Global Macro Perspectives
Looks like meltdown is averted; ECB will probably announce further bond purchases on it’s tomorrows Governing Council meeting.
Portugal managed to sell €500 of 12-month bills at bid-to-cover ratio of 2.5 times despite S&P negative credit watch issued yesterday.
Waiting for another ride in a few months…
Conference Board consumer confidence came out at 54.1 vs. 52.0 consensus and 49.9 revised reading for October.
Spain, Italy and Ireland at new record highs. Markets in panic mode.
I don’t see any other way how this could be reversed (meltdown prevented) except ECB bond purchases.
Euro Group (EU members which introduced Euro as their currency) introduced today the European Stability Mechanism (ESM). This is the finale of German push to introduce a mechanism for a private investor’s loss sharing in case of future bailouts.
The ESM kicks in in June 2013, which means Euro group support for Eurozone members in problems effectively stops then.
Nothing surprising here. The program announced is in the middle of speculated €70-€100 billion range.
The interest rate (if facility would be drawn now) is at 5.8%.
All this looks so futile, it is almost impossible for Irish economy to grow with this kind of austerity and interest rate burden.
Bloomberg’s Jonathan Weil has the answer…
Spain 10 year government bond spread vs. it’s German peer reached new high of 255 bps. Irish bond spread reached record high of 654 bps.
Markets have lost faith in EU bailout plan and are now finding out (again) that math is quite exact science. CNBC Europe has even sent it’s anchor to Lisbon to provide live coverage of Portugal bailout; they were wrong: the markets skipped Portugal and moved to big story – Spain. Spain has a funding requirement of at least €155bn in 2010. Looks intimidating, especially if we took to account the fact that Ireland was pre-funded for the first half of the 2011 and despite that needed a bailout.
This puts the markets near the point where the only solution is the Ben Bernanke way – buy worthless paper and stuff cash in monetary system. I would do it fast, but I doubt on EU leadership determination. In any case, more the ECB waits the situation will get worse.
The country is in the process of being bailed out and they have an A rating on it?
Only thing interesting are revisions to the committee’s forecasts for growth, unemployment, and inflation in the next three years.
This is the last thing world and markets need… Hope it will not evolve into something bigger. Bloomberg story: South Korea Returns Fire on North After Shells Wound Troops. South Korea scrambled fighter jets and returned fire after North Korea lobbed dozens of shells into its waters and an island, injuring 14 soldiers according to […]
And we have a second EU bailout.
The Wall Street Journal Link: In China’s Orbit.
I will post the whole article, as I find it great and the original link doesn’t work well. Hope the WSJ people won’t mind… I promise I won’t do it again.
It appears that Ireland is moving closer toward some kind of bailout. It is clear that Irish government want to keep some kind of fiscal independence and shift the focus toward bank problems, not country problems…
This is the absolute truth. Indecisive politicians and lack of leadership are two most significant EU problems…
Housing Market Index for November was reported at 16 vs. 15 in October (revised from 16). Consensus was at 17. Future component leading the index higher. Negative report; no improvements on the horizon as I believe future expectations components is overstated compared with traffic of perspective buyers component…