http://www.zerohedge.com/news/2012-11-06/overnight-sentiment-looking-forward-todays-big-event
http://www.businessweek.com/news/2012-11-05/italy-said-to-rebuff-bad-bank-plan-that-may-boost-sovereign-tie
and.....
http://www.businessinsider.com/september-german-factory-orders-2012-11
German factory orders plunged 3.3 percent in September, which was much worse than the 0.4 percent decline expected by economists.
and.....
http://www.telegraph.co.uk/finance/debt-crisis-live/9656859/Debt-crisis-Greece-48-hour-strikes-anti-austerity-strikes-begin-live.html
British opposition to EU budget increases will harden today after its auditor's report failed to give a clean bill of health to £89 billion (€111.2bn) of spending "affected by material error".
The two-day general strike is yet another sign of the anti-austerity climate among the Greek population. However, the government has to pass further austerity measures to guarantee disbursement of a vital €31.5bn loan tranche from the EU and IMF.
Overnight Sentiment: Looking Forward To Today's Big Event
Submitted by Tyler Durden on 11/06/2012 - 07:14Apple Australia Bond China Deficit Spending Equity Markets European Central Bank Eurozone FranceGermany Greece Gross Domestic Product High YieldJim Reid Market Sentiment Markit Monetary PolicyNational Weather Service Non-manufacturing ISM OhioPrice Action Recession Reuters Sovereign DebtUnemployment United Kingdom
Today it is all about the elections. It is not about last night's relatively surprising RBA decision to not cut rates (on an attempt to create a reflexive feedback loop when it said that China has bottomed; it hasn't, and the RBA will be forced into another "surprising" rate cut as it did previously). It is also not about Europe missing its Service PMI estimate (just like the US), with the composite printing at 45.7 on expectations of a 45.8 print (with both core countries - Germany and France - missing badly, at 48.4 and 44.6 on expectations of 49.3 and 46.2, respectively). It is not about reports that the EU believes Spain's GDP will again contract more than expected (it will, and certainly without any reports or beliefs). It is not about Greece selling €1.3 billion in 26-week bills even as, according to ANA, its striking power workers have taken 5 power plants online just as winter approaches. It is not about Jean-Claude Juncker telling the truth for once, and saying that Europe is still in crisis, and is facing the viability of the Euro (after saying weeks ago that the Euro is unshakable) and that some countries aren't facing up to their responsibilities. It most certainly isn't about German factory orders finally collapsing as the country is no longer able to delay its slide into full-blown recession, with a September decline of 3.3% on expectations of a modest drop of -0.5%, from the previous decline of 0.8% (the German ministry said that a weak Eurozone and lack of global growth are taking its toll; they will continue taking its toll for years and decades longer). No. It is all about the US elections, with the peak frenzy starting as soon as polls officially close at 8 pm. Everything else is noise.
http://www.businessweek.com/news/2012-11-05/italy-said-to-rebuff-bad-bank-plan-that-may-boost-sovereign-tie
Italian Treasury officials rejected proposals to create a so-called bad bank to take non-performing loans off the books of the nation’s lenders amid concern the plan would strengthen the link between sovereign and bank debt, said people with knowledge of the matter.
At least three restructuring advisers held talks with government officials about a bad bank that Italy could fund without seeking external aid, said the people, who declined to be identified because the discussions were private. The bad bank could hold 30 billion euros ($39 billion) to 100 billion euros of assets and lenders would receive government bonds in return for their bad loans, according to one person.
Italy didn’t solicit the proposals and there is no current plan to create a bad bank because deteriorating credit is in line with the government’s expectations, the people said. An official for the Rome-based Treasury declined to comment.
A bad bank is a tool the government could use to spur a turnaround in the country’s economy by easing funding needs among smaller banks that would allow them to boost lending, said the people. Still, it could strengthen the link between government and bank debt, going against reforms including plans for a European banking union that seek to weaken that nexus that has exacerbated the region’s debt crisis.
“The last thing Italy needs right now is a further strengthening of the links between the sovereign and the country’s banks,” said Nicholas Spiro, managing director of London-based Spiro Sovereign Strategy. “While Italian sovereign debt is a much safer asset class than a year ago, Italy is by no means out the woods and is seeking to differentiate itself favourably from Spain as much as possible.”
Bond Declines
The decline in Italian bonds since the outbreak of the debt crisis three years ago has weighed on the earnings of the country’s banks, the biggest holders of the nation’s debt. The yield on Italy’s 10-year bond has risen almost 100 basis points since the start of the debt crisis and the country now pays 357 basis points more to borrow for a decade then Germany does. A basis point is 0.01 percentage point.
Ireland and Germany have set up bad banks to get risky loans off the books of some of their lenders. Spain also is in the process of creating a bad bank after the collapse of its real estate market left the country’s lenders with 180 billion euros of problematic property loans and assets.
Gross non-performing loans at Italian banks account for 10.7 percent of total loans, lagging only Greece and Ireland in the euro area, according to data published by the International Monetary Fund in October. Italy’s banking association says the rate is about half the IMF’s projection, estimating the ratio at 5.9 percent at the end of September.
While Italian banks have stricter reporting requirements for bad loans compared with other lenders in the region, Italian banks will need to raise more capital from private investors, Ignazio Visco, Italy’s central bank governor, said on Oct. 13, without elaborating.
The euro region’s third-biggest economy contracted at a slower pace in the three months through September and will emerge from recession next year, Italy’s central bank said in an Oct. 16 report. The economy won’t start recovering until the second half of 2013 as foreign demand fails to offset the effect of a decline in household spending, the national statistics institute said yesterday. Gross domestic product will shrink 2.3 percent in 2012 and 0.5 percent in 2013, Rome-based Istat said.
and.....
http://www.businessinsider.com/september-german-factory-orders-2012-11
YIKES: German Factory Orders Dive
This lines up with last week's PMI report, which signaled further contraction in the manufacturing sector.
and.....
http://www.telegraph.co.uk/finance/debt-crisis-live/9656859/Debt-crisis-Greece-48-hour-strikes-anti-austerity-strikes-begin-live.html
11.55 Back to Greece. European Council President Herman van Rompuy has quashed reports yesterday which said that a deal on keeping Greece afloat and providing more bailout money for the near-bankrupt state is unlikely to be reached next week when eurozone finance ministers meet in Brussels.
Mr van Rompuy said a deal to keep Greece afloat by providing more bailout money will be agreed in "due time" once a report on the country is finalised by the troika of the IMF, reports Reuters.
"We need more time to reach agreements on privatisation law," Van Rompuy told reporters after a summit of Asian and European leaders in Laos. "In any case, the Europe group meeting on 12 November remains on the agenda."
Athens also needs to push through spending cuts and tax measures worth €13.5bn as well as a raft of economic reforms that will satisfy EU and IMF lenders but anger the Greek population, which has led to the anti-austerity strikes that we are seeing today in the country.
"The decision on this will be taken by the Europe group after analysis of the troika report, which is in the stage of finalisation in Athens," Van Rompuy added.
He urged the Greek government and leading political parties to decide on what is needed to reach an agreement with the troika, adding "I'm quite sure this will be done in due time".
11.42 Looking at the EU budget and the auditors have been going through it with a fine tooth comb which has resulted in anger as the budget fails to get a clean bill of health for the 18th year in a row.
The Telegraph's Brussels correspondent Bruno Waterfield reports:
British opposition to EU budget increases will harden today after its auditor's report failed to give a clean bill of health to £89 billion (€111.2bn) of spending "affected by material error".
The European Court of Auditors found that controls over 86 per cent of the EU budget are only "partially effective", a conclusion that will further polarise the battle over European Commission demands for increases in spending.
Vitor Caldeira, the ECA's chairman, said that auditors had "found too many cases of EU money not hitting the target or being used sub-optimally".
"This annual report's message is consistent with previous years, but this year it matters more than ever. With Europe's public finances under severe pressure, there remains scope to spend EU money more efficiently and in a better targeted manner," he said.
"Member states must agree on better rules for how EU money is spent, and member states and the commission must enforce them properly. In this way, the EU budget could be used more efficiently and effectively to deliver greater added value for citizens."
Despite 18 years of critical reports by the EU auditors, the Commission and European Parliament have defied national austerity measures by agreeing a series of demands that will increase Brussels expenditure by £95 billion over the next eight years.
11.15 Protests are not just happening in the Greek capital, they are also been held on the Islands.
11.05 Those protests in Athens have now reached Syntagma Squareoutside the Greek parliament. As you can see from these pictures that have just come through, the police are lining the streets around the demonstrations.
(AP Photo/Dimitri Messinis)
REUTERS/John Kolesidis
(AP Photo/Dimitri Messinis)
10.51 Back to Greece now where Martin Koehring from the EconomistIntelligence Unit has said these protests could convince to some MPs in the centre-left Pasok party to vote against the latest austerity package, but said he still expected the package to be approved.
The two-day general strike is yet another sign of the anti-austerity climate among the Greek population. However, the government has to pass further austerity measures to guarantee disbursement of a vital €31.5bn loan tranche from the EU and IMF.
The strike may convince more MPs from the centre-left Pasok party to vote against the latest austerity package; Pasok is part of the fragile three-party government coalition but has seen its support among voters eroded as a result of backing austerity.
The government has already suffered several setbacks in recent weeks, with the other left-wing junior coalition party, the Democratic Left, threatening to vote against the package.
Even the senior coalition party, the centre-right New Democracy party, has seen two MPs being forced out of the party for opposing further budget cuts. The government's majority is narrowing and the general strike further puts pressure on MPs to vote against the government's plans.
On balance, however, we expect the package to be approved by MPs because the alternative would be the government running out of cash by November 16 and facing default and potential euro exit.
10.29 Sticking with Greece, those strikes, whiich include public transport being shut down as part of the 48-hour demonstrations, has led to somemassive traffic jams.
Two pictures showing queues of vehicles jam Athens' ring road as public bus workers in the capital joined taxi drivers, metro, tram and train workers in the 48-hour strike, paralysing traffic.
Also seen in the third picture is Athens central train station which is empty during a 48-hour nationwide general strike on Tuesday.
AFP PHOTO / PANAYIOTIS TZAMAROSPANAYIOTIS TZAMAROS/AFP/Getty
AFP PHOTO / PANAYIOTIS TZAMAROSPANAYIOTIS TZAMAROS/AFP/Getty
(AP Photo/Thanassis Stavrakis)
10.17 Back to Greece. The austerity budget was handed in to parliament late last night and some journalists have got their hands on it and you can read it here (it's all in Greek).
To save you the time of learning Greek and then having to read the budget Yiannis Mouzakis has noted some key points.
The bits to note in the budget
09.58 Back in the UK, industrial output fell more than expected in September, reinforcing fears that Britain's recovery will struggle to gather pace towards the end of the year.
The wider reading of industrial output, which includes energy production and mining, fell by 1.7pc in September after a 0.5pc drop in August, the Office for National Statistics said.
Excluding a decline in June that was affected by an extra public holiday, the monthly reading was the lowest since August 2009 and below forecasts for a 0.6pc drop on the month.
09.52 And here are those protests arriving at the square in Athens, from Peter Oliver, RT news correspondent.
And here is his picture
09.45 Back over to Athens where the Police are getting ready at Syntagma Sqauare ahead of the demonstrations in the capital (see 08.20).
And here is his picture:
09.22 Some more PMI figures to report, this time its the eurozone composite PMI which shows that the combined output of the manufacturing and services sector fell at the fastest pace since June 2009.
The Markit Eurozone PMI Composite Output Index fell to 45.7 in October, down from 46.1 in September and the earlier flash estimate of 45.8. Overall activity has now fallen for nine straight months.
Faster rates of contraction were signalled in both the manufacturing and service sectors during October. Manufacturing production declined for the eighth month running, as companies experienced reduced inflows of new orders from domestic clients and lower intra- and extra-Eurozone trade. Service sector activity meanwhile fell at the sharpest pace since July 2009.
09.16 More bad news for Spain as the European Commission has slashed its forecast for growth in the country, according to reports in Spainish paper El Pais, which has seen a draft of the forecasts.
The Commission is forecasting a 1.5pc decline in Spanish gross domestic product in 2013, significantly worse than the 0.5pc contraction pencilled in by the Spanish government, El Pais said.
The Commission is due to officially announce its autumn economic forecasts on Wednesday, covering growth, inflation, debt and deficit projections.
The Commission does not expect the Spanish economy to grow until 2014, and its 0.5pc growth forecast for that year is far below the 1.2 percent growth seen by Spain, El Pais said.
09.10 In France it is bad news as the services sector saw the sharpest fall in business activity for a year. This primarily reflected a further drop in incoming new business, as weak economic conditions weighed on demand. The rate of job losses also accelerated as service providers responded to excess capacity.
The seasonally adjusted final Markit France Services Business Activity Index registered 44.6 in October, down from 45.0 in September, its lowest level for a year and the sixth fall in the past seven months.
Jack Kennedy, senior economist at Markit and author of the France Services PMI, said: “Another weak performance from the French service sector, combined with a further steep fall in manufacturing output, left overall business activity down considerably in October.
"The pace of contraction in private sector output during the last two months has been the sharpest since the post-Lehmans slump in early 2009.
"With ebbing confidence having resulted in widespread belt-tightening among clients, the economy heads towards the end of the year on a decidedly precarious footing.”
09.02 Better news In Italy, where activity in the services sector was at its highest level in over a year, as output, new work and employmenr all fell at reduced rates, but still registered a considerable contraction.
The seasonally adjusted Markit/ADACI Business Activity Index rose to a 14-month high of 46.0 in October, from 44.5 in September, signalling a slower (albeit still considerable) contraction in Italian services output.
Future expectations were little-changed since September, however, while developments in input and output prices put further pressure on profit margins.
Phil Smith, economist at Markit and author of the Italy Services, said: "The headline index is clearly moving in the right direction, with the implied rate of decline a far cry from that recorded at the depths of the current downturn in services output back in April.
"That was in part reflective of the trend in new business, which also fell at a reduced pace over month."
08.58 There is more PMI data out today, focusing on the services sector in France, Italy and Spain, after data for the UK service sector yesterday showed it had slowed to a 22-month low.
In Spain the news is bad as the services sector saw the 16th consecutive reduction in business activity, as new orders and activity fell sharply. The news is not set to improve for the country as companies have forecast a decline in activity over the next year.
The headline seasonally adjusted Business Activity Index – which is based on a single question asking respondents to report on the actual change in business activity at their companies compared to one month ago – posted 41.2 in October.
Although this was higher than the reading of 40.2 in September, it still signalled a substantial monthly reduction in activity. Output has now fallen in each of the past 16 months.
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