• Tag Archives Europe
  • The ECB Comes Clean On Rising Rates and the Coming Systemic Reset

    Remember how the Fed, ECB and others all claimed ZIRP and QE were about generating economic growth, making mortgages more affordable, and helping consumers?
    Well, that was a gigantic lie. The truth is that every major policy employed by Central Banks since 2008 have been about one thing…
    Maintaining the bond bubble.
    Governments around the world have used the bubble in bonds to finance their bloated budgets. If interest rates were anywhere NEAR normal levels, most countries would lurch towards default in a matter of weeks.
    If you think this is conspiracy theory, consider that the European Central Bank openly admitted this in its semi-annual Financial Stability Review this week:
    Even so, [the ECB] said that ‘higher interest rates may trigger concerns about sovereigns’ debt-servicing capacity,’ and noted that ‘distrust in mainstream political parties continues to rise, leading to fragmentation of the political landscape away from the established consensus.’

    This post was published at GoldSeek on 30 November 2017.


  • US Household Debt Is Rising 60% Faster Than Wages, And One Rating Agency Is Worried

    In a report released today by DBRS titled “Consumer debt and debt burden”, the rating agency which is best known for keep Italian debt eligible for ECB monetization at the peak of the European banking crisis, looks at the latest Quarterly Report on Household Debt and Credit issued by the NY Fed (discussed here previously) which showed that consumer debt for the third quarter of 2017 was approximately $12.96 trillion, representing an increase of $116 billion over the second quarter of 2017. The debt level for the first three quarters of 2017 has continued to increase above the previous record debt level which was established in the third quarter of 2008 as shown in Exhibit 1 below.

    DBRS also highlights that not only did total debt levels increase, but their composition changed as highlighted in Exhibit 2 below.

    This post was published at Zero Hedge on Nov 30, 2017.


  • “It Could Reshape The Global Trading System For Decades” – US Rejects China’s Bid For “Market Economy” Status

    The US has filed a legal submission to the WTO as a third party, intervening in a case that China has brought against the European Union. The US rejects China’s argument that under the 2001 agreement, which confirmed China’s WTO status, it would should automatically be considered a ‘market economy’ fifteen years after joining. The dispute could affect both America’s and China’s future within the international body and, as the New York Times contends, ‘shape the global trading system for decades to come.’ It goes without saying that this will only ratchet up the current tensions between the US and China over trade, which has been a cornerstone of Trump’s rhetoric since he launched his election campaign.
    Briefly, the US submission sets out the legal arguments explaining why China should not be designated as a market economy, which would give it preferential treatment under existing WTO rules. China is currently designated a ‘nonmarket economy’ which allows the US, EU and other countries to decide whether China is dumping products at unfair prices under a WTO framework. If they decide that China is dumping, countries can add an extra duty to protect domestic manufacturers.
    According to the Financial Times, “the Trump administration has opposed China’s bid for recognition as a ‘market economy’ in the World Trade Organization, citing decades of legal precedent and what it sees as signs the country is moving in the opposite direction under Xi Jinping. The US opposition to China’s efforts to be recognised as a market economy in the WTO came in a legal submission due to be released on Thursday in a case brought by Beijing against the EU. Market economy status would make it more difficult for the US to prove anti-dumping cases against Chinese companies at the WTO.”

    This post was published at Zero Hedge on Nov 30, 2017.


  • US Futures, World Stocks, Bitcoin All Hit Record Highs

    US equity futures continued their push higher into record territory overnight (ES +0.1%), and the VIX is 1.5% lower and back under 10, after yesterday’s blistering surge in US stocks which jumped 1%, the most since Sept. 11, following Powell’s deregulation promise, ahead of today’s 2nd estimate of U. S. Q3 GDP which is expected to be revised up. U. S. Senate Budget Committee sent the tax bull to the full chamber to vote, and on Wednesday Senators are expected to vote to begin debating the bill. It wasn’t just the S&P: MSCI’s all-country world index was at yet another record peak after all four major Wall Street indexes notched up new highs on Tuesday. Finally, completing the trifecta of records, and the biggest mover of the overnight session by far, was bitcoin which topped $10,000 in a buying frenzy which saw it go from $9,000 to $10,000 in one day, and which is on its way to rising above $11,000 just hours later.
    In macro, the dollar steadies as interbank traders and hedge funds fade its rally this week; today’s major event will be testimony by outgoing Fed chair Janet Yellen after Powell said there is no sign of an overheating economy; the euro has rallied on strong German regional inflation while pound surges on Brexit bill deal news; yields on 10-year gilts climb amid broad bond weakness; stocks rise while commodities trade mixed.
    In Asia, equity markets were mixed for a bulk of the session as the early euphoria from the rally in US somewhat petered out as China woes persisted (recovered in the latter stages of trade). ASX 200 (+0.5%) and Nikkei 225 (+0.5%) traded higher. Korea’s KOSPI was cautious following the missile launch from North Korea, while Shanghai Comp. (+0.1%) and Hang Seng (+-0.2%) initially remained dampened on continued deleveraging and regulatory concerns before paring losses into the latter stages of trade. Notably, China’s PPT emerged again with Chinese stock markets rallied in late trade, with the CSI 300 Index of mainly large-cap stocks paring a drop of as much as 1.3% to close 0.1% lower. The Shanghai Composite Index rose 0.1%, swinging up from a 0.8% loss, with property and materials companies among the biggest gainers on the mainland. The Shanghai Stock Exchange Property Index surged 3.8%, the most since August 2016. The Shenzhen Composite Index was little changed, after a 1.2% decline, while the ChiNext gauge retreated 0.4%, paring a 1.5% loss. In Hong Kong, the Hang Seng Index was little changed as of 3 p.m. local time, while the Hang Seng China Enterprises Index fell 0.3%Stocks in Europe gained, following equities from the U. S. to Asia higher as optimism over U. S. tax reform and euro-area economic growth overshadowed concerns about North Korea’s latest missile launch. The Stoxx 600 gained 0.8%, reaching a one-week high and testing its 50-DMA. Germany’s DAX, France’s CAC, Milan and Madrid were all up between 0.5 and 0.7% and MSCI’s all-country world index was at yet another record peak after all four major Wall Street indexes notched up new highs on Tuesday. ‘It seems to me markets are still trading on the theory that the glass is half full,’ said fund manager Hermes’ chief economist Neil Williams.

    This post was published at Zero Hedge on Nov 29, 2017.


  • Cable Crumbles After Government Denies Telegraph Report On Brexit Divorce Bill Agreement

    Update: That did not last long. Shortly after The Telegraph report hit the wires, AP reports that Brexit talks between the UK and European Union are continuing as officials played down suggestions that a deal has been reached on the so-called divorce bill.
    Reports suggested an agreement in principle has been reached which would see Theresa May increase her offer and pay between 40 and 49 billion (45-55 billion euro).
    A British source said they did not recognise the figure in the Daily Telegraph and stressed that talks were ongoing in Brussels.
    Cable has reverted back lower after tagging intraday highs…

    This post was published at Zero Hedge on Nov 28, 2017.


  • Bill Blain: “Germany Is On Fire: How Long Until Bundesbank Demands Rate Hikes To Cool It?”

    Blain’s Morning Porridge – November 27th 2017, submitted by Bill Blain of Mint Partners
    Germany – not solved and likely to prove an even larger problem..
    ‘El castillo, le torre yo soy, le espada que guarda el caudal.
    Another massive shopping day – Cyber Monday. Let’s see if the declining footprint into US malls confirms the end of retail and tomorrow belongs to Amazon, Ebay and Tencent? Suspect so… (Personally, I’m furious as I bought a new evening suit recently and picked it up Friday to discover even a proper West-end tailor was having a ‘black Friday sale’. I won’t be going back there again!)
    Looks like I got Germany wrong.
    My predictions Angela Merkel would find herself trapped into a difficult minority or a convention defying second election look increasing unlikely as she is now threshing out a ‘Grand Coalition’ CDU deal with the SDP. My ‘bad’. The membership of both parties apparently support it. I read a single member of her own party who dared to call for her resignation was subsequently booed down by the mob of enthusiastic Merkelistas.
    The market is welcoming the news as far more positive for Germany than the earlier Jamaica Coalition, and positive for Europe as a reinvigorated Merkel will re-engage with Macron’s France to solve Europe’s many problems with sprinklings of German good-fairy dust.

    This post was published at Zero Hedge on Nov 27, 2017.


  • Forget About Catalonia And Brexit, The Next European Black Swan Could Be Transylvania

    Via ValueWalk.com,
    Over the past 100 years, the borders in Central and Eastern Europe have been redrawn time and time again, often leaving groups of people separated from their home country by new borders. Although land often changed hands relatively peacefully, suddenly finding one-selves as an ethnic minority in a new country was bound to lead to tension and resentment.
    ***
    While these resentments may reveal real disenfranchisement of ethnic minorities in Central Europe, politicians, especially populist figures, have seized on the outsider narratives inherent in the diaspora experience.

    This post was published at Zero Hedge on Nov 27, 2017.


  • Demographic Dysphoria: Swiss Village Offers Families Over $70,000 To Live There

    Across the world, demographic dysphoria is taking shape, creating numerous headaches for governments. To avoid the next economic downturn, governments are searching for creative measures to increase population growth and deliver a sustainable economy. In Europe, a near decade of excessive monetary policy coupled with a massive influx of refugees have not been able to reverse negative population growth – first spotted in 2012.

    This post was published at Zero Hedge on Nov 25, 2017.


  • What Determines a Currency’s Rate of Exchange?

    Currency rates of exchange appear to be moving in response to so many factors that it makes it almost impossible to ascertain where the rate of exchange is likely to be headed. But rather than paying attention to the multitude of variables, it is more sensible to focus on the essential variable.
    As far as the currency rate of exchange determination is concerned, this variable is the relative changes in the purchasing power of various monies. The relative purchasing power of various monies sets the underlying rate of exchange.
    A price of a basket of goods is the amount of money paid for the basket. We can also say that the amount of money paid for a basket of goods is the purchasing power of money with respect to the basket of goods.
    If in the US the price of a basket of goods is 1 dollar and in Europe an identical basket of goods is sold for 2 euros then the rate of exchange between the US dollar and the euro must be two euros per one dollar.
    An important factor in setting the purchasing power of money is the supply of money. If over time the rate of growth in the US money supply exceeds the rate of growth of European money supply, all other things being equal, this will put pressure on the dollar.

    This post was published at Ludwig von Mises Institute on November 26, 2017.


  • Russian Anger Builds In Town Next To Leaking Nuclear Plant

    Earlier this week, we noted that Russia’s state-owned nuclear energy agency had taken baby steps toward recognizing the dangers posed by an aging nuclear storage facility in Chelyabinsk, a town located on Russia’s southern border with Kazakhstan, when it officially acknowledged the extraordinary high levels of radiation in the area. Though the government refused to admit culpability, as many believe the radiation leaked out of the Mayak nuclear power plant, which has a history of serious nuclear accidents.
    Still, a month after the mysterious radiation cloud was first observed over Europe, Russian authorities have said little other than admitting the spike in radiation – a troubling trend that’s making some locals nervous and angry.
    As the Financial Times points out, 76 years after radiation first began seeping from Mayak into the surrounding rivers, lakes and atmosphere, Russian authorities admitted that the nearby town of Argayash was at the center of a radiation cloud containing ‘exceptionally high’ levels of radioactive isotope ruthenium-106, which spread so far west that it reached France.
    But residents of the town are demanding more information from authorities, whom they blame for putting the health of locals at risk.
    The FT described Argayash is a cynical, mistrustful town. Apparently, decades of being lied to by the government about being down the road from a leaking nuclear plant does that to a place. So too does watching generations of people dying of radiation-related ailments while officials assure them nothing is amiss.

    This post was published at Zero Hedge on Nov 24, 2017.


  • Europe Rebounds From Chinese Rout After Stellar PMIs; US Closed For Holiday

    #Eurozone output #PMI hits 79-month high (57.5) in November. Employment rises to greatest extent in 17 years. pic.twitter.com/hCY1Dx9uzh
    — Markit Economics (@MarkitEconomics) November 23, 2017

    Nothing can keep the BTFD spirit at bay in Europe this Thanksgiving morning.
    Having started the session on the back-foot after the biggest Chinese stock market tumble in 17 months (the SHCOMP dropped -2.3%, most since June 2016) amid tighter liquidity conditions as a result of today’s Thanksgiving holiday in the US and attempts by regulators to rein in asset management firms and the micro-loan market, the negative sentiment was short-lived however, a slew of blockbuster November Eurozone PMIs, among which the highest output print in 79 months, with the highest employment number in 17 years, helped revive sentiment in Europe – and brought the Eurostoxx back to green on the session. Among the notable composite PMI prints:
    France 60.1 vs est. 57.2 Germany 57.6 vs ext. 56.7 Euro zone 57.5 vs est. 56.0 Markit noted this was a multi-year highs seen for all main indicators of output, demand, employment and

    This post was published at Zero Hedge on Nov 23, 2017.


  • Chinese Stocks Plummet: Shanghai Tumbles Most In 17 Months As Bond Rout Spreads

    The euphoria from the year-end melt up in Europe and the US failed to inspire Chinese traders, and overnight China markets suffered sharp losses, with the Shanghai Composite plunging 2.3%, its biggest one day drop since June 2016, over growing fears that the local bond rout is getting out of control. Both the tech-heavy Chinext and the blue chip CSI 300 Index dropped over 3%, as the sharp selloff accelerated in the last hour, as Beijing’s “national team” plunge protection buyers failing to make an appearance. There were sixteen decliners for every one advancing share.
    ***
    In addition to tech, consumer non-cyclical and health-care sectors, the hardest hit names were banks such as ICBC, Ping An Insurance and Kweichow Moutai. Over in Hong Kong, the Hang Seng Index slid 1 percent from a decade-high, one day after closing above 30,000.

    This post was published at Zero Hedge on Nov 23, 2017.


  • Budget Preview: Chancellor Philip Hammond’s Impossible Task To “Square The UK’s Circle”

    At lunchtime today, Philip Hammond will give the weakened Conservative government’s first budget in the new parliament.
    Against a likely backdrop of downgrades for the economy from the OBR, the Chancellor will be under immense pressure to provide a sound plan going forward on many issues. As Statista’s Martin Armstrong notes, the NHS has already had its call for an emergency boost of 4 billion rejected, but there will need to be at least some answers to the problems surrounding health and public services funding.
    As a new survey by ComRes shows, this topic is one of particular importance to the public, with 67 percent saying that there should be more investment in these services, with a slight majority even saying they would personally be prepared to pay more taxes to enable it.
    Clearly, this is a highly significant budget and we would be greatly surprised if it’s considered a success. As we noted yesterday, Reuters columnist and former European economics editor of The Economist, Paul Wallace, believes:
    Few British budgets have mattered as much as the one that Philip Hammond will deliver to the House of Commons on Nov. 22. The chancellor of the exchequer must shore up Theresa May’s perilously shaky government ahead of a vital Brexit summit of European leaders in mid-December. At the same time Hammond has to keep a grip on the public finances.

    This post was published at Zero Hedge on Nov 22, 2017.


  • Biggest Bubble Ever? 2017 Recapped In 15 Bullet Points

    Yesterday we presented readers with one of the most pessimistic, if not outright apocalyptic, 2018 year previews, courtesy of BofA’s chief investment, Michael Hartnett who warned that in addition to the bursting of the bond bubble in the first half of the year, the stock market could see a 1987-like flash crash, potentially followed by a sharp spike in (violent) social conflict. However, in addition to his forecast, Hartnett also had one of the more informative, and descriptive, reviews of the year that was, or as he put it: 2017 was the perfect encapsulation of an 8-year QE-led bull market.
    Here are his 15 bullet points that show why in 2017 we may have seen the biggest bubble ever (and why we can’t wait to see what 2018 reveals).
    Da Vinci’s ‘Salvator Mundi’ sold for staggering record $450mn Bitcoin soared 677% from $952 to $7890 BoJ and ECB were bull catalysts, buying $2.0tn of financial assets Number of global interest rate cuts since Lehman hit: 702 Global debt rose to a record $226tn, record 324% of global GDP US corporates issued record $1.75tn of bonds Yield of European HY bonds fell below yield of US Treasuries Argentina (8 debt defaults in past 200 years) issued 100-year bond Global stock market cap jumped1 $15.5tn to $85.6tn, record 113% of GDP S&P500 volatility sank to 50-year low; US Treasury volatility to 30-year low Market cap of FAANG+BAT grew $1.5tn, more than entire German market cap 7855 ETFs accounted for 70% of global daily equity volume The first AI/robot-managed ETF was launched (it’s underperforming) Big performance winners: ACWI, EM equities, China, Tech, European HY, euro Big performance losers: US$, Russia, Telecoms, UST 2-year, Turkish lira

    This post was published at Zero Hedge on Nov 22, 2017.


  • Asian Stocks Smash Records; Dollar Slides As Crude Surges To July 2015 Highs

    Global shares hit another record high on Wednesday, propelled higher by what increasingly more call (ir)rational exuberance, and investors’ unflagging enthusiasm for tech stocks. That said, S&P futures are unchanged the morning before Thanksgiving (at least before the market open ramp), as are European stocks (Stoxx 600 is flat), despite the euphoria in the Asian session which saw the MSCI Asia Pac index hit a new all time high…

    … as oil jumped, rising as much as $1.15 to $57.98/bbl, the highest since July 2015, following yesterday’s API report which showed crude stocks fell another 6.4mmbbls and a Keystone pipeline outage shaprly tightened the market, while the dollar fell after Janet Yellen warned against raising rates too fast and the euro gained amid new moves to end Germany’s political impasse.

    This post was published at Zero Hedge on Nov 22, 2017.


  • Russia Confirms Toxic Cloud Of “Extremely High” Radiation; Source Remains A Mystery

    This Part of Russia is Literally Exposed to 1000x the Normal Radiation Rate pic.twitter.com/AKbOJqUrhh
    — News Cult (@News_Cult) November 21, 2017

    One month after a mysterious radiation cloud was observed over Europe, whose source remained unknown last week speculation emerged that it may have been the result of a “nuclear accident” in Russia or Kazakhstan, on Tuesday Russian authorities on Tuesday confirmed the previous reports of a spike in radioactivity in the air over the Ural Mountains. In a statement, the Russian Meteorological Service said that it recorded the release of Ruthenium-106 in the southern Urals in late September and classified it as “extremely high contamination.”
    Earlier this month, France’s nuclear safety agency earlier this month said that it recorded a spike in radioactivity, and said that “the most plausible zone of release” of this radioactive material “lies between the Volga and the Urals” from a suspected accident involving nuclear fuel or the production of radioactive material. The agency noted, however, that it is impossible to determine the exact point of release given the available data. Luckily, it said the release of the isotope Ruthenium-106 posed no health or environmental risks to European countries.

    This post was published at Zero Hedge on Nov 21, 2017.


  • Ignore Merkel And Brexit: According To Bill Blain, A New Threat Can Bring Europe Crashing Down

    Blain’s Morning Porridge, Submitted by Bill Blain of Mint Partners
    Europe is like a 4D game of Jenga, and Germany is a very wobbly block – as are the banks
    Europe is an enormous 4 dimensional game of Jenga. At the moment there are far too many blocks in play. Some of them are likely to leave the edifice teetering but standing. The question is: will any cause it to tumble?
    Top of the wobbly blocks list is Merkel – what happens next in Germany? The CDU’s disastrous shift left has opened the door for the extreme right, and has fractured her own support.
    Merkel’s survivability is questionable. In her wake, all efforts to rejig Europe via closer union and monetary/fiscal harmonisation via banking union are absolutely on hold while the German constitutional crisis (yep, for that is what it is) plays out.
    Markets don’t seem particularly worried – they have become blas about political risk and look to the upside of Germany’s apparent rosy and robust financial strength. What’s not to like about Germany? What can possibly go wrong – it regards the current Merkel issue as a short-medium term minor concern. Get over it.
    On a purely German basis they might be right. The critical thing for Europe is who follows Mutti?
    Merkel’s threats to call another vote rather than continue coalition talks looks like bluster – sounds like she’s trying to scare the opposition parties into a deal rather than go through the uncertainty of second election. If it comes to a second vote, it’s another miscalculation.

    This post was published at Zero Hedge on Nov 21, 2017.


  • UK Cabinet Poised To Increase Brexit Divorce Payment By Another 20 Billion Euros

    Theresa’s May’s government is poised to concede an improved Brexit settlement offer to gain EU approval to move the negotiations on to the next stage.
    May reportedly has the backing of senior ministers ahead of a critical cabinet meeting on Monday afternoon. The list of senior ministers is thought to include chancellor, Philip Hammond, Brexit secretary, David Davis, environment secretary, Michael Gove and weakened foreign secretary, Boris Johnson, who famously said in July that the EU could ‘go whistle’ over a divorce settlement. Hammond said at the weekend ‘we’ve always been clear it won’t be easy to work out that number, but whatever is due, we will pay’. Press reports suggest that the UK will formally offer about 40 billion Euros, versus the previous 20 billion. The news caused Sterling to rise more than half a percent to a two and a half week high of 1.3272, its strongest level since 2 November 2017. According to Bloomberg.
    The U. K. could be about to improve its financial offer to the European Union ahead of a crucial meeting of the bloc’s leaders in December. Members of Prime Minister Theresa May’s divided cabinet will consider Britain’s divorce from the EU at a meeting Monday afternoon of the Brexit sub-committee that could be key to unlocking the most controversial matter in the negotiations — money. Britain is ‘on the brink of making some serious movement forward’ and starting to break the ‘logjam,’ Chancellor of the Exchequer Philip Hammond told the BBC on Sunday. While Hammond is among the most pro-European members of cabinet, his suggestion follows Brexit Secretary David Davis’s hint from Berlin on Friday that more details on a financial settlement would be presented within weeks. With businesses clamoring for clarity and the departure just 16 months away, pressure is mounting to break the impasse.

    This post was published at Zero Hedge on Nov 20, 2017.


  • In Dramatic Rebound, Euro, DAX Recover All Losses; “Is Strong Government Overrated?” SocGen Asks

    Having tumbled 80 pips to a one week low in kneejerk response to the late Sunday news that Angela Merkel had failed to form a government following the collapse of the “Jamaica Coalition” talks – when the Free Democratic Party walked out, saying the differences with the Green party were too great to bridge – both the Euro and European stocks have staged an impressive rebound, and the entire gap lower in the FX pair has now been, well, pared.

    Alongside the rebound in the EURSD, the German DAX, which earlier fell as much as 0.5% at the open (and whose futures at one point overnight looked set for a 1% drop), trims early losses and briefly even turns positive, on what some have speculated was another round of central bank intervention.
    As Bloomberg notes, while analysts contemplated possible scenarios of Merkel setting up a minority government headed by her Christian Democratic-led bloc or asking President Frank-Walter Steinmeier to order a fresh national election, “leveraged and interbank names were quick to fade the euro’s dip that stretched as much as 0.6% to 1.1722.”

    This post was published at Zero Hedge on Nov 20, 2017.