Category: Countries & Regions

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China spoils the party – macrobusiness.com.au

From the FT:

Chinese metals companies, lynchpins in the global economy, are warning that Beijing’s monetary tightening has gone too far, causing domestic customers to delay orders and raising the risk of payment default.

In one of the clearest signs yet of deteriorating sentiment, Baosteel, China’s second-largest steel producer, has told the Financial Times that its customers were pushing back scheduled deliveries “due to declining economic growth and tightening credit”.

via China spoils the party – macrobusiness.com.au | macrobusiness.com.au.

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BOE’s Monetary Gamble Nears Its Endgame – WSJ.com

So where once investors worried that it [the Bank of England] had got policy plain wrong, there’s now a chance they’ll start to fear that the bank has got things all too right, after all, and that the U.K. really does need policy settings appropriate for an economic ice age……

And a government focused on austerity measures is in no position to offer fiscal support even if it wanted to, and, according to the treasury’s pronouncements, it doesn’t. It’s sticking with the deficit-cutting plan A, come what may.

So this is clearly an economy with huge problems anywhere you might care to look. Its remaining cardinal virtue, perhaps, is that it isn’t in the euro zone, so the bloc’s more pressing concerns have shielded it from harsher scrutiny. It can’t rely on that shield for all time.

via BOE’s Monetary Gamble Nears Its Endgame – WSJ.com.

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Eurozone debt deal tackles symptoms, not cause | Investing | Financial Post

Eurozone leaders are as far as ever from finding a lasting solution to the bloc’s underlying problem of economic divergence, despite their latest progress in managing the symptoms of its debt crisis……

“This is another step in the right direction, but it is not enough to get us to the end game,” said Stephane Deo, chief European economist at UBS. “It buys time but it does not address the fundamental problem of the sovereign debt crisis.”

via Eurozone debt deal tackles symptoms, not cause | Investing | Financial Post.

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With focus on Europe, lack of U.S. debt progress slips under radar | Economy | News | Financial Post

Following a month where markets have locked on to developments in Europe, the lack of progress from the so-called U.S. Super Committee on debt has flown under the radar, an analyst warned Thursday.

Douglas Borthwick, managing director at Faros Trading, LLC, said in his latest report that U.S. debt troubles will likely take centre stage once again in the coming months.

“We argue that while Europe is dealing with their fiscal issues, we have yet to hear from the ‘Super Committee’ set up by the U.S. congress to find ways to decrease spending in the longer term,” he said.

via With focus on Europe, lack of U.S. debt progress slips under radar | Economy | News | Financial Post.

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Here’s What Will Happen When China’s Bubble Bursts

What would a China slowdown mean for the rest of us? In the main, three things will become evident.

  • First, China will remain committed to letting its currency, the yuan, rise in international foreign-exchange markets. A stronger currency will encourage companies to rely less on exports and more on goods and services consumed domestically.
  • Second, Chinese products will no longer be the cheapest on the shelves in years to come because China’s inflation rate will rise along with its wages. This is natural when any nation climbs a rung on the development ladder, which is what China is now doing.
  • Third, the Chinese market for raw materials and heavy equipment—cranes, bulldozers, factory machinery—will slow….

via Here’s What Will Happen When China’s Bubble Bursts.

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The Creeping Eurozone Credit Crunch | Credit Writedowns

During the 1997 Asian financial crisis, Japanese banks, getting killed with a falling Nikkei and their credit extended to Thailand and Indonesia, found that rolling off interbank lines to Korea the easiest way to shrink their balance sheets. American and European banks, not wanting to be the last out of Korea, panicked and followed the Japanese banks thus sucking in another country into the Asian crisis.

The Korean banks having to raise dollar liquidity sold their Brazilian and other emerging market bonds. Brazilian banks long their sovereign’s bonds that were declining in price had to raise liquidity and sold their Russian assets. The global margin call was on and fueled a full blown contagion and ended with the Russian debt default and LTCM crisis. Let’ hope it doesn’t come to this. Stay tuned and stay vigilant.

via The Creeping Eurozone Credit Crunch | Credit Writedowns.

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Quantitative Easing!!! – Andy Lees, UBS | Credit Writedowns

The BoJ announced today that it will expand its asset purchase programme by JPY5trn (USD66bn), with all the purchases being directed at JGB’s. Add that to the GBP75bn (USD120bn) by the BoE, CHF50bn (USD57bn) by the SNB and the EUR341bn (USD477bn) expansion of the ECB balance sheet since the end of June, and it collectively adds up to USD720bn. Clearly this explains the market rally from the low.

via Quantitative Easing!!! | Credit Writedowns.

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Europe’s Punishment Union – Ambrose Evans-Pritchard

As Sir John Major wrote this morning in the FT, this does not solve EMU’s fundamental problem, which is the 30pc gap in competitiveness between North and South, and Germany’s colossal intra-EMU trade surplus at the expense of Club Med deficit states.

It is therefore unlikely to succeed. It means that Italy, Spain, Portugal, et al must close the gap with Germany by austerity alone, risking a Fisherite debt deflation spiral. As I have written many times, this is a destructive and intellectually incoherent policy, akin to the 1930s Gold Standard. It risks conjuring the very demons that Mrs Merkel warns against.

Sir John is less categorical, but the message is the same. Europe will have to evolve into a fiscal union to make the system work….

via Europe’s Punishment Union – Telegraph Blogs.

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Dow breaks 12000

Dow Jones Industrial Average broke through resistance at 12000. On the monthly chart we can see the index is headed for a test of its 2011 high at 13000. Breakout would signal an advance to 15000*. Bearish divergence on 63-Day Twiggs Momentum, however, continues to warn of a primary down-trend; and respect of 13000 would indicate another test of primary support at 11000.

Dow Jones Industrial Average

* Target calculation: 13 + ( 13 – 11 ) = 15

Looking at the weekly chart, retracement to test the new support level at 12000 is likely. Respect would confirm the primary advance, while failure would signal another test of primary support at 10500/11000. A 13-week Twiggs Money Flow trough above the zero line would indicate strong buying pressure.

Dow Jones Industrial Average

* Target calculation: 12 + ( 12 – 11 ) = 13

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