So now the incoming Mr Hollande is sugared with talks of increasing the European Investment Bank's capital, in order to promote growth instead of austerity. This sounds very political to me, as new 100 billion at an institutional bank account will hardly make any difference in the current environment. They should really just concentrate on solving the Spanish problem.
We are now back to the announcement games, while we wait for the legal fudge that would allow the ESM to spend money against its treaty. So...first commitments and money are collected for an entity that is immune from prosecution, and it will circumvent its treaty even before it is officially launched? And this will create goodwill among the creditor countries? Or was this already agreed upon beforehand among the European heads of state?
Here are
the US market close regulars and select article
links. You can get update notifications by following ‘MoreLiver’ on Twitter or Facebook. Contact me with any questions or
suggestions. Before the stuff, a quick reminder:
In addition
to today's US Open Briefings and Morning Briefings, I posted the following during the
weekend:
29th Apr - Weekender: Off-Topic – not related to finance or
markets
29th Apr - Weekender: Trading &
Research -
views, quant stuff, people, education
29th Apr - Weekly Support - weekly reviews and previews
28th Apr - Best of The Week best from my last week’s posts
Have fun!
News – Between
The Hedges
Markets – Between
The Hedges
Recap – Global
Macro Trading
The Closer
– alphaville
/ FT
Debt
crisis: live – The
Telegraph
Europe Crisis Tracker – WSJ
FX Options
Analytics – Saxo
Bank
EURO CRISIS: GENERAL
More money for EU investment bank as leaders
re-focus on growth –
euobserver
The EIB move could be an anticipatory
concession towards Francois Hollande, the front-runner in this weekend's second
round of the French presidential elections.
Jean
Pisani-Ferry: In France, the Netherlands, and elsewhere, many citizens view Europe as a threat to their way of life.
Telling them that the euro is an unfinished construct that requires even more
commitment is a hard call for politicians.
One proposed solution is for Germany to employ fiscal stimulus at home, to increase domestic inflation and
increase investment and spending. Simon Wren-Lewis goes as far as to argue that
this is what a truly but hypothetical European government would do. I disagree:
a European government would employ stimulus in the periphery, not Germany.
If capital is relatively mobile, it would be
difficult to prevent a loan in Spain from making its way
to Germany, so I am not sure the ECB can produce a differential monetary
policy. Second, it is not clear that
easing lending conditions in the periphery would encourage additional
spending. I don't think it will be all
that easy to reverse the process of private sector deleveraging in the
periphery simply by easing lending conditions.
European Growth Pact Begins to Take Shape – Credit
Writedowns
The European Investment Bank (EIB) appears to
be at the center of the new thinking. In particular, reports suggest that an
investment program of as much as 200 bln euros is being considered…The
important take away is that the austerity agenda in Europe may have run as far
as it can, given the political instability/backlash that it is sparking.
Chart of the Day: Eurozone retail sector’s
sharp contraction –
Credit
Writedowns
Menuet Says Franco-German Relations May Sour – BB (mp3)
EURO CRISIS: SPAIN
Ludicrous Proposal by Harvard Economics
Professor to Force Taxpayers to Buy Spanish Bonds; Mish's Five-Point
Alternative Proposal –
Mish’s
1) take any
money (IMF, EFSF) 2) return to peseta 3) haircut 4) devalue 5) lower VAT and corporate
taxes.
Spanish engineers working in Germany may
therefore benefit not only the German economy—and the workers themselves,
obviously, which should not be neglected—but Spain, too: in the short run,
migration takes away pressure from budgets as the Spanish unemployed don’t
claim benefits but move to Germany instead. In the long run, there is a pool of
highly skilled workers who have not fallen victim to hysteresis effects and can
be re-activated for the Spanish economy once the crisis is over.
STOCK MARKET
Sell in May? – The Big Picture
Great set
of charts from The Chart Store showing the performance for the month of May
going back to 1928
Q1 earnings season wrap-up: IT continues to
shine – Saxo
Bank
With 275 companies having reported in the
S&P 500 we have enough data to do an interim update on the earnings season
so far. The 'winner' is once again IT - strongly outpacing the other sectors.
On the other hand, most sectors are now experiencing declining profit margins.
Mini Tech Bubble – The View
from The Blue Ridge
To better understand the dynamics of
exponential revenue growth and the repeated forecast errors made by investors
generation after generation, we highly recommend John Hussman’s analysis
OTHER
Kicking a central bank when it’s down – alphaville
/ FT
Japan eased… the yen appreciated. Nomura has some charts
Japan eased… the yen appreciated. Nomura has some charts
Solvency II securitisation slapdown!, from
Fitch – alphaville
/ FT
Fitch Ratings thinks Solvency II’s capital charges could make it uneconomic for insurers to hold structured finance assets, relative to corporate or covered bonds. This matters because the ultimate implication is that if banks can’t fund lending, or transfer their loan risk to what have historically been huge buyers, they will make fewer loans.
Fitch Ratings thinks Solvency II’s capital charges could make it uneconomic for insurers to hold structured finance assets, relative to corporate or covered bonds. This matters because the ultimate implication is that if banks can’t fund lending, or transfer their loan risk to what have historically been huge buyers, they will make fewer loans.
Global Trends – The Trader
Below are some projections of some of the
trends that will dominate the World going forward.
Interdealer broker: 'I'm one of those shouting
guys on a trading floor' – The
Guardian
Joris Luyendijk talks to a broker about the
punishing hours, entertaining clients, making money and how to cut a deal