Death Star Economics

ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

This week…

Was mostly about Ben Bernanke and the path of macro conditions he chose for the coming month. So QE could be gone for good sometime next year, given supporting data, that we are now waiting for under sweat and tears.

In fact, Bernanke himself could be gone as well, as Obama indicated that the chairman could retire in the near future.

Economists polled by Bloomberg now suggest that the cutting will begin in September, to be finished by June 2014. A tight schedule considering when the rumors started.

And if that’s not enough for you, there is always China and the fear of worse days ahead, pointing towards a credit squeeze. In short ():

Early Friday, rates in China’s money markets fell sharply on rumors that Beijing had ordered its big banks to loosen up cash. Still, they remain more than double than average for the year, and the turbulence suggest continued uncertainty in the market in coming days.

Probably equally noteworthy was the G8 meeting in Northern Ireland, the possibly biggest take-away from which was that Barack Obama kept referring to George Osborne as “Jeffrey Osborne“.

Jeffrey Osborne himself, an American soul singer, proceeded to offer George a duet, which was turned down because the Chancellor neither laughs nor sings.

In Turkey, things are getting interesting for bankers, Erdogan‘s new found enemy. According to the prime minister, the recent crisis was due to the “interest-rates lobby” trying to push yields up. To put this in perspective, the words “blood-sucking” were used, although government officials refrained from sea food comparisons.

Next week…

The US brings us June consumer confidence data (Tuesday), which is expected to have dropped from May, while consumer spending (Thursday) is meant to have increased slightly; the latest first quarter GDP reading will come in on Wednesday and is expected flat at 2.4%. Jobless claims are published on Thursday morning.

There is whole array of business climate and consumer confidence indicators as well as inflation data due in Europe, including Germany, France, Italy and the eurozone as such are, while the UK is also reporting first quarter GDP growth and the current account deficit.

Japan is due to report on unemployment and indeflation. On Wednesday, Japan reported higher May exports than expected, export value increased the most since 2010, indicating that Abenomics are working. And you say currency wars do no good. On that note,

Have a good one.

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An attempt at revival

This week…

Things in Turkey continued to be messy, as Erdogan’s stern view of protesters continues to spark new anger among the masses and sent the Turkish Lira falling.
On Thursday, Erdogan re-iterated that he was losing patience with the protestors. Today, the government and its counter movement reached an agreement, while Germany delayed further EU accession talks with Turkey.

In Greece, the doors of Hellenic Broadcasting Corp closed, sending 2,500 former employees out onto the streets. It is meant to be relaunched later this year in a slimmed-down version.

In the UK, jobless claims dropped, suggesting that the recovery is well on its way (remember how we’ve been here roughly 700 hundred times now..?).

And then there was Wednesday, when literally everyone with an audience called the bond bubble, for example (formerly of Goldman Sachs) and (Pimco)

Around the same time, Iraqi officials said the country was looking to increase its oil production by 29% in 2014 and 159% by 2020, showing that a) they can and b) they have buyers. r

Then there was a new price fixing scandal [yes, there are still some products left]; this time in FX.

Meanwhile on Wall Street, notes on correlations with Japan:

In Brussels, important issues like the size and curviture of bananas and cucumbers has been pushed aside as Washington’s lobbyists walked in to ensure EU privacy regulations wouldn’t get so strict that they could hurt US investigations overseas.

Rupert Murdoch is divorcing Wendy Deng, could this be the actual reason for splitting News Corp?

The week ahead…

The G8 meet on the outskirts of London on Monday and Tuesday; anti-globalization protesters will ironically stick to central London, where they will follow a scavenger hunt-like course through the West end, . Please refrain from buying condiments at Fortnum & Mason until the weekend, as you may otherwise be questioned about the social legitimacy of your job.

Otherwise, it’s going to be a Bernanke-dominated week – again – as the Fed is meeting and press conferencing. Although Bernanke tried to nullify the comments about an end of easing, saying that it would take “considerable” time until that would happen, everybody seems to think the US is going to turn the money tap off.

Have a good one.

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Dear reader,

if you have been wondering where the hell your news brief has gone, I must apologize for its absence. Due to other commitments (like a job that pays me), Death Star Economics suffered in the past weeks, but I’m working on a solution to combine the two again in the future.

So long.

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Yesterday…
US jobless claims came in higher than expected and housing data disappointed as well, raining on the American recovery 2013 parade and adding to the uncertainty over the future of the Fed‘s asset purchasing program.
At the same time, those with disposable income seem to be working on a new housing bubble of sorts.

Japan reported its economy grew in the first quarter of the year, leading to a 3.5% annualized growth leap and supporting Shinzo Abe’s approach since his inauguration in September. Most of the growth is attributed to private consumption.

Meanwhile, Japanese companies prefer to look for opportunities elsewhere, for example the US, where a handful of corporates bought into the US shale gas market for several billion dollar.

Following the Bloomberg user data debacle, Citigroup has banned its fixed income traders from participating in Bloomberg chat groups to shield the banks from any security breaches.

This morning…
Lloyds Banking Group might just be short of fully returning into private sector hands, as the bank’s shares rose higher than the government’s cut-off point for a sale of 61.2 pence per share. Over the past weeks, David Cameron had reiterated that bailed out and partly nationalized institution shouldn’t stay government owned for longer than needed.

Word got out that Qatar spent up to $3bn on supporting the Syrian opposition since 2011, the same year in which Libya’s rebels also received support, fueling rivalry over political influence between Arab countries.

Other than that, there is not much going on, time to get on the below.

Weekend reading…

- Bangladesh, globalization and the price of your t-shirts,
- from pork bellies to ruling the world – a brief history of the Chicago Mercantile Exchange,
- gold bulls vs bears,
- Super Abe and the fight for a prosperous Japan,
- on the uselessness of asset management,

Have a good one.

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Yesterday…
David Cameron and his comrades of the Conservative Party published a policy draft for a referendum for a possible EU-exit of the UK. The draft says the referendum has to be completed by December 2017, given the Tories win the 2015 elections. I think the campaigning just began.

While the global “recovery” continues to force deficits to skyrocket and imports to slump, India has managed to become the outlier in the trend on Monday afternoon. Taking advantage of the low gold price, imports rose 138% since April 2012 to $7.5bn, or 18% of all imports, while the trade deficit hit 17.8bn.

And of course the drama over Bloomberg‘s use of user data continued…

This morning…
there was a flood of data, with the German economy growing 0.1% from 4Q12 to the first quarter of 2013, undercutting the depressing estimate of 0.3% growth. The French economy contracted by 0.2% over the same period of time.
Franco-German relations haven’t been great since Hollande got into office, but this morning’s result may just worsen the atmosphere of any policy discussion. The eurozone as such, contracted 0.2% in 1Q13. The recession continues…

Simultaneously, Mervyn “it’s-almost-his-last-day” King of the Bank of England raised the outlook for the UK economy [with lower inflation] and raised his eyebrows at eurozone performance, as well as the continental Financial Transaction Tax.

Meanwhile, the US is preparing to become the model student again. The Congressional Budget Office is forecasting the deficit to fall as far as $378bn by 2015, much faster than anticipated. The 2013 forecast was cut by $203bn to an overall $642bn.
And that is not all: Formerly the largest corporate debt market in the world, providing ample opportunity for the Michael Milken followers of the world to make money, China is going to take that spot within the next two years, according to S&P. Soon America will be debt and deficit free and flow with milk and vodka (we’re all grown-ups here).

In the kerfuffle over whether Jamie Dimon is allowed to stay in in his double-role as chairman and CEO of JPMorgan seems to be blowing over (), as fewer shareholders than expected are looking to back the leadership reform. Another bullet dodged for the industry.

And in case you’ve been in a good mood this morning, have a look at this:

So long.

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Over the weekend…
we saw the first proposal for a Libor reform from Martin Wheatley of the FCA (Financial Conduct Authority and successor of the FSA), who told the FT about the Libor 2.0, which could look something like this:

[...] a dual-track system with survey-based lending rates running alongside transaction-linked indices as soon as next year.

In the US however, Gary Gensler of the CFTC calls for an immediate switch to transaction-linked rates.

Meanwhile, the G7 met just outside London to talk about monetary policy and how much liquidity is too much with the conclusion that money is something you can never have enough of: Go ahead Japan, ease some more.

In the US, WSJ correspondent Jon Hilsenrath published two articles on the future of the Fed, both in terms of staffing and monetary policy. Until yesterday, Friday’s article () was pretty much the most talked about news of the weekend, discussing how the central bank will unwind its QE program that is worth $85bn a month. It was followed it up with a piece on Janet Yellen, [probably] the next Ben Bernanke.

This morning…

David Cameron is meeting with Barack Obama on future trade agreements, something that is being interpreted as a potential first step for the UK to leave the EU. A free trade agreement between the new and old world could be worth up to £10bn for the British economy.

The Eurogroup is kicking of with both Cyprus and Greece on the agenda. Cyprus is seeking approval of the first chunk of its bailout program, worth €3bn, while Greece is set to receive €7.5bn in the latest bailout payment.

As for the rest of the week, we’ll get all kinds of data from the US, including industrial production and inflation and housing. Same goes for the eurozone and Germany; the UK reports unemployment figures and Japan will give us preliminary Q1 GDP figures.

So long.

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Yesterday…
the ECB shook up Europe for a moment, with government debt yields falling to new lows under the soothing sound of disgruntled murmuring Germans. The ECB is ready for more [again], it says, but Germans on the policy committee are going to do everything to keep rates from tumbling. In ze mozerland, Economists are scared of a real estate bubble and argue that banks could use the freshly pressed money to bolster their equity capital, dragging the effect away from the real economy.

This morning…
The EU deficit report came out, showing that France, Spain and the Netherlands will breach deficit agreements, limiting countries to 3%. Italy got in just below at 2.9% (based on 2013 forecast). Because France and the Netherlands aren’t the real bad guys, and you can’t leave one standing alone in the rain (unless it’s Greece), all of them are expected to receive extensions for reaching their deficit goals. France got its waiver this morning.

Its jobs Friday in the US: nonfarm payrolls are seen up at 148,000 (almost double), with the unemployment rate unchanged at 7.6%. But stakes are high as the estimates vary within a range of 90,000 jobs added. March payrolls came in below estimates, for example, but jobless claims have been declining over the past weeks. After the jobs report, there will be April non-manufacturing PMI, which is expected to fall slightly to 54. Data releases begin at 8.30am EST.

In the background, rumors of Twitter’s IPO are going wild after the company hired Morgan Stanley’s Cynthia Gaylor for corporate development, despite co-founder Jack Dorsey saying he was “not even thinking” about going public.

On Monday, the UK will be out for the early May bank holiday.

Weekend reading…- IvyConnect: is a ‘fascinating individual’ necessarily a douchebag?
- the real culprits behind the Libor scandal are London broker nights,
- ze Germans are gestuck with the Euro,
- stripped off the alter ego: ex-Barclays CEO Bob Diamond takes the subway now,
- terrorism, conspiracy and the media,

Have a good one.

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Europe is the new Japan – ECB cuts rates

Yesterday…The Fed’s FOMC meeting notes showed that we’re moving away from the “let’s close the money tap” idea and back to “whatever it takes” – meaning easing or no easing. The statement said that policy action will be taken with an eye on how the economy will progress. (interestingly, has interpreted this as a call for stimulus)

Apple‘s mega bond of $17m helps the company to avoid $9bn in taxes. If Apple would have had to bring in money from abroad to pay dividends to shareholders, that’s what it would have cost them. Of course, the average Apple customer, like me, doesn’t care about tax avoidance (it’s not even illegal), but the American state is upset, as it’s trying to crack down on offshore tax avoidance like never before this year.

Otherwise, an infographic to yesterday’s ADP employment report.

This morning…
all eyes are on the ECB, which just announced a benchmark interest rate cut by a quarter point to 0.50%. A press conference during which Mario Draghi will wear a suit made of money is set to follow at 1.30 BST. Let the excitement begin. Money for everyone.

UBS is holding an investor meeting today, during which the bank may be urged to split its investment banking and wealth management units [again].

So long.


ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

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Yesterday

The Fed is considering tougher capital requirements over worries that banks could be playing the [Basel III] system. Currently, the international agreement sees equity capital at only 3%. Basel brought that up significantly, but also gave the parties involved more room for… creative accounting. Give a bank a loophole.

Moody’s downgraded Slovenia to junk with negative outlook (ouch), which is unfortunate, because the country was planning to auction off some debt.
And now the pathway to an EU bailout: ()

Rising loan losses resulting from a housing bust and a second recession in two years have left a hole of about 7.5 billion euros ($9.9 billion) at Slovenia-based lenders, investment bank Keefe Bruyette & Woods estimates. That’s a lot for a 35 billion-euro economy: A bank bailout would push government debt above 70 percent of economic output.

Apple issued $17bn in debt – the largest corporate debt offering ever – in six tranches to return money to shareholders and avoid repatriation taxes on overseas funds.

In New York, the Empire State Building was lit up in FT-pink to celebrate the 125th anniversary of the newspaper.

This morning…
is quiet due to Labor Day in vast parts of the world.

Later on, we’ll get some data from the US, including the ADP employment report, ISM manufacturing data and the post-FOMC meeting statement from the Fed (ex Bernanke press conference). The ISM is expected to drop below 50, as it last did in November of last year and several months in 2009.

So long.

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Yesterday…
The IMF warned of the Asian bubble, saying too much FDI was leading to explosive credit growth and property prices, and it was to get even worse if Japan’s monetary policy was to have the intended effect on the Japanese economy (hold your horses, Christine).

Deutsche Bank is issuing €2.8bn of new stock to improve its capital base. According to WSJ, Deutsche Bank has one of the lowest capital ratios among European banks.

This morning…
The Dutch Queen Beatrix abdicated, to be replaced by her son Willem-Alexander. She will be demoted to Princess Beatrix.

The US Treasury is expecting the first lowering of the budget deficit since 2007 between April and June 2013, when it is looking to repay $35bn, against the February estimate of shouldering another $103bn in debt. The deficit cut is due to tax increases, spending cuts and tax revenues recoveries.

There was a whole flood of data out of Europe this morning: both came in at 1.2%, lower than expected, making a rate cut by the ECB on Thursday more likely. added to its rise in March, but the adjusted rate is still only marginally above the two-decade low of 6.8%. Eurozone unemployment climbed to 12.1%. No surprise there, when has it not been rising…

Spain reported GDP growth for the first quarter – keyword ‘growth’ – at -0.5%, leading the Bank of Spain to lower it 2013 growth expectations from -0.5% to -1.3%.

So long.

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