Monday, November 19, 2012

Global risk on for assets - seems based on hopium for resolutions of Fiscal Cliff and Greek problems rather than being data driven......



http://en.europeonline-magazine.eu/ferrari-boss-enters-italian-politics-with-new-pro-monti-party_249928.html

( If Monti wants to remain PM , then he should run for office , set forth his program and campaign like everyone else - the idea of Monti being a Deity that is above the political fray and that he could be reimposed on Italy again , should be fully rejected by the Italian people. )


Ferrari boss enters Italian politics with new pro-Monti party

Europe
17.11.2012
By our dpa-correspondent and Europe Online    auf Facebook posten  Auf Twitter posten  Im VZ-Netzwerk posten
Rome (dpa) - Italian Prime Minister Mario Monti was offered the backing of a new political party on Saturday, whose leader pledged to campaign in favour of the technocrat economist at the country‘s elections next year.

Monti has ruled out running for parliament, but said he could be prepared to remain as premier if circumstances required it. Italy‘s main centre-right and centre-left parties are competing to take over power from him, while centrist politicians want him to stay.

Ferrari Chairman Luca Cordero di Montezemolo on Saturday pledged to field a pro-Monti party in next year‘s electoral contest.

"We are not asking the prime minister to take up today the leadership of this political movement ... What we want to do is to provide the democratic and electoral basis so that the path started by his government can continue and strengthen," he said.

Montezemolo said Monti could rebuild Italy and Europe "better than anyone else."

Elections were originally expected in April, but Italian President Giorgio Napolitano signaled Friday they may be held on March 10 along with regional votes if parliament managed to approve over the coming weeks the 2013 budget and new voting rules.

Polls say that after one year in office Monti‘s job approval rating is still relatively high, despite the resentment against the tough austerity measures introduced by his government.

In a statement, Monti‘s office said those measures helped reassure markets about the solvency of Italy, the eurozone‘s third-largest economy. Had they not been adopted, "today perhaps the eurozone would no longer exist," his office said. dpa alv mat Author: Alvise Armellini


And Greek news of the morning..........

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_19/11/2012_470630


No final decision on Greece at Tuesday's Eurogroup, says Germany


Germany reiterated on Monday its strict opposition to taking a «haircut» on its holdings of Greek debt, saying such a procedure was «unimaginable.»
On the eve of a hotly awaited meeting of eurozone finance ministers to thrash out a deal on Greece, Berlin also cautioned that a final decision could not be taken on Tuesday as parliaments first had to give their go-ahead.
The idea of other governments and official institutions such as the European Central Bank taking a loss on their Greek debt is «as before, unimaginable», a finance ministry spokeswoman told a regular government news briefing.
"A final decision cannot happen tomorrow for purely technical and procedural reasons. For that, the Bundestag has to be involved,» added Marianne Kothe, referring to the German lower house of parliament.
She added the procedure was similar in other European countries but stressed: «We are working intensively to find a common line.»
Finance ministers from the 17 eurozone countries meet in Brussels on Tuesday in a bid to clinch a deal on releasing bailout funds for Greece, as the debt-wracked country teeters on the verge of bankruptcy.


and....


http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_19/11/2012_470615


Only governments, not ECB, can help Greece, says Germany's Bundesbank

Germany’s Bundesbank said any further aid for Greece has to come from governments and the European Central Bank can’t be involved.
“It is clearly the responsibility of fiscal policy makers to decide on further help for Greece, as well as to provide the financing and assume the risks involved,” the Frankfurt-based Bundesbank said in its monthly bulletin published today. “This is not the responsibility of monetary policy.”
The Bundesbank also reiterated its opposition to the ECB’s new bond-purchase plan, saying it is important to maintain a strict separation between fiscal and monetary policy “to avoid the impression of monetary policy being co-opted by fiscal policy interests.”
“The Bundesbank still remains critical of Eurosystem government-bond purchases and the stability risks these may entail, in particular if they are used to resolve government financial difficulties through monetary policy,” it said.
The central bank said the German economy may continue to weaken due to the uncertainty caused by Europe’s sovereign debt crisis.
“The economy is currently influenced by a streaky overall picture that is likely to continue to darken by the end of the year,” it said. “The uncertainties stemming from the sovereign-debt crisis are as much a concern as the mixed economic signals from other regions of the world.”



and....


http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_19/11/2012_470600


Greece finalizes reforms ahead of Eurogroup, as eurozone splits remain


The Greek government has finalized some details regarding structural reforms and fiscal monitoring ahead of a meeting of the Eurogroup on Tuesday, as the eurozone remains divided on how to move forward to the Greek program.
Prime Minister Antonis Samaras and Finance Minister Yannis Stournras met over the weekend to agree on the pending changes that had been demanded by the troika.
This led to the government drafting a legislative act that grants the Finance Ministry greater powers to oversee other ministries. According to the legislation, if a ministry fails to meet its fiscal targets for two quarters in a row, the Finance Ministry will place an inspector at the department in question to oversee spending practices.
The Finance Ministry will also have more control over the finances of local authorities and public enterprises (DEKOs). Executives at DEKOs face wage cuts or redundancy if they fail to meet the financial targets set by the government.
Any municipalities that fail to get their finances in order will have to increase their revenues from taxes and rates rather than receive more funding from central government, according to the legislative act.
The government also agreed on some “prior actions” demanded by the troika, which licensing for vocational colleges and installing tracking devices on trucks that transport fuel.
Samaras and Stournaras wanted to tie up these loose ends ahead of Tuesday’s Eurogroup, when the Greek government is hoping to hear positive news on the disbursement of its next loan tranche, the financing of its two-year extension and possibly with regard to the sustainability of its debt.

On Monday, however, it remained far from clear what, if any, kind of deal would be reached given the differences of opinion between the eurozone and the International Monetary Fund, and within the eurozone itself, with regard to the way forward.
The division within the eurozone was highlighted by comments made by French Finance Minister Pierre Moscovici with regards to some of his colleagues at last week’s Eurogroup, when only a decision on a two-year extension was taken.
In a fly-on-the-wall documentary for the Dimanche program for Canal +, Moscovici revealed that he raised his voice during last week’s meeting because he grew frustrated with another finance minister’s negative stance with regard to Greece.
“There are some crazy people in that room,” the French minister is heard saying. “Yes, it was necessary [for me to support Greece’s position] but I had to raise my voice to do this.”
Meanwhile, European Stability Mechanism managing director Klaus Regling expressed his opposition to the idea of a debt writedown for Greece in an article published by the German daily Handelsblatt newspaper Monday.
Regling said public sector haircuts should only happen in “extreme circumstances” and that Greece would be able to reduce its debt by a third through low interest rates on its bailout loans.



As for Spain.....

http://www.zerohedge.com/news/2012-11-19/spanish-bad-loans-hit-fresh-record-high-again

Spanish Bad Loans Hit Fresh Record High Again

Tyler Durden's picture
Submitted by Tyler Durden on 11/19/2012 08:28 -0500




In what is becoming a monthly parabolic charting tradition, it is again time to update the Spanish bad loan total: in September, Spanish loans that fell into arrears increased by €3.5 billion from August, reaching €182.2 billion in September. This is 10.71% of the total Spanish bank loans of €1.7 trillion, and an increase from 10.5% in the prior month. At the same time, new bank loans expanded 0.2% in September and dropped
4.9% from a year ago, the Bank of Spain said. Deposits rose 1.4% from
the previous month and declined 7.3% from a year earlier.  Putting the bad loan number in context, it is nearly double the €100 billion that the Spanish banks will receive as part of the bank bailout plan disclosed in July, and well above the "only" €40 billion that Spain promises it will need to actually fund bank capital shortfalls. Putting it into further context, as a percentage of GDP, it would be the equivalent of $2.8 trillion in US loans going bad. Naturally, just like with any "forecast" involving Greece, the final bailout (of both Spain's banks, and the sovereign) will be orders of magnitude higher, but for now everyone is forgiven to stick their head in the sand for at least a few more days/weeks.




and the week ahead.....


http://www.zerohedge.com/news/2012-11-19/key-events-shortened-week


Key Events In The Shortened Week

Tyler Durden's picture
Submitted by Tyler Durden on 11/19/2012 07:59 -0500



With Thanksgiving this Thursday, trading desks will be empty on Wednesday afternoon and remain so until next Monday. So even though it is a holiday shortened week, here are the main things to expect in the next 5 days:

The key events this week are the Bank of Japan meeting, the European Council meeting and the Eurogroup meeting. Key data releases include European and Chinese Flash PMIs.

The next Bank of Japan monetary policy meeting is scheduled for November 19-20. The BoJ has increased the size of its asset purchases at both the September and October meetings. At the November meeting the BoJ will want to wait and see the results of this easing rather than take further action. Beyond November, resurgent political pressure may induce further easing from the BoJ. However, under Governor Shirakawa we see little appetite for the BoJ to ease other than through further expansion of its Asset Purchase Program. Japanese trade data is released on Tuesday evening, and is expected to continue to show weakness stemming in part from tensions with China.
On Tuesday, the Eurogroup will again discuss Greece, including additional funding required by Greece as well as Greek debt sustainability. This follows last week's Eurogroup meeting, at which Euro area finance ministers approved new Greek fiscal targets and acknowledged the efforts made by the Greek government, including the latest reforms and budget. On Thursday and Friday, the European Council will meet to negotiate the EU budget with a particular focus on trying to avoid a UK veto as the British government tries to limit any budget increases. After GDP data last week continued to show a mild recession across the Euro area, the main data releases from Europe this week are the Euro area flash PMIs on Thursday.

In China, the HSBC Flash PMI is released on Thursday, an indicator that will be closely watched following a healthy increase in October.
In the US, the disruption caused to activity by Hurricane Sandy started to show up in data last week - Sandy was cited by Government agencies for the deterioration in both Initial Claims and the Philadelphia Fed Business Survey. Initial claims may take several weeks to normalise. US data releases are light this week, with US housing data including Existing Home Sales and Housing Starts the main points of interest. Our US team have pointed out that US housing data has improved recently, a sign that the housing sector has no longer contributes negatively to GDP growth.

On Tuesday the RBA releases the minutes of the November meeting and Governor Glenn Stevens gives a speech to the Committee for Economic Development of Australia. With both the market and consensus divided on the likelihood of a rate cut in December, these two communiqués will be watched for clues on the RBA's monetary policy outlook.
Week Ahead:

Mon 19th November
  • US Existing Home Sales (Oct). GS: -1.7%, Consensus: -0.1%, Previous: -1.7%
  • Also interesting: US Homebuilders’ Survey (Nov), Chile GDP (Q3)

Tue 20th November

  • BoJ MPC Meeting: The BoJ eased policy by increasing asset purchases at both the September and October meetings. The BoJ will likely want to wait to see the results of these measures at the November meeting.
  • Japan Trade Balance (Oct) - released 23:50 GMT. GS: JPY -280bn, Consensus: JPY -360bn, Previous: JPY -560bn
  • Eurogroup Meeting
  • US Housing Starts (Oct). GS: Flat, Consensus: -3.7%, Previous: +15.0%
  • Turkey MPC Meeting. GS: 5.75%, Consensus: 5.75%, Previous: 5.75%
  • Norway GDP (Q3). Consensus: 0.5%qoq, Previous: 1.0%yoy
  • RBA Minutes (Nov)
  • Also interesting: Fed Speeches (Bernanke, Lacker), Swiss Trade Balance (Nov), RBA Stevens Speech
Wed 21st November

  • US Initial Jobless Claims. Consensus: 400k , Previous: 439k
  • US Reuters/U. Mich Consumer Sentiment—Final (Nov). GS: 81.0, Consensus: 84.5, Previous: 84.9
  • UK MPC Minutes (Nov)
  • Also interesting: Malaysian CPI (Oct), UK Public Sector Net Borrowing, Spanish bond auction.
Thursday 22nd November (Thanksgiving in the US)

  • China HSBC Flash PMI (Nov). Previous: 49.5
  • European Council Meeting (Day 1)
  • Euro area Flash PMIs (Nov). Consensus expects 45.6 in Eurozone Manufacturing aggregate after 45.4 in October.
  • Euro area Consumer Confidence (Nov). Consensus: -25.7, Previous: -25.7
  • South Africa MPC. GS: 5.00%, Consensus: 5.00%, Previous: 5.00%
  • Also interesting: Canada Retail Sales, UK CBI Monthly Trends, Brazil Current Account Balance, Brazil IPCA-15 Inflation
Friday 23rd November

  • European Council Meeting (Day 2)
  • Germany IFO Business Survey (Nov). Consensus: 99.5, Previous: 100
  • Canada CPI (Oct). Consensus: 0.1%mom, Previous: 0.2%
  • Colombia MPC Meeting. GS: 4.75%, Previous: 4.75%
  • Also interesting: Italian Retail Sales, Germany GDP (revised), Mexico Current Account Balance, Speech by Mario Draghi

and.....



http://www.zerohedge.com/news/2012-11-19/overnight-summary-hope-back-however-briefly

Overnight Summary: The "Hope" Is Back, However Briefly

Tyler Durden's picture
Submitted by Tyler Durden on 11/19/2012 07:04 -0500



Those looking for fundamental newsflow and/or facts to justify the latest bout of overnight risk exuberance will not find it. To be sure, among the few economic indicators reported overnight in the Thanksgiving shortened week, European construction output for September tumbled -1.4% from August, after rising 0.6% previously. How long until Europe copycats the latest US foreclosure sequestration, "demand pull" gimmick and gives hedge funds risk free loans to buy up housing (aka REO-to-Rent)? More importantly, and confirming that Spain is far, far from a positive inflection point,Spanish bad loans rose to a new record high of 10.7%. This was the the highest level since the records began in 1962. The total value of these loans was €182.2 billion ($233 billion) in September, according to the Bank of Spain (more on this shortly). The relentless rise indicates that the Spanish bad bank rescue fund will be woefully insufficient and will need to be raised again and again. So while there was nothing in the facts to make investors happy, traders looked to hope and prayer, instead pushing risk higher on the much overplayed Friday "news" that politicians are willing to compromise in the cliff (which as we reported was merely a market ramping publicity stunt by Nancy Pelosi et al), and that Greece may be saved at tomorrow's Eurogroup meeting, for the third time. That this will be difficult is an understatement, with the Dutch finance minister saying no final decisions on Greece should be expected, and his German counterpart adding that a Greek debt writeoff is "inconceivable." In other words, even hoping for hope is a stretch, but the market is doing it nonetheless.

But if it is inconceivable to cut Greek debt on the public funds side, and a bond buyback for the private sector is improbable (as reported previously), what is the basis for Greek hope tomorrow? There is a loophole as SocGen explains:
Speaking over the weekend, Bundesbank President Weidmann also pointed to the moral hazard of offering Greece debt forgiveness (something he believes will ultimately be needed) today. His suggestion was to offer Greek conditional debt forgiveness, once the agreed austerity measures and reforms are implemented. The conditionality holds political appeal, but this involves handing over taxpayer money to Greece (so far, only private money has been lost).


A neat twist on the idea would be to allow the ESM to take over Greek bank recapitalisation (around €50bn or 25% of Greek GDP), placing responsibility for any losses on the Greek government, until austerity and structural reform are agreed. This solution would hold several advantages. First, the amount is large enough to secure general government debt below 120% of GDP by 2020 on paper. Second, it involves no unpalatable debt forgiveness. Third, it could easily be replicated for the other programme countries. Fourth, it would break the sovereign-national banking sector link. The question remains, however, whether such a solution can be introduced before the single supervisory mechanism is in place. Combined with the idea of using ECB profits from Greek government bonds of just under €10bn to buy back Greek bonds, the final outcome could be a debt reduction to the tune of 45% of GDP. Sadly, this would still not be enough in our opinion to make Greek public finances sustainable in the long-term.

Obviously, the important section is bolded: once again it is obvious that nothing can help Greece save a Grexit, but in the meantime, the Greek people will be bled some more, with what little wealth remains in Greek society, transferred to European banks, and what little assets remain in Greece, encumbered with further bank liens.
What else is on today's macro agenda:
Political uncertainty will be one of the major forex and rate themes for the G10 this week.

First Japan. The dissolution of Parliament has opened the door to elections on 16 December. Although Prime Minister Noda plans to present a new set of measures to boost the economy by end-November, will that be enough to keep the DPJ in power? Nothing is less certain. The LPD appears to be well placed to win, against growing pressure on the BoJ to ease monetary policy further and weaken the JPY. This political uncertainty could weigh on the JPY over the very short term, particularly as the Japanese trade balance, published this week, is expected to be negative again, unless the geopolitical situation in the Middle East worsens and risk aversion cuts short the rally in G10/JPY. That is the main risk.

In Europe this week, an extraordinary Eurogroup meeting will be held Tuesday on Greece. Will the EU and IMF reach an agreement on how to finance the 2Y loan extension to Greece? We should have the answer on Tuesday, or at the 26 November meeting at the latest. The longer it takes to present an official agreement, the higher the probability that the Spanish curve could get hit in contagion selling.

Finally, US. President Obama has begun discussions with Congress to extend tax cuts for the middle class and find USD1.6trn in new revenues. We do not expect many developments next week as it will be short owing to the Thanksgiving holiday.

Finally, and as usual, the remainder of the recap, comes from Jim Reid's crack team of recappers:

You know that you're in the home stretch for the year when Thanksgiving week is upon you. The US will be on holidays this Thursday and will have a half day of trading on Friday. So expect all the predictions and newsflow about retail activity as we approach and hit 'Black Friday'. Christmas slowly builds from there, although in an hour’s drive over the weekend, the radio played three Christmas songs so perhaps it’s too late to avoid already!! Even with the US winding down as the week progresses there is lots to focus on. The main highlights of the week are Tuesday’s Eurogroup/ECOFIN meeting which will focus on the latest Greece disbursements and fresh attempts to address debt sustainability, the latest and very important Global flash PMIs on Thursday and a two-day EU leaders summit starts on Thursday to try to agree on the EU budget for next seven years. Expect a lot of grand political posturing as this summit progresses.There's an understandable reluctance for some countries to risk sanctioning an increase when austerity is biting domestically. As for the fiscal cliff it might not be an active few days as Obama is in SE Asia over the early part of the week and will be enjoying his turkey in the second half.

So with a potentially quiet week ahead for the fiscal cliff, markets might take some encouragement from Friday's news. Risk markets turned on Friday after House speaker John Boehner described talks with Obama and other congressional leaders as “constructive”. The S&P500, which was down 0.75% in the morning session before Boehner’s comments hit newswires, rallied more than 1.2% from the lows to close 0.48% higher on the day. Gains were broadbased with nine out of 10 industry sectors finishing higher on the day. Boehner’s comments helped US treasury yields sell off 3bp to close virtually unchanged at 1.580% and the VIX to drop 2pts to close 8.8% lower on Friday. Boehner continued the conciliatory tone on Twitter, describing his “two-step framework” for reducing the deficit that includes tax reforms and spending cuts as “consistent with the President’s call for a balanced approach” and that he was “confident both parties can come together around a deal to avert the fiscal cliff”. On his part, Obama said at a press conference in Bangkok on Sunday that he was “confident that we can get our fiscal situation dealt with”. Treasury Secretary Geithner said that he’s confident an agreement on averting the fiscal cliff can be concluded within weeks.
The conciliatory tone from Washington has flowed through to Asian markets overnight. Risk appetite is also being helped by reports that an Egyptian-brokered Israel-Hamas ceasefire is being explored. Asian equities are generally trading higher, paced by the KOSPI (+1.1%), ASX200 (+0.57%) and Hang Seng (+0.41%). The Nikkei (+1.45%) is outperforming for the third session in a row following opposition leader Shinzo Abe’s dovish comments over the weekend. Abe he said would consider making the BoJ purchase construction bonds directly from the government to tame deflation, further blurring the wall between the State and the BoJ. He would also appoint a central bank governor that would agree with his proposed inflation target of 3%. The Yomiuri newspaper published a poll on Friday showing Abe’s party leading with 26% of voter preferences, compared with the incumbent DPJ’s 13%. However with as much as half of voters undecided, there's a fair amount still to play for ahead of election day in mid-December. So American and Japanese politicians will keep us busy well after Thanksgiving!
Elsewhere Chinese equities are underperforming, with the Shanghai Composite (-0.6%) again testing the 2000 level. DB’s Jun Ma is optimistic on reforms under the new leadership, with economic reforms in many areas able to move faster than expected. He believes that the most likely economic reforms in the coming three years include resource pricing reform, interest rate liberalization, greater exchange rate flexibility and capital account liberalization, nationwide implementation of the VAT reform to more service sectors, a new resource and environment tax system, and an increase in social spending. Here's a link to report if you're interested. In other markets, the Asian IG credit index is 5bp tighter, the AUD trading 0.4% higher against the US dollar while spot gold (+0.5%) is up at $1722.6/oz.
Turning to the Israel-Hamas conflict, there are a number of conflicting reports on the progress of Gaza ceasefire talks. UN Secretary General Ban Ki-moon is due to arrive in Cairo to help with truce efforts. Israeli media said a delegation from Israel had met with Egyptian officials in Cairo for talks on a ceasefire (Reuters), although this has not been confirmed by the government. Meanwhile, reports continue to suggest that Israel is massing forces at the Gaza border for a potential “significant widening” of operations and that the Israeli military have begun calling up 75,000 reservists. Brent crude futures are +0.7% as we type ($109.7/bbl) during the Asian trading session.
On Greece, ECB executive board member Joerg Asmussen said that European leaders should agree on aid to Greece for 2013 and 2014 this week. Italian Finance Minister Grilli was also confident of reaching a deal, although IMF's Lagarde appeared less certain and noted that an agreement among Greece's creditors on how to reduce its large debt pile should be "rooted in reality and not in wishful thinking". The EU Summit on Thursday may prove controversial with the FT reporting that EU officials are studying a plan to create a longterm budget without the UK's involvement reflecting frustration at PM Cameron's demand for spending freezes.
Taking a look at the calendar for rest of the week, US dataflow will be mostly front-ended loaded due to the shortened week. We have existing home sales today followed by housing starts/permits on Tuesday and the Markit US Preliminary PMI on Wednesday. Chairman Bernanke is scheduled to speak at the Economic Club of New York on Tuesday and it will be interesting to get his latest thoughts on ‘fiscal cliff’ and any hints of QE4 as hinted by the last week’s FOMC minutes. The US treasury will auction a total of $112bn of 2/5/7 year notes throughout the week and a 10yr TIPs on Wednesday. In the Eurozone, the above mentioned flash PMIs on Thursday will be the key focus. The Eurozone consumer confidence numbers are also due on the same day followed by German final Q3 GDP, trade balance and the IFO survey on Friday. On the political front, we have elections in the Spanish region of Catalonia on Sunday (25th). Ahead of this key election, Spanish PM Rajoy said that Catalonia mustn’t risk leaving the EU by pushing for independence from Spain adding that Catalonia benefits from Europe as the rest of Spain does. In Asia, the BoJ meeting on Tuesday and China's HSBC flash manufacturing PMI on Thursday are the main highlights. On the former, the consensus is expecting the BoJ to hold off on additional easing until after the elections.


and......

http://www.guardian.co.uk/business/2012/nov/19/eurozone-crisis-greece-aid-programme-imf

Bundesbank sounds the alarm

Germany's central bank has warned that economic growth in Europe's largest economy is weakening, due to the eurozone crisis and problems across the world economy.
In a new monthly report, the Bundesbank said that German firms are more worried about Germany's future prospects. It points to the slowdown in China, Japan's now-shrinking economy, and fears over the US fiscal cliff.
The full report is online here (pdf, in German), and Reuters provides a translation of the key points:
The economy currently presents a mixed picture, which is likely to cool further towards year-end...
By now it has become unmistakable that the disturbing external factors are affecting the willingness to invest and job planning so strongly that the whole economy could be affected.
Last week's economic data showed that German GDP rose by 0.2% in the third quarter of 2012 – the question is whether it shrinks in the last three months...

More on the looming EU budget row -- our political editor Patrick Wintour reports that David Cameron was lobbying other EU leaders over the weekend:
Meanwhile, the German finance ministry has been briefing that a decision on the budget could be delayed - perhaps until next year...


Austria: no new haircut for Greece


Austria's finance minister, Maria Fekter, is taking her traditional hard line in Greece ahead of tomorrow's eurogroup meeting -- saying that Athens' debt pile cannot be cut again.
Fab Goria of Linkiesta has the details:
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