day * Clearly Draghi didn’t want to disappoint the market *Extrapolating the numbers means that the ECB hints at a EUR 7bn of purchases per month * This is consistent with our base case of EUR 7.5bn per month

€348 Million: ECB Releases First Total Of Corporate Bond Purchases ZH

Looking ahead to the Fed: Assessing financial market set-up – voxeu
Tim Duy: Five Questions for Janet Yellen – BB
Newest Inflation Expectations Likely to Trouble the Fed – WSJ
Kocherlakota: The Fed Must Attack Low Inflation – View / BB
It’s a Good Thing the Fed Has Missed its Chance to Raise Rates – WSJ
FOMC Preview and Review of Projections – Bill McBride
Paul Krugman: Don’t Take A Hike – NYT
Janet Yellen's Inflation Problem – Tim Duy
FOMC preview: Fed likely to adopt a 'wait and see' approach – Danske Bank

Martin Enlund: FX: a cruel, cruel summer?Nordea
Growth and Brexit worries have depressed yields and Fed expectations lately, and if these subside then a Fed hike could soon be back on track - maybe already in July. The empirical track record of recent summers(!) does however provide cause for concern. Five out of the six past summers, something has hit the proverbial fan. If not a Brexit, could it be China's FX policies, or could BOJ push the panic button?

The real exchange rate and economic growth ECB
We find that a real appreciation (depreciation) reduces (raises) significantly annual real GDP
growth, more than in previous estimates in the literature. However, our results
confirm this effect only for developing countries and for pegs.

Global credit risk: world country and industry factorsECB
We find that macro and default-specific world factors are a primary source of default clustering across countries. Defaults cluster more than what shared exposures to macro factors imply, indicating that other factors also play a significant role. For all firms, deviations of systematic default risk from macro fundamentals are correlated with net tightening bank lending standards,
suggesting that bank credit supply and systematic default risk are inversely related.

Politics and EconomicsMarc Chandler

Macro Digest: Risk sentiment takes a dive as Brexit fears mountTF
The collective apprehension surrounding the June 23 Brexit vote has sippled over into risk sentiment in an overall sense creating a slew of interesting circumstances ahead of the vote.

How to Run a Russian Hacking Ring The Atlantic
It’s not that different from running any other business.

What if PTSD Is More Physical Than Psychological?NYT
A new study supports what a small group of military researchers has suspected for decades: that modern warfare destroys the brain.

Danske DailyDanske Bank

Euro rates updateNordea

Brexit concerns spur safe have demand; JPY stronger; Brent oil below USD 50 * Central banks and Brexit polls to dominate this week * US 10Y yields lowest since May 2013 * EUR/JPY at new three-year low

Morning MarketsTF
As the Brexit referendum on June 23 draws ever closer investors and markets appear less and less certain that things will continue as they have been.

Euro wrap-up – Daiwa

Daily Market Comment Marc Chandler
Brexit Dominates

Daily Market Comment Macro Man
A Brexit thought experiment

Daily Shot – TF

Daily Press SummaryOpen Europe
Labour to take on bigger role in Remain campaign amid concerns over swing to Leave * Schäuble warns that UK will not have access to Single Market post-Brexit vote as Tusk warns new deal could take up to seven years to negotiate * Leaked documents suggest UK diplomats discussed granting visa-free travel to up to 1.5m Turkish citizens * James Dyson: Claims that no one would trade with UK after Brexit are “absolute cobblers” * Pound weakens as polls tighten with ten days until EU referendum * Irish PM raises concerns over EU investment rules * EU Commission President and Dutch PM call for swifter deepening of single market * Turkey has no chance of joining EU under Erdogan German Greens leader says * German Vice Chancellor compares AfD to Nazis * Baltic States and Poland considering building air defence system to counter Russian aggression * Finnish Finance Minister set to quit post after losing party leadership election

Brussels PlaybookPolitico
Horror in Orlando — Parliament debates weapons ban

Global Stocks Plunge; US Futures, Oil Slide As Brexit Fears "Jolt Markets"


FX UpdateTF
Fresh polls on Friday showing once again point to higher odds of a Brexit than the market is prepared for sending sterling into a tailspin and impacting the euro and all risky assets globally as correlations head to one.

From the FloorTF
Global markets are engulfed in a sea of fear this Monday morning as the heightened risk of a Brexit hammers equities (particularly banks and miners) exerts pressure on sterling crosses and triggers a flight to the usual safe havens of bonds gold and the Japanese yen.

Fed tarkkailee tämän(kin) kesän * USA:sta vähittäismyyntiluvut ennen Fedin kokousta * Brexit painaa Britannian työmarkkinalukuja *​ Venäjän keskuspankki leikkasi korkoja

Elämäsi pankin ohjauksessa Jouko Marttila