The euro broke support at $1.36 and is headed for a test of primary support at $1.32. Respect of zero by 63-day Twiggs Momentum signals a strong down-trend. Failure of support would signal a decline to $1.22*.
* Target calculation: 1.32 – ( 1.42 – 1.32 ) = 1.22
The pound is also retracing, to test primary support at $1.53. 63-Day Twiggs Momentum indicates a strong down-trend. Failure of support would signal a decline to $1.45*.
* Target calculation: 1.53 – ( 1.61 – 1.53 ) = 1.45
The Office for National Statistics said its comprehensive internationally comparable measure of unemployment rose 129,000 in the three months to September to 2.62 million, the highest level since 1994. That lifted the unemployment rate to 8.3%, the highest rate since 1996, compared with 8.1% in the three months to August.
Within that figure, the number of unemployed people between 16 and 24 years old, known as youth unemployment, rose 67,000 in the three months to September to 1.02 million, a rate of 21.9%.
Markets largely shrugged off the ECB, as long-term investors continued to dump everything but German bonds—considered the market’s safe harbor—and it became increasingly difficult to find private buyers for bonds issued by the large, indebted countries such as Italy and Spain…..The ECB fought a running battle throughout the day, traders said, in an attempt to drive the yield on the 10-year Italian note below 7%. The trading session started with price rally that drove the closely watched rate down to 6.84%. Then, as ECB buying lightened, private sellers took over, driving the yield—which moves in the opposite direction of price—up to 7.22%, according to Tradeweb data. Prices then rallied in the afternoon, with some market participants citing more ECB buying as well as comments from German Chancellor Angela Merkel indicating German support for more fiscal integration in the euro zone.
via ECB Fights to Put Lid on European Bond Yields – WSJ.com.
Dow Jones Europe Index is testing medium-term support at 230. Bearish divergence on 21-day Twiggs Money Flow warns of selling pressure. Failure of support would test the primary level at 210 — and breach of primary support would signal another decline, with a target of 160*.
* Target calculation: 210 – ( 260 – 210 ) = 160
WASHINGTON — The Federal Housing Administration has a “close to 50” percent chance of requiring a bailout if the housing market deteriorates next year, the agency’s independent auditor said in a report released Tuesday.
The F.H.A., which offers private lenders guarantees against homeowner default, has just $2.6 billion in cash reserves, the report found, down from $4.7 billion last year.
The agency’s woes stem from the national foreclosure crisis. In the last three years, the F.H.A. has paid $37 billion in insurance claims against defaulting homeowners, shrinking its cash cushion.
FT reports:
The president of Germany’s powerful Bundesbank has firmly rebuffed international demands for decisive intervention in the bond markets by the European Central Bank to combat the eurozone debt crisis, warning that such steps would add to instability by violating European law. Bundesbank president Jens Weidmann told the Financial Times that only politicians could resolve the crisis, and he rejected the idea of using the ECB as “lender of last resort” to governments.
We’ve seen this movie before. Higher rates after a severe debt-deflation recession are burdensome, perhaps economically fatal. Hiding behind the excuse that we must fight inflation NOW requires a grand dismissal of economic history. There are times to impose austerity and don the hawkish posture, but there are times when that’s exactly wrong. This is one of those times, particularly for Europe.
via EconoMonitor : EconoMonitor » The Triumph of Austerity (and its Consequences).
Italy is running a primary surplus. The only thing sending her over the edge is the simple fact that the Italian government cannot borrow at low-enough rates. At 4% (where rates were a year ago), they can gradually begin to adjust their debt ratios and still finance their borrowing – it will not be easy, but they, unlike their spendthrift cousins in the Aegean, have one of the highest savings rates in the OECD…..
via Things That Make You Go Hmmm… – Outside the Box Investment Newsletter – John Mauldin.
“Common responsibility for the European currency will also engender a common decision-making instance for the European economy. It is unthinkable to have a European central bank but not a common leadership for the European economy. If there is no counterweight to the ECB in European economy policy, then we will be left with the incomplete construction which we have today… However even if the building is not finished it is still true that monetary union is part of a supranational constitution… It is our task for the future to work with the appropriate means for the transfer of traditional elements of national sovereignty to the European level.”
~ Italian President Carlo Ciampi, Frankfurter Allgemeine Zeitung, February 8, 2000
With thanks to Grant Williams (via John Mauldin)
The Shanghai Composite Index reflects China’s controlled slow-down, edging lower with intermittent bear market rallies. The index is currently testing the descending (secondary) trendline at 2500. Penetration would offer a target of 2650 but would not indicate that the primary down-trend is over. Failure of support at 2300/2350 remains more likely and would offer a target of 2000.
* Target calculation: 2300 – ( 2600 – 2300 ) = 2000
HongKong’s Hang Seng Index is headed for a test of the (primary) descending trendline at 21000; breakout above 20000 would confirm. The primary trend remains downward, however, and respect of the trendline would suggest another test of 16000.
Japan’s Nikkei 225 Index is ranging between 8400 and 9100. Breakout would indicate future trend direction.
* Target calculation: 8400 – ( 9000 – 8400 ) = 7800
South Korea’s Seoul Composite Index continues to reflect buying pressure on 13-week Twiggs Money Flow. Follow-through above recent highs would indicate a strong bear rally, but the primary trend remains downward.
* Target calculation: 1900 + ( 1900 – 1800 ) = 2000
Italy was forced to pay its highest interest rate since the euro’s creation to sell five-year bonds—a sign of skepticism that new governments in Italy and Greece will be able to simultaneously boost economic growth and reduce high public-debt levels……Industrial production in the euro zone plunged 2% in September from August, the steepest slide since February 2009, according to the European Union’s statistics agency. The decline stretched from the weak periphery of Spain, Italy and Portugal to powerhouses such as Germany, France and the Netherlands. Compared with a year ago, output rose just 2.2%—the weakest gain in nearly two years. The data suggest “the euro-zone will soon fall back into another fairly deep recession,” said Ben May, economist at consultancy Capital Economics.
