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EUROPE
German
Finance Minister Wolfgang Schaeuble said deficit-fueled growth leads to
economic decline, signaling discord with Italy and France as euro-area policy makers seek
ways to avoid deflation and spur growth.
A country's
fiscal health has little bearing on how much yield investors demand to buy its
bonds, and cheap central bank money has distorted the market environment to
transform it into something unfamiliar -- and disturbingly hospitable to the
likes of Spain.
With an
election less than two weeks away, traders and investors are bracing themselves
for something rarely associated with Sweden: political risk.
SNB
faces classic 'trilemma' as EURCHF floor nears – TradingFloor
The
worst kind of love is the unwanted one – TradingFloor
The ECB
policy meeting later this week will undoubtedly exercise Mario Draghi as he
weighs policy options for the moribund Eurozone and the euro. The Scottish
referendum meanwhile is beginning to undermine the pound while Ukraine continues to set a nasty backdrop
to markets.
UKRAINE / RUSSIA
IMF reviews
Ukraine’s economic program; unlocks additional $1.39
billion * Strong program implementation; difficult measures taken amid volatile
situation * Conflict in the East, disruption in gas supplies weigh on economy
and society
Ban on
buying Russian bonds eyed as EU envoys meet-sources – Reuters
Putin Faces
Debt to Import Curbs as EU Weighs Sanctions – BB
EUROPEAN CENTRAL BANK
The
Eurozone needs action, and ABS won't cut it – TradingFloor
The
economic data coming from the Eurozone is bleak, and the European Central Bank
urgently needs to take action. But with the rate-reduction option off the
table, what can ECB president Dragi do? Stephen Pope argues that asset-backed
securities are not enough, and that sovereign debt use needs to enter the
picture.
The market
has lost confidence in the ECB, and president Mario Draghi must act to rebuild
confidence. So an immediate drop in the ECB’s official rates is likely.
Meanwhile there no end in sight for the declining EURUSD.
5 Things
to Look Out For at Thursday’s ECB Meeting – WSJ
ECB
Preview: Further Measures Will Be A Close Call – WSJ
Unlikely to
see QE any time soon, QE not as effective as other asset purchase programs.
If ECB
Does QE, It’s Another Sign of Western Governments’ Failures – WSJ
The ECB’s
move underscores the abject failure of Western governments to deal meaningfully
with difficult economic and demographic challenges. That abdication has left
central banks such as the U.S. Federal Reserve and ECB to play an ever-larger
role — one they can’t fulfill indefinitely without compromising their own
integrity or the health of financial markets.
Gavyn
Davies: Draghi’s incursion into fiscal policy over deflation – FT
Mr Draghi
is an expert in knowing exactly how far he can push the Germans. He has set his
sights on an integrated growth package, including impressive structural reform
in France and Italy, supported by fiscal and monetary
relaxation. Slowly but surely, his message may be getting across.
Once
again we wait for "shock and awe" from the ECB – Sober
Look
The ECB (Eurosystem)
balance sheet continues to decline… Anywhere else this would have been
considered a massive tightening of monetary policy
Why the
opponents of QE have failed to make their case – FT
The
European Central Bank is the only major central bank in the advanced world that
has not implemented quantitative easing – yet. A lot of arguments have been
argued in defence of not following the Federal Resere, the Bank of England and
Bank of Japan along the path of QE. But their validity is fast diminishing.
Here is why QE’s detractors are wrong – possibly dangerously so.
UNITED STATES
Fed Positioning to Normalize Policy – Tim Duy’s Fed Watch
The baseline path for interest rates is a delayed and gradual rate hike scenario beginning mid-2015. It seems reasonable, however, to believe that the risk is that this baseline is too dovish given the general progress toward the Fed's goals, a point made repeatedly by Fed hawks.
Fed Positioning to Normalize Policy – Tim Duy’s Fed Watch
The baseline path for interest rates is a delayed and gradual rate hike scenario beginning mid-2015. It seems reasonable, however, to believe that the risk is that this baseline is too dovish given the general progress toward the Fed's goals, a point made repeatedly by Fed hawks.
US
Labour Market Monitor: Job growth is strengthening – Danske
Bank
Solid ISM
report supports picture of stronger job growth – Danske
Bank
Markit US
PMI manufacturing hits highest level since April 2010 – TradingFloor
ISM
Manufacturing Index: Growth Again Beats Forecast – dshort
ISM
Manufacturing index increases to 59.0 in August – Calculated
Risk
ISM
Manufacturing Hits a Three Year High – Bespoke
Blackstone’s
Take: Euro Will be Judge and Jury for Mario Draghi * CBO, Fed Growth Forecasts
Unattainable, Northwestern’s Gordon Says * Inflation Stays Below Fed’s Target
for 27th Straight Month * BOJ May Be Reluctant to Affirm Positive Economic
Cycle * Australia Central Bank Holds Interest Rates Steady
Daily
Macro – WSJ
The focus
this week is on the European Central Bank’s policy meeting on Thursday.
Although there’s talk the ECB might launch quantitative easing as early as this
month, this seems unlikely. The central bank will want its policy initiatives
announced in June to fully take effect before doing yet more. Elsewhere, the U.K. is increasingly focused on the
Scottish independence referendum, due to be held on Sept. 18. The latest
opinion polls have unsettled markets, triggering sterling weakness, but it’s
still unlikely the Scots vote to split off from the U.K.
Blogs
review: The bond market conundrum redux – Bruegel
Fed
tapering was widely expected to push up US yields. Instead, US yields have
fallen since the beginning of the year, raising the question of whether we’re
seeing a new version of the Greenspan 2005 conundrum. Interestingly, a
successful explanation of this new conundrum cannot just rely on a flight to
safety explanation as it also needs to rationalize why 5-year yield and 10-year
yield have diverged over the same period.
What
Happened Monday and a Look Forward – Marc
to Market
Banks
say funding rules will make key equities trades more expensive – CNBC
Banks are
sounding the alarm about a proposed global rule aimed at forcing them to fund
themselves more safely, warning that it could have "severe" knock-on
effects on short selling and other important equities market transactions.
Global
equities are setting new highs, and interest rates have fallen substantially.
So far, 2014 has been a pretty decent investment year, with the US in a full-blown economic expansion.
However, in Europe, the picture is different.
FINNISH
Näkökulma: Onko Kataisen pesti tärkeä vai ei? – IL
Varakkaat suomalaiset katumapäällä – YLE
Paljastivat verottajalle Sveitsiin piilotetut omaisuudet
Keskusta ohitti kokoomuksen, SDP nousi kuopasta – YLE
Pääministeri Stubb ei halunnut kommentoida tuoreita
kannatuslukuja Yle Uutisille.
Nato-haukka – Mikä se on? – Jukka
Hankamäki
Mikä NATO on? – Atlantti-seura