2015.02.12 News


We start with a surprising story that hit the wires this afternoon.

Wow! A quick deal for Greece would potentially save the new government from running out of funds. I wonder who was the CNBC’s source …

But the euphoria didn’t last very long and we got this headline.

Reuters: – “We had an intense discussion, constructive, covering a lot of ground, also making progress, but not enough progress yet to come to joint conclusions,” Jeroen Dijsselbloem, the chairman of Eurogroup finance ministers, told a midnight news conference.

“We didn’t actually go into detailed proposals, we didn’t enter into negotiations on content of the program or a program, we simply tried to work next steps over the next couple days. We were unable to do that.”

It wasn’t even close. Meanwhile Greece has a new slogan: “Bankrupt but Free”. It’s all fun and games until pensioners line up at the soup kitchen and move into the homeless shelter because they can’t get their retirement checks. Greeks are playing with fire – it’s not going to end well.

Here is the Greek stock market ETF after the CNBC “news” and then – reality hit. CNBC needs to start checking their sources – someone is going to get fired over this.

And here is how the euro responded (by the way the S&P500 futures reacted in a similar fashion).

Greek bond yields remain elevated and will probably rise from here.

One other quick note on the Eurozone. Deflationary pressures continue to be a major concern. That’s why the ECB had little choice in taking such an aggressive monetary easing action. Italy’s inflation rate is not only negative, but it’s now the lowest on record.

Denmark’s 5-year yield continues to move deeper in the red. People ask why anyone would buy negative-yield paper. If one anticipates deflation that is worse than the yield, the real rate would actually be positive. Or if someone wants to take their money out of the Eurozone badly enough, they are willing to pay to have their money parked in Denmark. Amazing.

In fact the bulk of the Denmark’s yield curve is now in negative territory (similar to Switzerland).

UK’s massive housing rally is coming to an end. The RICS (The Royal Institution of Chartered Surveyors) House Price Balance is approaching zero. It measures “the percentage of surveyors reporting a house price increase in their designated area”. The BOE is going to be on hold for a long time now.

The Ukrainian hryvnia takes another leg down vs. the euro. With such currency devaluation Ukraine’s inflation will likely rival Argentina’s in the coming months –

Now on to Japan where the BoJ is losing its fight against deflation. Japan CGPI (PPI equivalent) came in massively below consensus.

Australian jobless rate report came in worse than consensus. The nation’s unemployment rate is now at the highest level since 2002.

Clearly the collapse in industrial commodities is taking its toll. Here is the CRB BLS Raw Industrial Commodity Index. And people wonder why the Baltic Dry index is hitting new lows.

The headlines are already rolling in…

Brazil’s economy continues to struggle. Retail sales massively missed economists’ expectations.. The recent drought conditions are making the situation worse.

US crude oil supply in storage is out of control. Oil in storage hit another record and the “days of supply” measure is rising way beyond last year’s level. It’s very hard to see oil prices strengthening until this situation is stabilized. Rig count reductions have had no visible effect thus far.

The US dollar is pushing higher again as some Fed officials threaten to hike rates this year.

Appalachian coal (March contract) has bounced off the lows as storms in the Northeast increased demand for power (among other reasons).

The world now has nearly $300 trillion in financial assets. Here is what they look like.

– Greek bailout talks broke down in recriminations after six hours. Eurozone finance ministers trying to hammer out a solution in Brussels were not even able to agree a way to take negotiations forward.

It is looking ever more likely that, come expiry in March, Athens will be without any bailout assistance for the first time in nearly five years. Many fear that outcome could spark turmoil and domestic bank runs. The euro weakened on news of the collapsed talks. (FT)

– The social security network Facebook is launching a social network for cyber security professionals to share information andleads on cyber attacks. The world’s largest social network has teamed up with other tech companies including Yahoo and Pinterest to step up its cyber security work. (FT)
– Obama wants greater military power The US president asked Congress for new powers to wage military operations against Isis. This has kicked off a debate over the limitations of presidential war power. (WSJ$)
– Glencore spins off Lonmin stake The miner is to divest its 24 per cent stake in the troubled South African platinum producer just as it slashes spending on its mines over the next year. (FT)


– Eurozone talks fail to agree way forward on Greece
– Japanese PPI: deflation ogre stalks policymakers
– Aussie credit card spending at record high in Dec
– Ukraine signs new $17.5bn IMF bailout deal
– Australia jobs market worse than expected in January
– Greek bonds sold off after bailout talk breakdown



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s