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Europe Refuses To Be Fixed

Courtesy of ZeroHedge. View original publish here.

Submitted by Tyler Durden.

It appears like it was only 24 hrs ago that Europe bailed out Greece for the third time and anything was “fixed”, with a resultant desperate attempt to validate this by pushing the EURUSD above 1.3000. Sadly, as constantly takes place, Europe, and particularly Greece, refuses to be fixed, due to the fact as we will not tire of saying: you can’t repair financial debt with i) far more financial debt, ii) hockeystick projections or iii) soothing phrases of platitude and an outright bankruptcy, just like that which Argentina is about to undergo, will be essential. If that signifies the finish of the EUR and the delusion that the Eurozone is a viable monument to the egos of a few technocratic profession politicians, so be it. As a result, this time about the halflife of the newest bailout was specifically zero, as was that of the newest Japanese QE episode, as the total world is now habituated to the lies emanating from Europe, and demands specifics, which in flip are sorely lacking, especially as relates to the question of just the place will Greece get the funds desperately essential to fund the Greek bond buyback. But at least Kathimerini was sort enough to advise readers that said buyback need to consider area by December 7 in time for the euroarea finmins to approve the payment of the subsequent Greek loan tranche at the December 13 meeting, something which will very likely not occur, particularly if Germany’s SPD celebration delays the vote on the Greek bailout until finally the end of December as was reported yesterday. We can’t wait to find out the specifics of the buyback package, which will come in the “next couple of days” per ANA, and specifically where the buyback money will come from, specially with the FT reporting that a variety of European nations will previously lose cash up coming year on the most recent Greek bailout.

Aside for the lack of “Greece is fixed-er-est” specifics, the European Titanic continues to drive on autopilot, blissfully unaware it is headed straight into a unsustainable debt load Titanic, and as such Italy was able to sell EUR7.five billion in 6 Month Bills at reduce yield, pushing the 3 Yr to the lowest yield because 2010, even as the up coming Greece, Spain, just reported a collapse in retail product sales, which plunged eight.4% Y/Y. But at least it was “better” than lost month’s -12.7%.

An update on European monetary developments showed that M3 soared at a three month rate of 3.1%, effectively above expectations of 2.8%, and the highest considering that October 2008, which means any probability of more ECB charge cuts has been properly taken off the table nicely into 2013. We do, even so, eagerly look forward to the pundits’ explanation how it is feasible that Europe is obtaining progressively worse even as a close to record sum of liquidity is sloshing about in the Eurosystem. 

But all of this is largely moot, as the reactionary market follows every update out of Washington, in hopes there will be a fiscal cliff resolution. Advance spoiler: there won’t be, at least not until we have a replay of the 2008 TARP/2011 Debt Ceiling situation, and the marketplace plunges to get DC to act. Sorry, the current quick downtick was definitely not ample to break the record deadlock in Congress, fondest wishes to the contrary notwithstanding.

Finally, the Shanghai Composite once more showed what takes place when a nearby central bank refuses to inject any new liquidity, and dropped 1%, breaching the 2009 lows, and closing at a degree of 1973.

Assume minor in terms of actual market moving macro news these days as the fascination with the Fiscal Cliff persists.

A lot more from Jim Reid:

“Reid moves markets”. I’ve constantly dreamed of reading such a headline and last evening I received my want. However it was Senate Vast majority Leader Harry Reid who grabbed the headlines and took the shine off what was a mildly good day for markets by suggesting that little progress had been made in fiscal cliff negotiations over the final week or so. He added that ‘we only have a couple weeks to get one thing done so we have to get away from the content talk.’ This overshadowed a day of more robust US information with Sturdy Goods, House Charges and Buyer confidence all ahead of expectations. The S&P closed .52% decrease right after currently being .2% greater earlier in the session and once again near to the highs just prior to Reid’s comments hit newswires about 90 minutes before the shut.

Yesterday marked only four weeks till Xmas so we do need to have some US political progress quickly. It’s possible that Senator Reid was just reminding his colleagues of the relative urgency of the discussions. This is nonetheless the greatest story in global markets at the moment and has the capacity to move the S&P significantly into yr finish in either way.

Asian markets are trading firmly in damaging territory following the weak lead from the US. Losses in equities are currently being paced by the Hang Seng (-.83%), Nikkei (-1.%) and the ASX200 (-.21%). Chinese equities continue to break new post-crisis lows.

Following closing under the symbolic two,000 level yesterday, the Shanghai Composite is down a additional .87% this morning. Curiously the Shanghai index is down two.five% because the country’s new leaders had been unveiled in mid-November, in the course of a period when risk assets have usually carried out well. Also breaking new lows is the Japanese 10yr government bond yield which has reached its lowest degree in at least 9 years (.718%), aided by calls from the Japanese opposition leader Abe to pursue aggressive easing right up until inflation targets are met. Ironic really as if such a policy succeeds then JGBs will be a horrible investment in actual terms. Elsewhere the AUD and EUR are almost unchanged overnight against the greenback (1.0445 and one.292 respectively) even though the Australian iTraxx is 2bp wider at 133bp.

More on yesterday’s Greece deal, it was interesting to see the market’s comparatively muted response to the Troika’s package – probably reflecting the reality that the bundle is conditional on a “positive” financial debt buyback scheduled to consider location in excess of the next few weeks and the approval of member state’s parliaments in excess of what would seem to be an aggressive timeline target of Dec 13th. As DB’s Mark Wall pointed out, what is meant by a “positive” final result on the buyback is not officially defined, nonetheless in his view it would be a shock for the Eurogroup to deny support to Greece on the back of very low investor participation in a bond tender following getting come this far in negotiations. Greek 10yr bond yields closed 26bp lower yesterday at 16.25%, even though the Athex Composite (+.29%) was denied further gains as Greek financials (-seven.9%) reacted negatively to the prospect of dilutive bank recaps from the Troika’s package deal.
On the topic of European politics, DB’s Gilles Moec published a piece on France’s reform path yesterday, pointing out that considering that coming to electrical power President Hollande’s stance has tilted towards a far more reformist stance than expected, highlighted by the recent competitiveness pact and dedication to fiscal discipline.

Returning to the fiscal cliff, the WSJ reported that Morgan Stanley’s CEO James Gorman has called on the bank’s US personnel to contact members of Congress in order to urge lawmakers to reach a deal on the fiscal cliff. According to the report, Mr. Gorman’s email doesn’t mention any distinct man or woman or parties, but does utilize Obama’s rhetoric in calling for a “balanced solution”. The move follows a recent contact to action by the CEO of Caterpillar who wrote to employees encouraging them to signal a “Fix the Debt” petition. On that note, Obama is meeting with organization leaders and CEOs today as portion of his public PR campaign pushing his resolution to the fiscal cliff. Amongst these attending today’s White House session are a who’s who of the corporate world which includes the heads of Home Depot, Goldman Sachs, Deloitte, Merck, Coca-cola, Macy’s, Yahoo, Pfizer, Comcast, State Farm, AT&T, Archer Daniels Midland and Caterpillar (Bloomberg). John Boehner and other Republicans will be meeting with some members of the identical group before today’s White Home session.

Away from the cliff debate, Bloomberg news explained that the Fed might require US units of foreign banking institutions to comply with tougher capital principles by directing non-US companies to home all their businesses inside of a US holding firm.

Offered the lack of any significant data releases, the very likely focus right now will be on Obama’s meeting and headlines close to the fiscal cliff. Data-wise, Eurozone cash provide, German CPI and Spanish retail sales are scheduled right now. In the US, we get the new property sales report for October and the Fed’s Beige Book.

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