Back in May 2016, Lithuania central bank head, and ECB governing council member, Vitas Vasiliauskas said that contrary to widespread perceptions of central planners as clueless hack economists who would not survive one day in the private sector and who can only inflate asset bubbles, then watch them burst and replace them with even bigger asset bubbles, central bankers are really "magic people." “Markets say the ECB is done, their box is empty,” Vasiliauskas told Bloomberg in the spring of 2016. "But we are magic people. Each time we take something and give to the markets -- a rabbit out of the hat." It now turns out they also appear to be corrupt, criminal people because on Saturday, Vasiliauskas' next door peer, Latvian central bank Governor, Ilmars Rimsevics who is also a member of the European Central Bank’s governing council, was detained by Latvia's anti-graft bureau, prompting calls for him to step aside to prevent harming the country’s financial sector. In a statement to Reuters, Latvia’s Prime Minister Maris Kucinskis did not say why Rimsevics had been detained or what he was being investigated for. However, he attempted to reassure people that the economy was stable. Latvia's Central Bank governor Ilmars Rimsevics Rimsevics, 52, has worked at the Baltic nation’s central bank since graduating with an MBA from Clarkson University in Potsdam, New York, in 1992. After first taking the role of deputy governor that year, he was promoted to governor in 2001. He’s been a member of the ECB governing council since 2014, when Latvia adopted the euro. Hardly encouraging confidence, the statement said that “there are no indications that would suggest threats to the financial system of Latvia,” Kucinskis said, confirming that it is very likely that there are copious threats to the financial system of Latvia, whose central banker may soon be in prison for graft. As a result, finance minister Dana Reizniece-Ozola said Rimsevics should step aside for the time being to protect the Baltic country’s reputation. “Given that the governor of the central bank is a symbol for every country, [then] I think that it would be sensible at this moment that Mr. Rimsevics, at least during the investigation, steps down,” Reizniece-Ozola told a news conference. “Under the current circumstances... every day that Mr. Rimsevics remains in the post of governor of the central bank, the situation (for the reputation of Latvia’s financial system) substantially worsens,” she said. Latvia’s Economics Minister Arvils Aseradens, speaking on Radio Latvia, also said the governor should consider resigning. The home and office of the central bank’s governor were searched on Friday, the state broadcaster said on Saturday. Meanwhile, Rimsevics’ lawyer told local media that the detention was unlawful. “A complaint is being prepared at the moment,” the lawyer, Saulvedis Varpins, told news agency LETA without elaborating. Varpins, who spent more than eight hours at the anti-graft bureau in Riga with Rimsevics before the governor was taken away in a bureau van, said his client was being held at the state police station and hasn’t been charged, according to Leta. Varpins, who didn’t answer repeated calls and text messages, cited the reason for the detention as alleged acts from years ago. Reiznice-Ozola said the country was suffering a crisis of reputation over ABLV, which has denied all accusations from the U.S. Treasury and said it will work with U.S. officials and provide information so that doubts about it can be laid to rest. Latvia has asked the U.S. Treasury to discuss and share data on ABLV, she said. The central bank is helping the lender with liquidity, said Edvards Kusners, a member of the monetary authority’s board. As Bloomberg adds, this is the latest setback for Latvia’s banking sector, which last week was hit by allegations by the U.S. Treasury Department’s Financial Crimes Enforcement Network that its third largest financial institution by assets, ABLV Bank, has institutionalised money laundering, claiming it helped entities allegedly linked to North Korea’s missile program process transactions -- charges the lender denies. The ECB declined to comment, according to Bloomberg. Another ECB governing board member, Bank of Greece Governor Yannis Stournaras, is also being accused of bribery, an accusation he vehemently denies, alleging political persecution aimed at forcing him to resign.
For the first time since 2006, Greek 10Y sovereign bond yields have plunged below 4.00%. The last few weeks have seen a veritable rush to grab that yield as GGBs plunged from 5.50% on Dec 4th to 3.98% today!! Of course, this 'signal' from the bond market is being heralded as proof that the worst is over and everything is awesome in Greece again - hooray. It's Not! Over 40% of youth (under 25) are still unemployed, suicide rates remains extremely elevated, emigration among the smart and young is prevalent, and of course there is the immigrant crisis that Greece appears to have become the main bearer of. As The Guardian reports, a study by the DiaNeosis thinktank found that 15% of the population, or 1,647,703 people, in 2015 earned below the extreme poverty threshold. In 2009 that number did not exceed 2.2%. The net wealth of Greek households fell by a precipitous 40% in the same period, according to the Bank of Greece. Unemployment, austerity’s most pernicious effect, hovers around 22%, by far the highest in the EU, despite a 5% drop in the last two years. Faith in government claims that the country has turned the corner – based on a massively manipulated bond market – is in short supply. “Greeks can’t see any light at the end of any tunnel,” said Christodoulaki, shaking her head in disbelief. “They won’t believe anything at this point until they see it for real in front of their eyes.” For those affected hardest by Greece’s bankruptcy ordeal, the Syriza government has been praised for providing food vouchers and rental subsidies, free school meals and hospital care for some 2.5 million uninsured. “For the poorest of the poor Syriza has been good,” said Mourtidou. “But it has not done what the vast majority hoped and that is very dangerous. Tsipras had a calming effect when he came along. There isn’t another Tsipras to promise us the world and now I fear the earth could be trembling under our feet. The next choice could be the far right.” It is a common concern. Greeks have responded to loss with fortitude and resilience but a mood of uncertainty prevails. Amid the rage and disappointment many worry the power of loss could assume other more menacing forms. “Uncertainty is the new normality,” psychology professor Fotini Tsalikoglou noted. “It could manifest itself in apathy, violence, more uncertainty, we just don’t know.”
Parliamentary audit cleared Stournaras of failing to disclose assets, Bank of Greece says
'Mystery' solved... maybe. Bloomberg is reporting that excess liquidity within Greek banks - who leant it to their credit-risky peers at notably high rates - are responsible for the sudden, scary spike in EONIA over the last two days, according to two bankers with knowledge of the matter. Salaries that were deposited by Greek civil servants and higher receipts from repurchase agreements provided National Bank of Greece with more liquidity, the person said, asking not to be named because the matter is not public. National Bank of Greece SA had excess liquidity of around 450 million euros ($536 million) this week, which it loaned to its peers in the country, the people said. Other Greek banks found the rate offered by National Bank of Greece appealing, thus drawing on the cash, the people said. While the flood of funds and the increase in interbank lending in Greece is good news, the rates at which borrowers from the country can access funds are still higher than for the rest of the continent, thus pushing up the weighted average of the overnight rates in Europe, one of the people said. Today's fix at 1245ET printed at -29.1bps, 5bps lower than Thursday as 'pressure' seems to be relieving.
Cреди последних покупок основателя ростовской «Группы Агроком» — местные медиа
Центробанк Испаниии сообщает - банковской системе, в качестве платы за сдутие пузыря на недвиге, которые они раздули, требуется 60 ярдов евро (ИСТОЧНИК - ЦБ ИСПАНИИ). Подчеркну - это ОФИЦИАЛЬНАЯ оценка, в реале они признали лишь то, что уже невозможно не признать. Каким конкретно банкам требуется помощь? Смотри таблицу, обратите внимание на номер 1: Напомню справку […]
S&P futures are flat after Monday’s drop in the S&P 500 where a rout in Apple weighed on tech companies and tensions with North Korea persist; Asian stocks are modestly lower while Europe has shaken off the Korean crisis and is in the green on the back of a sharp drop in the EURUSD which has tumbled below 1.18 as the USD rises ahead of much anticipated speeches by the Fed Chair and the French president. At 12:45pm ET Janet Yellen is due to speak at an economics conference in Cleveland on the topic of "inflation, uncertainty and monetary policy", while other U.S. and European central bankers will also offer more clues to the path of monetary policy. Investors will be parsing Yellen's words for clues on whether the U.S. central bank will stick to plans to raise interest rates in December. “Investors are not fully up to speed with the risk of hawkish signals from Fed officials,” Mizuho strategist Antoine Bouvet said. “The Fed is back in a situation where it would want to show optimism at the very least, and the market should be pricing in more hikes in the coming months and quarters than it is currently.” Money markets currently point to a 70 percent chance of a hike in December but only a 20% chance of a further hike in March 2018, and just under 3 rate hikes for the next two years. Another big speech on today's calendar will be delivered by French president Emmanuel Macron: it is being billed as a big Euro integration platform, although it comes as a bad time, just 2 days after Merkel's ability to embrace the idea has taken a set-back. Looking at what’s expected from Macron, the press have suggested that the speech will include plans for a permanent finance minister for the euro area, a euro area budget worth several percentage points of aggregate GDP and a “European Monetary Fund”. As if to acknowledge the necessity of progress, German Finance Minister Schaeuble recently reciprocated, saying he intends to publish proposals for a reinvigorated ESM shortly after the election. We will see if the German election result cautions either. After the dust settles in Germany, the rush to integrate may need to slow. Merkel’s room for manoeuvre on conditionality just got narrower, meaning progress towards integration will likely be slower and the scale of common resources agreed will likely be more limited. While global equities were mostly flat, the big movers overnight were the rising dollar, and the sliding euro. Indeed, as Bloomberg notes, markets attempted to stabilize as investors digested a host of catalysts from North Korean war threats and central-bank policy to tailwinds for oil and the aftermath of the German election. The euro tumbled below $1.1800, its weakest since August 25, sliding below its 55-DMA for the first time in 5 months, as investors continued to unwind long positions, with fresh tactical selling pressure setting in ahead of Yellen's speech. What started off as a knee-jerk reaction after the German election now appears to have become a broader hit on euro bulls’ conviction. Concern that the European Central Bank may not shed sufficient light on stimulus tapering even at its next meeting is weighing on the sentiment, amid growing speculation that the $1.20 level marks the limit of the central bank’s tolerance for gains in the common currency for now, Bloomberg notes. Additionally, the euro’s inability to stage a significant rally during the most recent war of words between the U.S. and North Korea also raised doubts whether it can re-test $1.20 level soon enough. The good news for Europe is that a weaker euro automatically meant higher European stocks, and the Stoxx 600 was trading about 0.2% higher at publication time after opening in the red. In terms of sector specific performance, healthcare names sit at the bottom of the pack with Swiss heavyweight Roche trading lower after being downgraded at Exane. To the upside, energy names lead the way higher amid yesterday’s surge in crude prices, with RBC’s downgrade of Total failing to place too much pressure on the sector. There was no further reaction in Asia trading hours to the most recent threats from North Korea, and the risk-off moved quickly stalled (though it has not yet been reversed). The general feeling in Asia is that this is simply further noise – although as Citi notes some spooky parallels have been drawn with the infamous 1969 EC-121 shoot-down incident, when NK did shoot down a US reconnaissance plane, and Nixon resisted the urge to hit the big red button. Asian stocks fluctuated without clear direction with neither large gains or losses across the the main indexes. The Korean Kospi was modestly lower as won drops following latest escalation in U.S.-North Korea rhetoric. Yesterday's Nasdaq rout pressured ASX 200 (-0.22%) and Nikkei 225 (-0.33%), although strength in energy names following a 3% rally in crude later helped stem downside in Australia. Hang Seng (+0.05%) and Shanghai Comp. (+0.06%) also conformed to the lacklustre, indecisive tone amid a lack of drivers and a weaker PBoC liquidity operation. As the Euro fells, the dollar strengthened against most G-10 peers as recovery from the multi-year low hit earlier this month continues. The New Zealand dollar underperformed after business confidence plunged to a two-year low. The pound briefly supported as EUR/GBP cross breaks through yesterday’s session low. Treasuries edge lower from overnight highs, initially spurred by North Korean risks. Yields marginally higher across the curve, long-end flattens with most participants eagerly awaiting Yellen speech for hints on next policy direction Meanwhile safe havens such as gold took a breather. The yellow metal and the Swiss franc pared some of yesterday’s gains, which followed North Korea’s declaration it could shoot down U.S. warplanes. WTI crude fell, but remained close to a five-month high after also surging on Monday as Turkey threatened to shut down Kurdish crude shipments. In bigger picture terms, markets continue to oscillate between risk-on and risk-off stances since early August as tensions simmer on the Korean Peninsula. Equities have edged away from recent record highs as the U.S. and North Korea trade threats, and now an assortment of global political risks look set to further cloud the outlook. “I think we have a classic case of risk-on, risk-off across markets,” said Saxo Bank’s head of FX strategy, John Hardy. “There is a lot being attributed to North Korea but I think there are a lot of other factors here,” he added, citing the drop in Apple and big U.S. tech stocks and the weekend German elections that saw a far-right party enter parliament. The yen, which traditionally performs strongly in jittery markets, was beginning to fade meanwhile having gone as high as 111.550 yen to the dollar as gold also dropped off a 1-week high it had hit on Monday. That came after North Korea’s foreign minister said a tweet by U.S. President Donald Trump that “little Rocket Man” might not be around for too long amounted to a declaration of war. The bond market’s reaction to the latest escalation in tension between North Korea and the U.S. proved short-lived. Yields on U.S. Treasuries and German Bunds fell to a day’s low follow North Korean Foreign Minister’s Ri Yong Ho comments on Trump’s tweet. Both traded back up early on Tuesday in what analysts say reflects a widespread belief that diplomacy will prevail. All other euro zone bond yields were also a touch higher. A rise in oil to a 26-month high, which bolsters inflation, and an upcoming sale of two-year German debt should also keep upward pressure on yields. Brent crude futures dipped fractionally to $58.85 a barrel, having earlier hit $59.49, the highest since July 2015 and more than 34 percent above the 2017 low. The rise was supported by Turkey’s threat to cut crude exports from Iraq’s Kurdistan region as well as signs that market rebalancing is accelerating. Turkish President Tayyip Erdogan threatened on Monday to cut off the pipeline that carries 500,000-600,000 barrels of crude per day from northern Iraq to the Turkish port of Ceyhan, intensifying pressure on the Kurdish autonomous region over its independence referendum. Alongside geopolitics, this week’s bevy of central bank speakers continues to offer more clues to the path of monetary policy and the fate of stimulus. It’s Federal Reserve Chair Janet Yellen’s turn on Tuesday, who will weigh in as policy makers continue to disagree on whether to raise U.S. interest rates again this year. Finally investors will be monitoring the ongoing saga that President Donald Trump’s domestic policies have become in a bid to gauge the chances of any meaningful tax reform in the world’s biggest economy. Economic data include new home sales, consumer confidence. Scheduled earnings include Nike, Carnival, Micron Market Snapshot S&P 500 futures down 0.01% to 2,495.25 STOXX Europe 600 up 0.2% to 384.55 MSCI Asia down 0.3% to 161.66 MSCI Asia ex Japan down 0.5% to 529.61 Nikkei down 0.3% to 20,330.19 Topix unchanged at 1,672.74 Hang Seng Index up 0.05% to 27,513.01 Shanghai Composite up 0.06% to 3,343.58 Sensex down 0.05% to 31,610.25 Australia S&P/ASX 200 down 0.2% to 5,670.98 Kospi down 0.3% to 2,374.32 Brent Futures down 0.6% to $58.65/bbl Gold spot down 0.3% to $1,306.87 U.S. Dollar Index up 0.2% to 92.85 German 10Y yield rose 0.2 bps to 0.402% Euro down 0.3% to $1.1811 Italian 10Y yield unchanged at 1.814% Spanish 10Y yield fell 0.2 bps to 1.622% Bulletin Headline Summary from RanSquawk European and Asian equities traded with little in the way of firm direction as equity markets shrugged off mounting geopolitical tensions NZD extended on political uncertainty, as USD gains some ground as markets await Yellen Looking ahead, highlights include US new home sales, APIs, ECB’s Praet, Fed’s Yellen, Mester and Brainard, US 2yr note auction Top Overnight News The U.S. has gamed out four or five different scenarios for how the crisis with North Korea will be resolved, and “some are uglier than others,” National Security Adviser H.R. McMaster said as tensions remain high between the two countries U.S. Senate Republicans fail in their push to repeal Obamacare; Senator Susan Collins said Monday the bill would cause too many Americans to lose insurance French Prime Minister Emmanuel Macron will make proposals for re-shaping Europe that he acknowledges will need German Chancellor Angela Merkel’s support to push through U.K. Prime Minister Theresa May’s speech last week failed to break the Brexit stalemate, as the EU demands more from the U.K. if there’s to be any hope of a discussion about trade next month. As the fourth round of talks kicked off, both sides remain divided over when Britain should agree to the size of its bill While Austria may have successfully sold a 100-year bond this month, other European countries may be slow to follow suit given the concerns over demand, liquidity and legal restrictions The Bank of Greece plans to start stress tests for the country’s four systemic banks in late February with a view to determine by June if they need fresh capital before the end of the Greek bailout program CVC Is Said to Mull Options for $4 Billion Drugmaker Alvogen Baidu’s iQiyi Is Said to Seek a U.S. IPO at Over $8b Valuation Jaguar Land Rover Is Said to Hunt for Luxury Brand Purchases Demise of Obamacare Repeal Shows How Far GOP Remains From Goal Turkey Warns Iraq Kurds It Can ‘Close Valves’ on Oil Exports Nestle Aims to Boost Profitability Amid Pressure From Loeb Trump’s State-Tax Plan Could Cause Headaches for 52 Republicans Banks Lobbying to Stem MiFID’s Spread Spark a U.S. Client Revolt Uber’s New ‘Good Cop’ Tack Will Face Test in U.S. City Tussles Asian stocks lacked any solid direction after the weak momentum from US where all 3 major indices closed negative due to geopolitical concerns, while the Nasdaq took the brunt of the worst day for the tech sector in over a month. This pressured ASX 200 (-0.22%) and Nikkei 225 (-0.33%), although strength in energy names following a 3% rally in crude later helped stem downside in Australia. Hang Seng (+0.05%) and Shanghai Comp. (+0.06%) also conformed to the lacklustre, indecisive tone amid a lack of drivers and a weaker PBoC liquidity operation. 10yr JGBs were relatively flat with only minimal support seen from the cautious risk tone in Japan, while today’s 40yr auction also failed to spur firm demand despite the b/c at the highest since 2015, as this was relatively stable from the prior. PBoC injected CNY 40bln via 14-day reverse repos and CNY 10bln via 28-day reverse repos. PBoC set CNY mid-point at 6.6076. BoJ Minutes from July 19th-20th meeting stated that Japan's economy was expanding moderately and that financial conditions were highly accommodative. The minutes also stated that exports are on an increasing trend and that momentum towards achieving the 2% price stability target was being maintained. RBA's Bullock says high levels of debt leave households vulnerable and that RBA will take this into consideration for monetary policy. Top Asian News Cindat Capital Says Estimates Put China NPLs Up to $1 Trillion Euro Hits One-Month Low as Stops Triggered Across the Board Iron Ore Faces ‘New Reality’ on Flight to Quality, BHP Says Modi Starts $2.5 Billion Plan to Electrify Every India Home Singapore Cryptocurrency Firms Facing Bank Account Closures European equites started the session on the backfoot, albeit modestly so with lingering geopolitical tensions continuing to act as a source of concern for investor sentiment. In terms of sector specific performance, healthcare names sit at the bottom of the pack with Swiss heavyweight Roche trading lower after being downgraded at Exane. To the upside, energy names lead the way higher amid yesterday’s surge in crude prices, with RBC’s downgrade of Total failing to place too much pressure on the sector. From a fixed income perspective, the 10yr Bund trades relatively flat after initial losses have been pared throughout the morning. However, analysts at IFR highlight that paper could be halted at 162.05 which marks the 50% retracement of the 8th-21st September move. In the periphery, yields continue to remain resilient to the fallout of the German election with RBC downplaying the concerns for peripheral markets in a research note this morning. That said, investors will continue to remain wary over potential Catalan-related headlines over the coming days. Top European News ECB Is Said to Start Stress Tests at Greek Banks in February EU Dangles Praise for U.K. But Asks More for Brexit Trade London Luxury Home Values Set for 20% Rebound Over Five Years BNP Paribas Aims to Grow German Revenue 8% Per Year Through 2020 Monte Paschi Restructuring Will Cut Bank in Half: EU Official Pandora’s U.S. September Campaign Failed, Carnegie Says: Ritzau Deutsche Wohnen, Vonovia Lead Europe Real Estate Stocks Higher In currencies, the JPY remains at better levels after yesterday’s comments from the North Korean Foreign Minister in which he stated that the war of words from President Trump has been deemed as a declaration of war. Additionally, PM Abe also called a snap election which will likely be held around late October, as such uncertainty heading into the event could suggest that risks are skewed to the downside in USD/JPY. With regards to the USD itself, the USD-index is broadly higher as participants await comments from Fed’s Yellen and look for any further clarity on the train of thought at the Fed after last week’s meeting very much left a Dec hike on the table. Additionally, broader USD strength has also likely been supported by EUR softness which was initiated by a break of September’s lower in EUR/GBP. NZD notably weaker overnight with NZD/USD slipping 0.45%, as political uncertainties, alongside poor overnight data weighed on the Kiwi. As it stands, the RBNZ are not seen lifting interest rates until Sep’18, according to OIS markets. Focus will be on the comments from the RBNZ where there may be an air of caution given the latest election results. In commodities, both WTI and Brent have given back a small percentage of yesterday’s noteworthy gains which were largely triggered by tensions surrounding the Kurdish independence referendum. As such, WTI has briefly moved back below the USD 52/bbl level in early European trade. However, markets will likely remain sensitive to any Turkish involvement in the matter after President Erdogan threatened to cut off the pipelines that transfer oil from Northern Iraq. Elsewhere, copper was seen higher during Asia-Pac trade while safe-haven gold was mildly underpinned as geopolitical concerns lingered. Local press reports state that ASX will likely suspend most of Australian listed gold sector if WA government budget with new gold royalty increases is passed Looking at the day ahead, there is the Conference board consumer confidence index, Richmond Fed manufacturing index, CoreLogic house price data for key cities as well as new home sales data. Onto other events, there is the BOJ Minutes for its July meeting. In the US, the Fed’s Mester, Brainard and Bostic will speak. Further, Mrs Yellen will speak on inflation, uncertainty and monetary policy. Back in the Europe, UK’s PM May and EU president Tusk will meet to discuss Brexit, while France’s Macron will outline his plans to reform the EU. US Event Calendar 9am: S&P Case Shiller 20-City MoM SA, est. 0.2%, prior 0.11%; 20-City YoY NSA, est. 5.7%, prior 5.65% 9:30am: Fed’s Mester Moderates Session NABE 10am: New Home Sales, est. 585,000, prior 571,000; New Home Sales MoM, est. 2.45%, prior -9.4% 10am: Conf. Board Consumer Confidence, est. 120, prior 122.9; Present Situation, prior 151.2; Expectations, prior 104 10am: Richmond Fed Manufact. Index, est. 13, prior 14 10:30am: Fed’s Brainard Speaks on Labor Market Disparities 11:30am: Fed’s Bostic Speaks to the Atlanta Press Club 12:45pm: Yellen Speaks on Inflation, Uncertainty, and Monetary Policy DB's Jim Reid concludes the overnight wrap What happens when you cross a middle aged man with two recent knee operations and a trampoline at a 2 year olds birthday party. Answer a very sore and 'clicky' knee. Over the weekend I went on a trampoline for possibly the first time in around 4 decades and got my timing a bit wrong. I bounced high in the air and then misjudged the landing and over extended just as the trampoline came to meet my leg. It was quite painful at the time and 3 days later it just clicks all the time. I'm hoping I haven't done any damage! As a minimum it’s going to make me very bad at surveillance going forward. It does worry me that the next few years I'm going to be doing more and more silly things to impress my children or their friends or probably their parents! I may as well already book in a surgeon for a few weeks after my first sports day whenever that is! Bunds bounced better than me at the weekend after the uncertain German election results with 10 year bunds 4.6bps lower yesterday. In both bonds and equities the core outperformed the peripheral (more below). For today, we have a Yellen speech at 12:45pm ET entitled "inflation, uncertainty and monetary policy" to look forward to and a Macron speech where timing is not ideal given that it was billed as a big Euro integration platform 2 days after Merkel's ability to embrace the idea has taken a set-back. Looking at what’s expected from Macron, the press have suggested that the speech will include plans for a permanent finance minister for the euro area, a euro area budget worth several percentage points of aggregate GDP and a “European Monetary Fund”. As if to acknowledge the necessity of progress, German Finance Minister Schaeuble recently reciprocated, saying he intends to publish proposals for a reinvigorated ESM shortly after the election. We will see if the German election result cautions either. After the dust settles in Germany, the rush to integrate may need to slow. Merkel’s room for manoeuvre on conditionality just got narrower, meaning progress towards integration will likely be slower and the scale of common resources agreed will likely be more limited. For more details, please refer to DB’s Mark Wall’s “Reality check for the Macron Pivot”. Focusing back now on the German election and its near term implications. As a recap, Merkel’s CDU/CSU remained the strongest party, scoring 33% of the votes, but it’s also the worst result since 1953 and substantially less than 2013 (41.5%). A feasible alliance to govern is the Jamaica coalition between the CDU/CSU, the Greens and the FDP. Looking ahead, DB’s Barbara Boettcher believes markets will face a period of political uncertainty as coalition building will take time. Further, coalition talks are unlikely to turn serious before the elections in Lower Saxony on Oct 15. Thus, it is likely that Merkel will be re-elected as chancellor only just-in-time for the December EU summit. Overall, the risk of a failure of coalition forming is small, in part as German voters demand predictability and responsibility in uncertain times. This morning in Asia, markets are trading a bit softer. As we type, the Hang Seng (-0.03%), ASX 200 (-0.13%) and the Kospi (-0.39%) is down slightly. Elsewhere, the Nikkei is down -0.40% as the initial optimism from PM Abe’s stimulus package and his call for a snap election has somewhat faded. The new election is likely to take place on 22 October and is opportunistic from Abe in an attempt to capitalise on his growing approval ratings (now c50% vs. c30% in July). Moving on to markets yesterday now. US bourses softened following rising geopolitical tensions and weakness in large cap tech stocks. The S&P and Dow both closed c0.2% lower following North Korea’s Foreign minister threatening to shoot down US warplanes in any airspace given that “the US has declared a war”. The Nasdaq fell 0.88% (worse day since mid-August), impacted by increased selling in the FANG stocks (down 1% to 4.7% each). Elsewhere, suppliers to Apple and Apple’s own shares were down c3% and -0.88% respectively, after Digitimes reported Apple has instructed suppliers to slow down delivery of some of the component shipments for the production of the iPhone X. Elsewhere, the energy sector rose 1.47% (+9.3% for the month) on the back of higher oil prices (more below). European markets were mixed but little changed, the Stoxx 600 and the Dax rose 0.18% and 0.02% respectively following Merkel’s election win. Across the region, most indices traded lower though, with the FTSE (-0.13%) and CAC (-0.27%) down slightly, while the peripherals slightly underperformed (FTSE MIB -0.63%; IBEX -0.86%), perhaps a reflection of the rising populist vote in Germany. Over in government bonds, there was a similar theme with core bond markets firmer but peripherals underperforming. Core bond yields were modestly lower in the US (UST 2Y: -1bp;10Y: -3bp) and also across Europe, with Bunds (2Y: -3bp; 10Y: -5bp), Gilts (2Y: -1bp; 10Y: -2bp) and French OATs (2Y: -3bp; 10Y: -3bp) all down 1-5bp across maturities. Conversely, peripherals such as Italian BTPs (2Y: +0.3bp; 10Y: unch) and Portuguese (2Y: +2bp; 10Y: +2bp) bond yields were slightly higher. Turning to currencies, the EURUSD fell 0.86%, partly reflecting the uncertainties with Merkel’s new coalition mandate. Elsewhere, the US dollar index gained 0.52% while Sterling was little changed (-0.28%). In commodities, WTI oil rose 3.08% and Brent jumped 3.80% to $59.02/bbl (the highest close since November 2015) after Turkey indicated it may shut down Kurdish oil exports that pass through its territory. Precious metal were slightly higher (Gold +1.04%; Silver +1.08%) while other base metals are also trading higher this morning, with Copper (1.12%), Zinc (+2.87%) and Aluminium (+0.30%) all slightly higher. Away from the markets and onto central bankers commentaries. In the US, the NY Fed’s Dudley has noted that inflation should eventually pick up and “stabilise around the Fed’s 2% goal over the medium term”. Thus in response, “the Fed will likely continue to remove monetary accommodation gradually”. Elsewhere, the more dovish Chicago Fed’s Evans disagreed and noted that “as the FOMC comes to decision points over the coming months, I think we need to see clear signs of building wage and price pressures before taking the next step in removing accommodation”. Over in Europe, ECB’s Draghi talked up the economy, noting “economic expansion is now firm and broad based across countries and sectors”, but gave little away on the extent and potential approach on the tapering plans. Notably, he said “we have to be sensitive about the danger of halting a recovery through hasty monetary policy decisions” and that we know “a very substantial degree of monetary accommodation is still needed for the upward inflation path to materialize.” Elsewhere, ECB’s Executive Board member Coeure indicated that the ECB was not “scared” by the prospect of QE exit, but noted that exit would have to be carried out carefully. Moving onto Brexit, the EU’s Chief Brexit negotiator Barnier has signalled he is unwilling to discuss a trade deal until the UK provides more clarity. He said “what is important now is for the UK government to translate the (PM May’s) speech into a clear negotiating position”. His counterpart David Davis has reiterated UK will honour its financial commitments, but has avoided specifics. We wait and see how the Brexit talks evolves. With the US congressional leaders expected to release the parameters of a tax framework shortly, DB’s Binky Chadha gauges that little or nothing has been priced in. He expects the fundamental impact of a cut in corporate tax rate to be modest at the aggregate level, but the relative impacts could be large for small vs. large companies. For more details Finally, the latest ECB CSPP holdings were released yesterday. They bought €1.77bn last week which equates to €353mn/day vs. €349mn/day since CSPP started. Overall, the CSPP/PSPP ratio of net purchases continues to run well above average, at 14.8% last week (vs. 19.2%, 13.6%, 12%, 10.3% and 9.6% in previous weeks), which continues to suggest the ECB has tapered credit purchases less than government bonds. Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. Over in the US, the September Dallas Fed manufacturing activity index was above the markets’ expectations at 21.3 (vs. 11.5 expected) – the highest reading since February. Within the details, the employment index rose 6.4pts to the highest reading since April 2014 and the prices paid index also rose to the highest since July 2011. Moving along, the Chicago Fed National index was a touch lower at -0.31 (vs. -0.25 expected), although there were positive revisions to the prior month and the three-month average remained close to the zero mark, which suggests an economy growing at around trend. In Germany, the September IFO business climate index fell slightly to 115.2 (vs. 116 expected), driven by weaker expectations (107.4 vs. 108 expected) and current assessment (123.6 vs. 124.7 expected). However, DB’s Marc Schattenberg does not see the dip in the IFO index as a signal of a marked slowdown in Germany's growth prospects for Q3, as the average reading of the IFO index increased further in Q3 to 115.7 from 114.3 in Q2. Looking at the day ahead, in France, there is the September manufacturing and business confidence indicators. In the UK, there is finance loans for housing. Over in the US, there is the Conference board consumer confidence index, Richmond Fed manufacturing index, CoreLogic house price data for key cities as well as new home sales data. Onto other events, there is the BOJ Minutes for its July meeting. In the US, the Fed’s Mester, Brainard and Bostic will speak. Further, Mrs Yellen will speak on inflation, uncertainty and monetary policy. Back in the Europe, UK’s PM May and EU president Tusk will meet to discuss Brexit, while France’s Macron will outline his plans to reform the EU.
While the broader market for Swiss stocks has risen modestly this year, one 'entity' has outperformed its peers by such a staggering margin, it has left bamboozled market experts struggling for an explanation. And that company is…the Swiss National Bank. The price of a share in Swiss National Bank in August rose above 3,000 francs ($3,143) for the first time, more than double the level of a year ago, and up 50% since mid-July, as the Financial Times noted in a story about its performance. Shares of the SNB trade like any other company listed on the Swiss stock exchange, though because of their price liquidity is somewhat thinner. The Swiss cantons together own 45% of the SNB while 15% is owned by cantonal banks and the remaining 40% by private individuals or companies. The Swiss Federal Government owns no shares. Given the SNB’s holdings – it has demonstrated a voracious appetite for Apple stock and currently holds more than $80 billion in US stocks – the shareholder-backed hedge fund is also having one hell of a year. Perhaps it’s understandable that shareholders see these gains as a driver of value. And of course, the FT has a few theories about what’s been driving the bank’s astounding gains. One is that, because of the bank’s stellar P&L, it will almost certainly make a dividend payment this year (it has occasionally failed to do so, like in 2015). Dividend payments are fixed by law at a maximum of 15 Swiss franc per share. If paid in full, that would amount to a yield of 50 basis points – far superior to the minus 15 basis-point yield on the country’s 10-year bond. Another is that some German investing newsletter issued what amounts to a “buy” call: “German investor newsletter Actien Börse encouraged a buying spurt after likening the shares in July to ultra-rare “Blue Mauritius” 19th century postage stamps. Trading in the 100,000 SNB shares is thin, so even modest buying or selling leads to significant price swings.” Of course, these arguments seem specious: Investors could still probably lock in higher yields by buying Treasurys and hedging their exposure, as one example. And the influence of that newsletter sounds like it’s being overstated. However, the FT hints at one possible driver that’s probably closer to the truth: Private investors are trying to front-run a possible share buyback by the central bank. As the FT notes, the SNB wouldn’t be the first central bank to buy back its shares. “Another theory is that investors are speculating they might be bought out. Central bank buybacks have happened before. In the early 2000s, the Basel-based Bank for International Settlements — which acts as a bank to central banks — bought out its private shareholders so it could focus on its public service functions, rather than the interests of financial investors.” Regardless of their motives, the stock’s gains are almost definitely being driven by private shareholders. As we reported last year during a smaller bout of appreciation in the SNB's stock, it’s unlikely that a canton or a cantonal bank would buy the shares en masse because their ownership has been carved in stone for many years. And as the FT notes… Harder to explain, however, is why the price of SNB shares has risen so steeply this summer. “Institutional investors do not invest in them, so there is no demand for analysis or coverage,” says Andreas Venditti, bank analyst at Vontobel in Zurich. “Since the impact of even small financial market moves on its financials is so huge, it would be difficult to do a reliable earnings estimate.” The alternative is that a private investor is quietly buying up all the stock available. The single largest private shareholder is a German national called Theo Siegert, a German business leader and professor at Munich University. He owns 6.7% of the Bank, more than any Swiss canton except Bern. Still, if the buyer was Siegert, he would have to file a new report as a large shareholder once he crosses a 10% threshold. While buybacks are unlikely, and a leveraged buyout of the central bank woud be impossible - though it'd make for an interesting case study - there’s only one probable conclusion left: The SNB is pushing global stock prices up, in the process creating the next bubble. And now private traders are gobbling up shares of the bank itself, adding a dangerous feedback loop to the equation. The SNB isn’t the only central bank that trades publicly. Both the Bank of Japan and the Bank of Greece are publicly traded, as is the Bank of Belgium; but when it comes to massive wealth-multiplying asset purchases, the BOJ is the real master. And we all know how that turned out.
Security measures in the building of the Bank of Greece in downtown Athens are not as good as they should be. As KeepTalkingGreece reports, a crowd of anarchists from the well-known group Ruvikonas entered the Bank of Greece on Wednesday afternoon. Some 20 people entered the Bank of Greece from a side entrance at 1:40 pm, threw leaflets and fled. The Bank personnel tried to hide under the desks and behind counters, media reported. Some of the leaflets read: “Bank of Greece is the doorman of the Memoranda” Police squads arrived at the Bank, detained several people in the surrounding area. The detainees are – or meanwhile were – to be set free as they are not in connection with the raid.
UNEXPECTEDLY: Two years after the bailout, life in Greece has gotten more miserable. The economy is stagnant, unemployment hovers around 25% and is twice as high for young adults, taxes are rising, and wages are falling. Half of Greek homeowners can’t make their mortgage payments and another quarter can’t afford their property taxes, according to […]
Better than not, but I can’t say I find this entirely reassuring as a predictor of future productivity growth: With the exception of shipping, tourism is Greece’s biggest foreign earner, the mainstay of an economy that has otherwise contracted by 27% since late 2009 when the country’s debt crisis began. The industry accounted for eight […] The post Greece fact of the day appeared first on Marginal REVOLUTION.
FORMER Greek Prime Minister Loukas Papademos was recovering in an Athens hospital on Thursday after an attack against him which was unequivocally condemned by political parties as an attack on democracy. The
Roughly a year ago we wrote about perhaps the most notable bank heist in history in which a group of hackers used Swift, the interbank messaging system, to steal $81 million from the Central Bank of Bangladesh. Here's our recap: For those who missed the story, you can review it in all its James Bond-ish glory in the four posts linked below, but here is a brief summary of what happened to the $81 million: 1) it was transferred to four accounts at the Jupiter Street, Makati City, branch of Rizal Commercial Banking Corp (RCBC) in the Philippines, 2) $470,000 in cash went into the branch manager's trunk and the rest went to a possibly forged (but possibly not) account registered to one William Go, 3) the money was transferred to an FX broker called Philrem, 4) $50 million was split between two casinos and the remaining $31 was delivered to a "Weikang Xu" in cash. From there, the trail goes cold. Plot Thickens In New York Fed Heist As $30 Million In Cash Said Delivered To Mystery Chinese Man The Incredible Story Of How Hackers Stole $100 Million From The New York Fed Chinese Hackers Break Into NY Fed, Steal $100 Million From Bangladesh Central Bank Mystery Of New York Fed Robbery Has Central Banks Asking Who's Next But Bangladesh isn't the only country whose Central Bank has been targeted by a growing number of hackers seeking to score a quick, and massive, loot. As Bloomberg notes, hacks on global financial systems soared in 2016 and claimed Russia, Poland, Uruguay and Mexico, just to name a few, as victims. Over the course of last year, hackers looted up to $21 million from accounts opened with the Bank of Russia. Poland’s financial regulator was targeted in January by a suspected “watering hole” attack, where hackers target an often-used website, according to research from BAE Systems. In this instance, the hack originated from the website of Polish Financial Supervision Authority (KNF), where code was planted that would serve malware to certain visitors of the site. The malicious code was selectively targeted at financial institutions, and multiple banks were compromised via their users simply browsing the KNF website. Similar code was also believed to be present on the website of the state-owned Banco de la República Oriental del Uruguay, and the National Banking and Stock Commission of Mexico in late 2016, according to analysis from BAE Systems and U.S. software company Symantec Corp. Now, the hacking collective “Anonymous,” known for its activism against big corporations, security forces, and governments, has decided it wants to get in on the massive central bank scores and is actively recruiting new hackers that can assist in the effort. While the people wouldn’t say which banks are being targeted, they said the group has been busy recruiting new hackers to aid it in its forays, and renewed its attack against a number of central banks in February. The group last year attacked at least eight monetary authorities, including the Dutch Central Bank, the Bank of Greece, and the Bank of Mexico, the two people said. In a change of tack, it is also considering plans to sell on any confidential information it obtains, according to one of the people. The actions by non-state hacking and hacktivist groups such as Anonymous “are a wake-up call that should alert us to the critical weaknesses of global financial systems,” said Stefano Zanero, a professor of computer security at Italian university Politecnico di Milano. Janet Yellen recently warned in testimony before the congressional Joint Economic Committee in November that a successful cyber-security attack on the U.S. banking system is “one of the most significant risks our country faces." In fact, central banks all around the world are spending millions on cybersecurity experts and even buying startup companies to avoid being the next embarrassing victim of a multi-million dollar cyber heist. In response, central banks and related agencies have been busy attempting to stem the increasing number of attacks. In June Swift hired BAE Systems and U.K. cybersecurity adviser NCC Group Plc in a bid to improve its security defenses. BAE has since helped Swift analyze whether it needs to flag potential issues to correspondent banks. The Bank of England is even scooping up startups to help it battle online threats. It is currently running an accelerator, launched in June 2016, and is to start working with Anomali in order to “hunt and investigate cyber security intelligence data in a highly automated fashion,” according to a case study published in February by the Bank. Of course, try as they might, we suspect the world's bureaucratic central banks may be ill-equipped for a battle against an army of anonymous, international hackers fed up with their destructive policies aimed at continously inflating assets bubbles which serve only to help the rich get richer while enslaving the masses...
Authored by Maria Polizoidou, The Greek people have just about reached the limits of their strength. The economic situation is tragic. Illegal immigration is out of control, criminality increases day by day. The political system is steeped in corruption and the media have stopped being the communication channel between citizens and the political system. The Greek media are functioning as the praetorian guard of the euro; they favor the massive admission of Muslim populations into Greece and they fiercely attack every voice that disagrees with them. Bishop Ambrossios is urging people to revolt. He characterizes the illegal Muslim immigrants entering the country as conquerors. He also says that Christianity is under attack in Greece, while Islam is being daily reinforced. He says that Greek Orthodox churches are being desecrated, robbed and burned by Muslim immigrants while the state just sits by and looks on. Prime Minister Alexis Tsipras does not fully control his political party; his biggest problem is his cabinet. When a political system is corrupt, when the media only put out propaganda and not information, when oligarchs control public life, when the political system seems repeatedly directed against the interests of its own people, when a political system ignores the constitution and the will of the majority but draws its legitimacy once every four years through elections, then, although it may be called "democratic", it is a democracy of junk. It is not the people's democracy anymore; instead, it belongs to the elites. If Greeks do not take back their homeland, wrote journalist Makis Andronopoulos on January 3, 2017, the guns may well have the last word. Andronopoulos wrote that he came to this conclusion after polls showed the detachment of the political system from the Greek people and their tragic way of life. The director of the newspaper Kathimerini, Alexis Papahelas, wrote on January 29, 2017 that the people are exhausted, that democracy still does not have solution to the problems of citizens and that the situation in Greece reminded him of 2012, when the old political system was wiped out. Bishop Ambrossios is urging people to revolt. He characterizes the illegal Muslim immigrants entering the country, as conquerors. He also says that Christianity is under attack in Greece while Islam is being daily reinforced. He says that Greek Orthodox churches are being desecrated, robbed and burned by Muslim immigrants while the state just sits by and looks. Members of the governing coalition say that Germany wants to bring down the Greek government and bring the New Democracy party to power. The leader of New Democracy, Kyriakos Mitsotakis, is the most obedient and tenacious follower of the German policy in Greece. The Greek parliament has eight political parties, but if one excludes the Greek Communist party and the Golden Dawn party that have their own anti-establishment agenda, the remaining parties express exactly the same policies: All of them are enthusiasts of the eurozone and the European Union; they support open borders and globalization, and have no respect for Greece's religious or cultural roots. The Greeks, for the last seven years, have been requesting: strict measures against illegal immigration; mass deportations of illegal immigrants; parliamentary independence from supranational organizations; accountability from their leaders; transparency in political life; security and economic liberalization from their lenders; combating corruption and protecting the country's national identity. These requests, however, have been rejected for decades by the system -- with no debate. When those who make these requests are characterized as nationalists and racists and are socially stigmatized instead of being heard, such requests can burst outside the democratic framework. When a supposed democracy and the media do not allow people space to express these opinions and become part of the democratic process, citizens will ask to be heard by other means. The Greek people have just about reached the limits of their strength. The economic situation is tragic. Illegal immigration is out of control, criminality increases day by day. The political system is steeped in corruption and the media have stopped being the communication channel between citizens and the political system. The Greek media are functioning as the praetorian guard of the euro; they favor the massive admission of Muslim populations into Greece and they fiercely attack every voice that opposes their own. The country is rotting inside the EU and the eurozone. The Greek people have crashed economically. Greek cities, because of massive illegal immigration, look less like cities in Europe and more like cities in Afghanistan. Banks have begun the mass-confiscation of residences. The people are on the verge of revolt. The Financial and Industrial Research Foundation, in its latest report, stated that the per capita income of Greek citizens has declined to the level of year 2000. According to the Bank of Greece, the wealth of Greek households decreased by 37.5% between 2000 and 2015. The European Bank for Reconstruction and Development (EBRD), in a report, characterizes the Greek people as the unhappiest in the EU. Unemployment is more than 25%, the highest in the eurozone. Scandals in Greece have been coming to the surface one after another. The Novartis pharmaceutical company, for example -- in one of the largest scandals in Greece -- was found to be giving money to politicians, government officials, journalists, publishers and doctors so that the public hospitals would use Novartis's products. According to the media, those involved are a former prime minister of Greece, who is currently the EU Immigration Commissioner), Dimitris Avramopoulos, and several former ministers. In addition, the German company Siemens is also alleged to have been bribing Greek politicians to win public contracts. The case is now being heard in court. The Siemens scandal may also end up having a huge impact on the political system. According to the accusations of May Zanni, Deputy Secretary for Strategic Planning and Communication (from the New Democracy party), Greece's opposition leader, Kyriakos Mitsotakis, and his family seem to have huge dealings with the German company. In fairness, the current government is working hard so that corruption and mismanagement cases are heard in court. Also in fairness, Prime Minister Alexis Tsipras is not a man with bad intentions and tries, within the limits the lenders leave, to negotiate as hard as he can for his country. He knows very well that Greece, to survive, should withdraw from the euro and the European Union. He also knows, as do the Greek people, that Greek history, Greek values and Greek geopolitics always lie close to the naval powers, the USA and Great Britain. Greece has never been able to join the European continental powers. But a powerless prime minister, even if he wants to lead his country towards salvation, away from the European Union, cannot do it. Tsipras does not fully control his political party; his biggest problem is his cabinet. SYRIZA is a political party that relates politically and ideologically to the US Democratic Party. So, he is committed to follow the US Democratic Party's policies about the European Union, the eurozone and globalization. Perhaps now, with the Trump Administration, at least some of these problems will be able to be addressed. The media's favorite target, meanwhile, is President Trump and the orderly, peaceful -- truly democratic -- political revolution that brought his presidency about. Poverty, criminality, corruption, illegal immigration and the delegitimization of the political system are the dots which, if one connects them, point to Article 48 of the Greek constitution. This article, which determines when the government can suspend the constitutional rights of citizens, can be activated when the state is under siege from internal or domestic enemies. With more taxes in the offing, with more pension and salary cuts, and with Turkey sending more immigrants to Greece, there is no way for Greece to be governed without the government declaring martial law to enforce its policies on the population. There are several ways this can happen. One possible scenario is that the Germans will force Tsipras to resign and go to elections. If that happens, the opposition parties will win the elections, but in order to deal with the rage of the left and the Greek people -- who will have to pay even more taxes, as the Germans asked -- the Greek government will have to declare a state of emergency. One possible scenario is that the Germans will force Greek Prime Minister Alexis Tsipras to resign and go to elections. Pictured: German Chancellor Angela Merkel meets with Tsipras, on December 16, 2016. (Image source: phoenix vor Ort video screenshot) Another scenario is that the EU will push Tsipras to co-operate with the opposition parties in order to create a broad government coalition that will enforce all the new taxes and pension cuts. In such an event, the Golden Dawn party and the Greek Communist party, along with rebellious citizens, will declare themselves against the entire political system, and take their fight not to the parliament but to the streets.
It didn't take much for the Greek bank run jog to return: with Greece once again stuck between an IMF rock and a Schauble hard case, and whispers that another bailout may be on the horizon, the local population took advantage of whatever capital controls loopholes they could find, and withdrew money from the local banking sector, which to this day remains on ECB life support, almost two years after the 3rd Greek bailout in the summer of 2015. According to Greece central bank data, Greek private sector bank deposits declined in January for the second month in a row, driven by renewed concerns over the country's neverending bailout. Business and household deposits fell by €1.63 billion, or 1.34% month-on-month to €119.75 billion ($126.8 billion), the lowest level since November 2001. The January outflow follows a "jog" of €3.4 billion in December, making the two-month drop the worst since the latest Greek bailout panic in July of 2015. And as concerns about the Greek fate only grew in February, it is likely that the next month's data will show another acceleration in outflows, especially since Greek non-performing loans remain at a staggering 70% of total bank assets and continue to grow. As Reuters further notes, starting in December, the Bank of Greece stopped counting deposits of 4.2 billion euros held in the Loans & Consignment Fund and another 2.1 billion euros in the Deposit Guarantee Fund (TEKE) as private sector deposits. The move followed a reclassification by the country's statistics service ELSTAT, which groups the two institutions under the general government sector. The latest two months of outflows put an end to a period of relative stability during which Greek banks had seen small deposit inflows in more than a year after the country clinched a third bailout to stay in the euro zone. Local banks, for the most part insolvent, remain dependent on central bank borrowing to plug their funding gaps. The gap between outstanding loans and deposits has forced banks to rely on borrowing from the European Central Bank and the Bank of Greece to plug their funding holes. Greece's banking sector saw a 42 billion euro deposit outflow from December 2015 to July last year. Capital controls imposed on June 2015 helped contain the flight but sharply increased banks' dependence on emergency liquidity assistance (ELA) from the Bank of Greece. Prior to the latest outflows, to signal confidence in the banking system the government has eased capital restrictions after making headway on bailout-mandated reforms and improved confidence in the banking system. Following the latest deposit outflow data, that may soon change. As part of the relaxation of controls, "mattress" cash that are returned to banks are not subject to the restrictions, meaning amounts deposited can be fully withdrawn. That is, of course, assuming the upcoming showdown between the members of the Troika ends amicably. Should the outflows persist as this rate, Greece will be back on the front pages, and demanding a 4th bailout by mid-Spring, and certainly ahead of the looming July 2017 debt maturities.
European, Asian stocks declined, halting a global rally that sent U.S. stocks surging to new all time highs faltered, weighing on the S&P although the index rebounded modestly after a kneejerk announcement lower overnight after Trump's National Security Advisor announced his unexpected resignation. The dollar dropped versus most of its Group-of-10 peers ahead of uncertainty surrounding Fed Chair Janet Yellen's testimony to Congress later Tuesday, while the pound declined after U.K. consumer-price inflation data missed economists’ forecasts. Oil gains, copper advances. Treasuries steadied. As a result, the DXY dipped 0.2 percent against a basket of currencies to 100.74 but was still near its strongest since Jan. 20, while the euro was 0.3 percent firmer after three sessions of losses to stand at $1.0626. Against the yen, the dollar weakened 0.2% on the day to stand at 113.38 yen, off Monday's high of 114.17 but well above a 10-week low of 111.59 yen touched a week ago. Adding to pressure on the dollar was the resignation of President Donald Trump's national security adviser Michael Flynn, who quit over revelations he had discussed U.S. sanctions against Moscow with the Russian ambassador to the United States before Trump took office, and misled Vice President Mike Pence about the conversations. As Reuters notes, the prospect of Trump-led economic stimulus in the United States has underpinned the dollar and stocks in recent days, powering U.S. equity markets to record highs on Monday and helping Asian shares to eke out 19-month peaks on Tuesday. But the buoyant mood in global markets was tempered somewhat as attention turned to semi-annual testimony by Yellen on Tuesday and Wednesday that could highlight the likelihood of two or more U.S. interest rate hikes this year. Attention now shifts to Yellen’s first Congress appearance since Trump was sworn in, as investors seek clues on whether the Fed will accelerate monetary tightening to make way for the administration’s promised fiscal stimulus. The market will be hoping Janet Yellen doesn't ruin Valentine's Day as today marks her semi-annual testimony to the Senate Banking Panel before she repeats it tomorrow to the House Financial Services Committee. There are probably too many unanswered questions of the new Trump administration’s fiscal plans and also not enough additional hard data to make Yellen deviate much from her January 19th speech and the February 1st FOMC statement. The testimony might instead be used to emphasise that the economy is close to reaching its dual mandate goal and it’s possible that we also get a repeat of the “every meeting is live” mantra, although it would be surprising if Yellen signalled strongly about a March rate hike. Perhaps the most interesting part for markets might be what Yellen says about the Fed’s balance sheet, which as we know has been a topical discussion amongst policymakers of late and also drawn scrutiny from congressional Republicans in the past. The testimony is scheduled for 10am. Dallas Fed President Robert Kaplan on Monday argued the Fed should move soon to avoid falling behind the curve, especially as fiscal policy could drive faster growth and inflation. "If Yellen wants March to be a live meeting as other Fed officials have suggested it is, she will have to adopt a more hawkish tone beyond the usual reference to data dependency," said ING senior rates strategist Martin van Vliet. "Currently we calculate a market implied probability of around 17 percent for a March rate hike." Europe reported Q4 GDP numbers, with German and Italian growth falling short of forecasts, casting doubt on the strength of two of the euro area’s biggest economies amid global uncertainties. German gross domestic product rose a seasonally-adjusted 0.4 percent in the three months through December, while Italian GDP expanded 0.2 percent, according to the nations’ statistics offices. Both figures missed predictions in Bloomberg surveys by 0.1 percentage point. As Bloomberg adds, while Italy has lagged growth in the 19-nation euro area, Germany -- which had annual growth of 1.9 percent last year -- has driven Europe’s slow but steady recovery, aided by a weak euro, cheap oil and the European Central Bank’s stimulus policies. While those tailwinds boosted consumer spending and supported exports, rising inflation pressures and uncertain prospects for global trade have cast doubt over whether the pace of expansion can be maintained. German fourth-quarter GDP was led by domestic demand, the statistics office said. Government spending increased markedly, and households raised consumption slightly. Investment also developed positively, bolstered by building. With imports outpacing exports, net trade was a drag on growth. “The data are alright -- German growth is solid, and impulses came exactly from where we expected them to do,” said Marco Wagner, an economist at Commerzbank AG in Frankfurt. “Growth drivers will be similar in 2017.” Meanwhile, Europe's most battered economy, Greece, suffered yet another unexpected economic contraction with Q4 growth dropping 0.4% after 0.9% growth in Q3, suggesting that once again the country’s stuttering bailout talks are doing nothing to help boost the real economy and dimming hopes that growth is finally back on track. Looking at global markets, the MSCI All-Country index was little changed at 441.02, near its all-time high of 442.70 reached in May 2015. The MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent, trying for its fifth straight session of gains. Japanese shares ran into trouble after Toshiba Corp delayed an anxiously awaited earnings release. As reported earlier, Toshiba said it would take a 712.5 billion yen ($6.28 billion) writedown on its U.S. nuclear business, wiping out its shareholder equity and dragging the company to a full-year loss. There was also some eye-catching data from China, where producer price inflation picked up more than expected in January to near six-year highs, while consumer price inflation neared a three-year high. The Stoxx Europe 600 Index slipped 0.1 percent, after a five-day rally brought it to the highest level in more than a year. Japan’s Topix slipped 1 percent. Toshiba tumbled after delaying a scheduled earnings announcement meant to show how much of a loss the company was facing from its nuclear-equipment operations. Futures on the S&P 500 fell 0.1 percent, after the benchmark index closed up 0.5 percent at a record 2,328.25 on Monday. U.S. stock market futures pointed to a slightly weaker open on Wall Street stock indexes hit historic peaks on Monday, with the benchmark S&P 500's market value topping $20 trillion as investors bet tax cuts promised by Trump would boost the economy. In commodity markets, metals were on a tear thanks to supply disruptions and strong Chinese demand. Copper CMCU3 hit its highest since May 2015 after shipments from the world's two biggest copper mines were disrupted. Iron ore climbed to its since August 2014 amid reports China plans to cut steel capacity by at least half in 28 cities across five regions during the winter heating season. Oil recouped some ground on OPEC-led efforts to cut output, though rising production elsewhere kept prices to a narrow range that has contained them so far this year. U.S. West Texas crude added 22 cents to $53.15 a barrel, having shed 1.7 percent overnight. Brent futures LCOc1 rose 33 cents to $55.90 a barrel. Bulletin Headline Summary From RanSquawk European equities enter the North American crossover with little in the way of direction as market's await Fed Chair Yellen GBP has felt the squeeze during the European session as the latest inflation data hampers investor sentiment Looking ahead, highlights include Fed's Yellen, Lacker, Kaplan and Lockhart Market Snapshot S&P 500 futures down 0.09% to 2,324.25 STOXX Europe 600 down 0.1% to 369.63 German 10Y yield rose 0.5 bps to 0.336% Euro up 0.2% to 1.0619 per US$ Brent Futures up 0.8% to $56.05/bbl Italian 10Y yield fell 4.6 bps to 2.225% Spanish 10Y yield fell 1.1 bps to 1.651% MXAP down 0.2% to 144.03 MXAPJ up 0.1% to 463.54 Nikkei down 1.1% to 19,238.98 Topix down 1% to 1,539.12 Hang Seng Index down 0.03% to 23,703.01 Shanghai Composite up 0.03% to 3,217.93 Sensex down 0.03% to 28,342.16 Australia S&P/ASX 200 down 0.09% to 5,755.24 Kospi down 0.2% to 2,074.57 Brent Futures up 0.8% to $56.05/bbl Gold spot up 0.3% to $1,228.59 U.S. Dollar Index down 0.1% to 100.85 Top News from Bloomberg White House National Security Adviser Michael Flynn resigned Monday amid a snowballing controversy over whether he lied about his contacts with a Russian official, throwing President Donald Trump’s security team into turmoil just weeks into his term PSA Group, the maker of Peugeot and Citroen cars, is exploring an acquisition of General Motors Co.’s European business Toshiba Corp chairman Shigenori Shiga will step down amid a 7.125 billion yen ($6.3b) writedown in its nuclear power business, citing cost overruns at a U.S. unit and diminishing prospects for its atomic-energy operations Apple Inc. shares hit a record on optimism the next iPhone will drive a resurgence in sales and help the company’s services businesses grow After posting a 4Q loss of 2.35b francs and taking a charge to settle a U.S. investigation into the role of its mortgage securities business in the 2008 financial crisis, Credit Suisse pledged to cut between 5,500 and 6,500 jobs this year President Donald Trump assured Prime Minister Justin Trudeau that Canada isn’t the main target of his plans to reset U.S. trade relationships, as both leaders said they are committed to maintaining commercial ties and economic integration that support millions of jobs on both sides of the border German and Italian growth fell short of forecasts, casting doubt on the strength of two of the euro area’s biggest economies amid global uncertainties Asia equity markets traded subdued as the region failed to sustain the momentum from Wall Street where stocks extended on record highs and financials outperformed amid a continuation of the reflation trade. ASX 200 (+0.1%) was initially kept afloat by strength in real estate and the mining sector with the latter underpinned following continued advances in iron ore, but then failed to sustain early gains and finished marginally negative while Nikkei 225 (-1.1%) was dampened by a firmer JPY with Toshiba shares slumping after the Co. delayed its earnings release. Shanghai Comp (-0.3%) and Hang Seng (flat) traded subdued despite an increased liquidity injection by the PBoC and stronger than expected Chinese CPI and PPI data which printed multi-year highs, as the firm inflation figures spurred concerns of overheating prices and prospects of tighter policy. 10yr JGBs saw minor gains amid weakness in Japanese stocks, although gains were only minimal with a mixed 5yr auction failing to spur prices while the curve steepened amid underperformance in the super-long end. Top Asia News South Korean Prosecutor Again Seeks to Arrest Samsung’s Lee Noble Group Surges as Trader Confirms Strategic Investor Talks Bank Mandiri Posts First Annual Drop in Profits Since 2005 Top Nickel Shipper Intensifies Mine Crackdown as Prices Rise China H-Share Rally Falters as Inflation Fuels Liquidity Concern Maersk to Expand Online Freight Booking After Partnering Alibaba European stocks traded modestly lower for the majority of the morning, however much of the initial losses have been pared in recent trade. In terms of a stock specific basis, Roll Royce (-5%) lags in the FTSE 100 after announcing a record loss and as such is now on course for its largest one decline in 4-months. Elsewhere, Credit Suisse (+2.5%) outperforms in the SMI after the bank announced that profit before tax came ahead of analyst estimates. while material names are among the worst performers in Europe to pare some of yesterday's advances. Across fixed income markets, price action has been somewhat range bound thus far, however some of the initial downside has been reversed led by gilts amid the aforementioned UK inflation report. Top European News German Economy Grows Slower Than Forecast as Trade Drags Michelin to Raise Dividend as Europe Helps 2016 Profit Increase EDF Profit Beats Estimates After French Utility Lowers Costs U.K. Rejects 1.8 Million-Signature Petition Seeking Ban on Trump Bund Futures Dip, Flows Muted; Downside Bought in Options Germany, Italy Grow Less Than Forecast Amid Global Uncertainties Rolls-Royce Profit Beats Estimates on Cost Cuts, Airbus Lift In currency markets, AUD is firmer this morning in the wake of Chinese inflation figures overnight (Y/Y 2.5% vs. Exp. 2.45) subsequently eyeing last Friday's high (0.7689), while option related barriers are situated at 0.7700 which could curb a move to the upside. GBP has been pressured following a surprise miss on UK inflation (1.8% vs. Exp. 1.9%),which is a blow for the hawkish members of the Bank of England advocating a rate hike. Elsewhere, in terms of data, this morning's disappointing German ZEW survey and Eurozone GDP data failed to provide much in the way of traction for prices. In commodities, gold (+0.2%) prices were mildly higher amid a subdued USD and downturn in risk sentiment, with participants now looking ahead to Fed Chair Yellen's Semi-Annual testimony today. Copper has eroded some of its gains after the red metal reached its highest level since May 2015 due to supply disruptions, meanwhile, WTI crude futures nursed some of yesterday's losses to barely reclaim the USD 53.00/bbl level to the upside. Looking at the day ahead, the main focus will be on the January PPI report where headline PPI is expected to have increased +0.3% mom and the core +0.2%. Away from the data, the big focus for the market and as we mentioned at the top will be on Fed Chair Yellen’s semiannual testimony at 10am. It’s worth also highlighting that we’re due to hear separately from the Fed’s Lacker, Kaplan and Lockhart today too. US Event Calendar 6am: NFIB Small Business Optimism at 105.9, est. 105, prior 105.8 8:30am: PPI Final Demand MoM, est. 0.3%, prior 0.3% PPI Ex Food and Energy MoM, est. 0.2%, prior 0.2% PPI Ex Food, Energy, Trade MoM, est. 0.2%, prior 0.1% PPI Final Demand YoY, est. 1.5%, prior 1.6% PPI Ex Food and Energy YoY, est. 1.1%, prior 1.6% PPI Ex Food, Energy, Trade YoY, prior 1.7% Central Banks 8:50am: Fed’s Lacker to Speak at University of Delaware 10am: Fed’s Yellen Appears Before Senate Banking Panel 1pm: Dallas Fed’s Kaplan Speaks in Houston 1:15pm: Fed’s Lockhart to Speak on Economy in Huntsville, Alabama DB's Jim Reid concludes the overnight wrap The market will be hoping Mrs Yellen doesn't ruin this special day as today marks her semi-annual testimony to the Senate Banking Panel before she repeats it tomorrow to the House Financial Services Committee. As we discussed yesterday there are probably too many unanswered questions of the new Trump administration’s fiscal plans and also not enough additional hard data to make Yellen deviate much from her January 19th speech and the February 1st FOMC statement. The testimony might instead be used to emphasise that the economy is close to reaching its dual mandate goal and it’s possible that we also get a repeat of the “every meeting is live” mantra, although we’d be surprised if Yellen signalled strongly about a March rate hike. Perhaps the most interesting part for markets might be what Yellen says about the Fed’s balance sheet, which as we know has been a topical discussion amongst policymakers of late and also drawn scrutiny from congressional Republicans in the past. The testimony is scheduled for 10am. Markets look set to go in to today’s main event on a high after the four main US equity markets recorded fresh all time highs once again last night. Indeed the S&P 500 (+0.52%), Dow (+0.70%), Nasdaq (+0.52%) and Russell 2000 (+0.25%) indices all had another positive day with a rally for financials at the heart of that with the S&P 500 Banks index breaking out of the recent range to touch the highest level since February 2008. Tech stocks also had a decent day with Apple closing at its highest price ever, while the telecoms sector was the only sector to retreat. Prior to this moves in Europe had been even more impressive after the Stoxx 600 closed up +0.75% and FTSE MIB (+1.13%) and IBEX (+1.07%) alsorebounded. Meanwhile there appears to be no stopping the Greenback in recent days after the Dollar index (+0.19%) rose for the ninth consecutive session, the longest streak since November when the index rose for ten sessions in a row. Treasury yields also continue to inch higher with 10y yields finishing 2.9bps higher yesterday at 2.436%. Yields are now 11bps off the lows of last week. With newsflow light there wasn’t a huge amount to drive markets yesterday leaving investors to instead debate the potential for hawkish appointees to the FOMC. Former Fed official Alan Blinder said that Trump’s administration could “really transform the board” with three spots now to fill. Interestingly Blinder also said that Yellen could look to signal a possible March rate hike at the testimony today with the clue being if she talks more than usual about inflation. Markets barely responded to that comment though with the market pricing in a low 30% probability according to Bloomberg of a hike (although other measures suggest the probability is lower). Elsewhere, in commodity markets it was another overall decent day for base metals with Copper (+0.26%), Nickel (+0.66%) and Lead (+0.83%) continuing to edge higher. Even more eye catching was the rally for Iron Ore (+6.48%) which has now surged past $90/tn and touched the highest level since August 2014. Energy was however a bit of an underperformer yesterday with WTI Oil (-1.73%) back below $53/bbl despite Saudi Arabia announcing that it had cut production by more than it pledged last month under the OPEC agreement. This morning in Asia the positive momentum has generally faded as the session has progressed. The Nikkei (-0.55%), Shanghai Comp (-0.26%), ASX (-0.10%) and Kospi (-0.25%) are in the red while the Hang Seng is little changed. Despite markets being quiet there has been some data out of China this morning though with the January inflation numbers released. CPI has printed at +2.5% yoy which is not only up from +2.1% in December, but also a tenth ahead of expectations and the highest since May 2014. Meanwhile the remarkable increase in producer prices has continued with PPI rising to +6.9% (vs. +6.5% expected) from +5.5%. That is the highest rate of growth since August 2011, with last month’s rise helped by a 31% surge for mining products prices. After 54 months of negative PPI prints January marked the fifth consecutive month of expansion for producer prices. Away from that we’ve also had the news of the first personnel casualty from the Trump administration with National Security Adviser Michael Flynn announcing his resignation. This follows the controversy surrounding the allegations of improper conduct with Russian officials according to Bloomberg. Moving on. While yesterday was a fairly quiet day for newsflow, European politics continues to be one to watch. In France the latest Opinionway poll, released yesterday, showed that a second-round vote between Macron and Le Pen would have the former coming out on top at 63% versus 37%. Interestingly a second round vote between Fillon and Le Pen showed Fillon coming out on top at 58% versus 42% - that is the highest second round vote percentage for Fillon in Opinonway polls this year (a total of 7 separate polls). Meanwhile in Germany there was some criticism from the CDU about new SPD leader Schulz’s prior support for Eurobonds in the single currency bloc as a way of relieving its debt crisis. A CDU campaign manager said yesterday that the party intends to remind voters ahead of the election later this year that Schulz has long pushed for the introduction of EU wide debt. A reminder too then that German political developments will only likely pick up in the months to come. Elsewhere, in Greece there wasn’t much in the way of developments yesterday, rather it was some strong words from Bank of Greece Governor Stournaras which seemed to stoke a near 50bps sell off in Greek 2y yields. The Governor warned that “any further delay in completion beyond this month will feed a new circle of uncertainty” and that “such a vicious circle could return the economy to recession and a rerun of the negative developments that took place in the first half of 2015”. As we noted yesterday the ball is back with the Greek government and we’ll have to wait to see further response from Tsipras’ administration as to the route they decide to take in the face of the demands from creditors. Before we look at today’s calendar, the FT ran an interesting story yesterday suggesting that the EU and other US trading partners have already began early stage work for a potential legal challenge over the US border tax proposal in what the FT suggest could be the biggest case in WTO history. The article suggests that the basis of the argument is that the Republican plan is “definitely not compatible with global trade rules”, notwithstanding the fact that a tax change would lead to a major challenger to the global trading system. One to perhaps keep an eye on. Looking at the day ahead, there’s a fair bit of data to get through in Europe this morning. We’ll be kicking things off in Germany where we’ll get the preliminary Q4 GDP print (consensus for +0.5% qoq) and also the final revisions to the January CPI report. After that attention turns over to the UK where the January inflation data dump is due out with CPI, PPI and RPI prints all released. Thereafter we’ll get Euro area Q4 GDP (+0.5% qoq expected) and industrial production data, as well as the February ZEW survey out of Germany. Over in the US this afternoon the main focus will be on the January PPI report where headline PPI is expected to have increased +0.3% mom and the core +0.2%. The NFIB small business optimism reading will also be released. Away from the data, the big focus for the market and as we mentioned at the top will be on Fed Chair Yellen’s semiannual testimony at 3pm GMT. It’s worth also highlighting that we’re due to hear separately from the Fed’s Lacker (at 1.50pm GMT), Kaplan (at 6pm GMT) and Lockhart (at 6.15pm GMT) today too.