Chillin' out till it needs to be funded
The Spanish sun of course need helps to shine its banks. Three downgrades for the sovereign, three for the banks..(one still to come) The
Italian sun, did not even get a look in at Cannes, it is hot, dry and the mediterranean is looking to high tide over Florence and Milan to Austrian and German homes this summer…Dare I shut myself down with the poetry..Actually, Italians are probably paying for their North Africa connections as much as France and then there is alsoo the luxury goods retailing and other paraphernalia that has moved due North, not across the Alps but on a Jet to the Continental United States
The G20 is not over as Foreign Minsters get down to it this week and markets are apt to make a mountain out of a molehill with “issues” in extending the IMF hand which is the first hurdle to cross when the sun comes out on the new week at work. The referendum that never happened (Greece – the return of the prodigal – EURUSD) proved us right on holding back on large commentary while the World was at Cannes writing a new script every minute with every Greek breath even as a population of 7 billion threatened to overrun the world.
A new IMF report leak underlines how everyone knew about the ‘impending fall of the Euro’ as market rumours had it at the time since April 2009, IMF wanting to make it clear that with a 12% deficit Greece was over However, that still does not make the $4.5 tln of French Italian debt manageable to save in a half a tln pocket ( having spent two thirds of the original $600 bln) According to the Telegrapheven after the asset sales Italians could owe most of thier external bank debt to French banks which would really be a distressing scenario very early. Even Barclays has been caught with its pockets not out of Greece
and Morgan Stanley’s binge may not get netted out soon with Italian yields running at 600 basis points at the cusp of a viral outbreak of instability Talks of Greece leaving the Euro even as the confidence vote is past are not helping.
Italy in the mean time has already saved a lot in German Debt holding $100 bln of it and has been getting thru auctions like a breeze and selling a lot of bonds to ECB with adequate collateral. Mario draghi being at the helm will also help Italy which apparently now has three representatives on the board of ECB, making international observers, the Spanish and the French fidgety for their own.
ECB in the meantime saw the writing on the wall with a lowest Eurozone PMI of 47 ensuring that the rate cuts came a month ahead of schedule . The rate cuts however will last for more than an ephemeral fashion unlikely to stimulate the exports or businesss credit in a hurry as Germany sees the writing on the wall, getting ready for a round of referendums that will more or less allow unlimited bankrolling of the rest of the crisis as the Trillion comes to nought fast and asunder. Recent CDS writing bans in Europe have hardly stemmed the tide as the drying of structured finance will also cause a large down tick in trade growth in the region. This month, Spain , Italy and France have limited shorting of banks and financial stocks and European banks are still in the market, selling off assets at a fast clip downloading loans to other regional players with capacity. Deutsche Bank could soon get into the act but as IIF accepts a large haircut on Greece, there has been less talk of the 9% Common ratio for European Banks required by this month by the ECB
Among the believers, the only options left are for ECB to print money and issue Eurobonds to subsidise the failing economies..independent fiscal policy of member states will have to increasingly fall in line with the Central diktat from Draghi as their correlation with the global marketplace causing many a heartburn in daily trades
IT IS MY INHERENT BELIEF THAT ALL ECONOMIC RESULTS WILL BE IN LINE WITH A DROPPPP IN CRUDE PRICES..THE SQUEAKS IN EUROPE GROWING SHRILL TILL IT BOTTOMS BELOW 80