Back from blogging holidays! Plenty of stuff going on -
Spanish bailout waiting game, summit and more time for Greece. Someone
asked for updated views on EURUSD, after my view from last Sunday. Here
it was. It seems currently all the issues appear to be solved. It will not be long before we see the cracks appear, so I will update views and comment on Thursday. I guess that tactical shorts or at least an opportunity to get long in EUR or SPX will soon become available.
Roundups and
Commentary
News – Between
The Hedges
Markets – Between
The Hedges
Recap – Global
Macro Trading
The Closer – alphaville
/ FT
Roundup – A
View From My Screens
Tomorrow’s Tape: Microsoft, Google Lead Earnings
Parade – WSJ
Reference
Debt
crisis: live – The
Telegraph
The Euro
Crisis Blog – WSJ
FX Options
Analytics – Saxo
Bank
European
10yr Yields and Spreads – MTS indices
EUROPE
Once "Jollying
The Markets" With "Faith, Hope And Charity" Fails, What Comes
Next: A Primer On Europe's Next Steps – ZH
Grexit: First Borg,
then Buiter, now Jakobsen – Saxo
Bank
The main macro input on Europe is now
the German election (September 2013) and the total apathy left behind by the
discussion on fiscal multipliers from the IMF has left the central planners
'rudderless on the open sea of debt crisis'. The EU Commission will try to find
a compromise on extend-and-pretend for Greece but...
Germany could
leave the euro, "and the problem would disappear in thin air," as the
value of the euro declines and yields on the bonds of debtor countries adjust.
What’s the German for
‘property porn’? – alphaville
/ FT
German house prices:
heading for a bubble? – The
World / FT
…there may be a bubble building in the German property
market with Berlin in
particular looking peaky, although that must be caveated with the relatively
sedate nature of the market previously.
The euro zone: choose your own adventure – MacroScope
/ Reuters
predictions
about the euro zone are coloured heavily by whether someone works for an
employer based inside the currency union or not.
Swiss army prepares
for euro unrest – euobserver
EU commissioner
pleads innocence – euobserver
EU freezes tobacco
law after lobbying scandal – euobserver
EUROPE: SUMMIT
Another euro zone summit – MacroScope
/ Reuters
The day
before an EU summit that probably won’t come up with anything decisive in
crisis management. If that sounds rather underwhelming beware… In the end, the
euro zone finance ministers’ meeting on Nov. 12 looks like the more likely
forum for decisions
Low expectations
ahead of this week’s EU Summit – Nordea
EU-Summit preview: don't expect too much – Danske
Bank (pdf)
EUROPE: ECB
The Hand of Draghi
(aka Mariodona) – alphaville
/ FT
…hopes that the markets will effectively bail out Spain and do
the ECB’s job for it are, in our view, very unlikely to be met.
How would ECB bond
purchases affect the level of interest rates? – Nordea
EUROPE: FISCAL UNION
A new weapon to
tackle the crisis? On the euro area fiscal capacity – bruegel
Van Rompuy published a report that dedicates two of
eight pages to a “fiscal capacity for the EMU”, going beyond the EU budget.
The eurozone budget and the maze of EU money – euobserver
[Opinion] In their efforts to address the economic
crises, political leaders risk to create a mishmash of non-transparent
institutions and money flows.
EUROPE: BANKING UNION
In June, European heads of state and government
committed themselves to the creation of a single European supervisor for banks
in the eurozone. Now they have to resolve several remaining questions in order
to establish Europe-wide bank supervision by January 2013.
An EZ
banking union is on the way, but nobody yet knows what it will look like. Which
banks are to be regulated, by whom and how? Regulation goes hand-in-hand with
bank rescue (in cases of illiquidity) and bank resolution (in cases of insolvency).
But who pays for the rescue? Who organises the resolution and under whose law?
This column introduces a new Vox eBook in which the world’s leading experts
examine the issues and make concrete recommendations.
Creating Europe’s single
supervisory mechanism is only one step on a much longer path towards crisis
resolution and banking union. Compromise on it will be difficult but possible.
Eurozone Bank
Supervisor Plan Found To be "Illegal" – ZH
FT: A plan to create a single eurozone banking
supervisor is illegal, according to a secret legal opinion for EU finance
ministers
EUROPE: IMF’S REVISION
Euroland's debt strategy is an economic and
moral disgrace – The
Telegraph
The
International Monetary Fund has demolished the intellectual foundations of Europe's debt crisis strategy.
IMF Breakthrough Is Fundamental – EconoMonitor
Over the
past week there has been a fundamental recalibration in understanding about the
current economic crises afflicting Europe, the USA, Japan, the UK and some other countries. The IMF analysis of the likely magnitudes of
budget multipliers (see “World Economic Outlook,” October 2012) has raised the
stakes dramatically in the debate about the relative merits of fiscal austerity
versus fiscal stimulus.
The maths behind the madness: interactive guide
to government-debt dynamics – The
Economist
Spain has lots of work to do. Keeping all
things equal, the country would need to grow by 7.7% a year, or nominal bond
yields to fall to a Teutonic 0.5% to stabilise government gross debt at its
2011 level of 70% of GDP. Fat chance: the IMF forecasts GDP growth to average just 0.5% a year
and bond yields of 7.7% between 2012 and 2017. A bail-out for Spain it seems, is not a case of if, but
when.
Europe’s economy is likely to shrink this
year and to see little or no growth in 2013. Please note: That’s if all goes
well. The IMF’s dismal new forecasts assume -- or let’s say hope -- that Europe’s plan for restoring stability will
soon take effect. Don’t take this for granted.
EUROPE: SPAIN
Waiting for Prime Minister Mariano Rajoy to ask for
lending assistance to Spain is enough
to make you ask: Where are the bond vigilantes when you need them?
Spain is
considering a request for a line of credit from the European Union's new
bailout mechanism, a senior Spanish Finance Ministry official said Monday
Spain did not
require any money from the European Stability Mechanism, the eurozone’s state
rescue fund, but would be comfortable making a request for a credit line only
in order to satisfy the conditions of the ECB to begin buying bonds.
Spain's exposure to the rating agencies – Sober
Look
The recent downgrade of Spanish debt by the S&P is
not going to have a significant effect on the bonds' eligibility as collateral
at the ECB. The ECB takes the best of the four ratings of Moody’s, S&P,
Fitch, and DBRS to determine the eligibility for repo collateral.
…the maintenance of market access is critical because
the risk that some form of burden-sharing will be imposed on bondholders is
material for those countries that rely entirely or to a very large extent on
official-sector funding for an extended period of time.
USA
The Ultimate
Presidential Election Guide For Investors – ZH
Credit Suisse’s deep look – 42 pages
ASIA
What to make of the latest round of Chinese
data – alphaville
/ FT
Such a lot
of data has come out since Friday that we wanted to wrap it all here. The short
version is, it’s not great but not terrible either.
MARKETS
Understanding The
Bond Bubble – The
Short Side of Long
A look at both the stock and bond markets
MARKETS: STOCKS
What's Driving This
Bounce? – Bespoke
The stocks that fell the most during the pullback have
rallied the most so far this week.
The Best and Worst of
Earnings Season (So Far) – Bespoke
It's still early, but this earnings season is so far
looking a lot like last earnings season.
Global Equity Rally Hangs By A Thread – The
Big Picture
This is a critical week for most major global equity indices. Many are right at or just through their trend support lines and ironically have been selling off since the September 13th announcement of further quantitative easing. With the Fed now all in we’re a bit concerned the markets may perceive Mr. Bernanke is out of bullets, which could result in a decent short term correction if the trend breaks are confirmed this week.
This is a critical week for most major global equity indices. Many are right at or just through their trend support lines and ironically have been selling off since the September 13th announcement of further quantitative easing. With the Fed now all in we’re a bit concerned the markets may perceive Mr. Bernanke is out of bullets, which could result in a decent short term correction if the trend breaks are confirmed this week.
The US
election will take precedence over the next 6 weeks, so expect the market
uncertainty to grow due to the ’fiscal cliff’, which will undoubtedly impact market
sentiment and therefore performance. Expect rough and volatile markets for the
next couple of months, until we see a light at the end of the fiscal tunnel in
the US.
MARKETS: BONDS & FX
Yield Forecast Update - Bouncing at the bottom – Danske
Bank (pdf)
EM Bond Snapshot – Oct 2012 – Danske
Bank (pdf)
FX Forecast Update: October: USD weakness to
continue – Danske
Bank (pdf)
New Financial Forecasts: Another EU summit,
another clearance?
– Nordea
(pdf)
Next weeks
EU Summit is not expected to reveal much new. More discussion of Greece, Spain and perhaps Cypress and Slovenia but if anything expect more
defensive clearance. The fact that Spanish bonds managed to rally after the
S&P downgrade indicates the risk-on crowd is still here. Hence, we still
believe investors on balance are looking to take on more risk going into the
end of the year but it’ll not be a straight line and volatility will continue
to be rather high.)
OTHER
The next step – Buttonwood’s
/ The Economist
The idea that central banks might cancel their
government debt holdings, or restructure them into zero coupon debt, is gaining
traction.
Emerging Markets Briefer - Oct 2012 – Danske
Bank (pdf)
IN FINNISH
Kenestä Raimo Sailaksen seuraaja? – Jyrki Virolainen
mielenkiintoinen blogi – hyvä, että tämmöistä tehdään
Kohti
"todellista" talous- ja rahaliittoa – Sampo
Terho / US Puheenvuoro
Game-changer ei taida
vieläkään tulla – Henri
Myllyniemi / US Puheenvuoro
Teollisuuden
sähkönkulutus laskussa syyskuussa – euroetana
Irlannin pankeissa
odotellaan ja katellaan – euroetana
Talvisodan henki ei
syntynyt isänmaallisuudesta – YLE
Uuden talvisodasta tehdyn tutkimuksen mukaan Neuvostoliiton
armeija kohteli suomalaisvankeja ja -siviilejä yllättävän hyvin. Sen sijaan omia kuolleitaan
venäläiset kohtelivat kuin jätettä.