UK & Europe Archives - Page 55 of 88

July 26, 2012

U.K. Stumbles, Fueling Austerity Debate – WSJ.com

More evidence that imposing fiscal austerity while the private sector is deleveraging will aggravate rather than cure the problem. From WSJ.com:

The [UK] economy shrank 0.7% between April and June, dragged down by weakness in the construction industry, according to official data released Wednesday.

An extra day’s holiday in June for the Queen’s Diamond Jubilee had a significant negative impact on the economy, the data showed, but an official said it was too early to quantify the full effect at this stage. Unusually wet weather during the quarter may also have played a role.

It is the third quarter in a row that gross domestic product has shrunk and the largest quarterly contraction since early 2009.

via U.K. Stumbles, Fueling Austerity Debate – WSJ.com.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

July 25, 2012

Benoît Cœuré: Short-term crisis management and long-term vision – how Europe responds to the crisis

Interesting to get a view from within the ECB as to the state of the euro-zone crisis.

Benoît Coeuré, Member of the Executive Board of the European Central Bank:
On 29 June, the Euro Summit took a further series of steps to strengthen crisis management. They agreed that loans to Spain as part of its bank recapitalisation programme would not have a senior status, removing a key concern for investors about the programme and their continued purchases of Spanish government debt. They committed themselves to use the full range of EFSF and ESM instruments in a flexible and efficient manner. And most importantly, they decided that the ESM should have the ability to recapitalise banks directly, once a single supervisory mechanism is in place involving the ECB. These are all very significant developments. Let me elaborate.

First, the possibility for direct bank recapitalisation by the ESM is crucial to break the vicious circle between banks and their sovereigns that is at the heart of the crisis. It would allow for banks to be stabilised without increasing the debt level of the sovereign, thereby avoiding further damage to sovereign debt markets and banks’ balance sheets. This would move the euro area closer to the type of financial union we see in federations like the U.S. or Switzerland, where banking sector problems are dealt with at the federal level and have no implications on the finances of the federated units…..

via Bank for International Settlements >> Benoît Cœuré: Short-term crisis management and long-term vision – how Europe responds to the crisis.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 24, 2012

Christian Noyer: Monetizing public debt

Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the BIS: Some central banks have developed large-scale public debt acquisition programmes. They have done so for reasons relating to immediate macroeconomic stabilisation… to go beyond the zero-interest rate limit. The Eurosystem as well intervened on a much smaller scale when malfunctioning debt markets prevented the effective transmission of monetary policy impulses. There is not a single central bank that is seriously considering the monetisation of deficits with the more or less declared intention of reducing the weight of debt via inflation. In my view, this notion is nothing more than a financial analyst’s fantasy.

via Christian Noyer: Public and private debt – imbalances of global savings.
Comment:~ No central bank has declared an intention to monetize public debt (or deficits) — reducing public debt via inflation — but without a viable alternative how many will end up there? Gary Shilling points out that “competitive quantitative easing by central banks is now the order of the day.” The Bank of Japan last year “expanded its balance sheet by 11 percent, while the Federal Reserve’s increased 19 percent, the European Central Bank’s rose 36 percent and the Swiss National Bank’s grew 33 percent.” Japan, after 20 years of stagnation and with net public debt at 113% of GDP, illustrates the predicament facing many developed countries. If there was a plan B they would have tried it by now.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 23, 2012

Europe: Selling pressure

Dow Jones Europe Index is testing the long-term descending trendline at 240 but 13-week Twiggs Money Flow failure to cross above zero warns of strong selling pressure. Breakout below primary support at 210 would indicate a decline to 180*.

Dow Jones Europe Index

* Target calculation: 210 – ( 240 – 210 ) = 180

Narrowing 63-Day Twiggs Momentum (around zero) on the FTSE 100 suggests a ranging market. Respect of resistance at 5750 would test primary support at 5250, while breakout would indicate an advance to 6000.

FTSE 100 Index

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 19, 2012

Three Converging Factors May Slash Economic Growth By 71% | Daniel Amerman | Safehaven.com

An excellent historical analysis of this issue can be found in the working paper, “Debt Overhangs: Past and Present”, which was published by the National Bureau of Economic Research in April, 2012. Authored by Carmen Reinhart, Vincent Reinhart and Kenneth Rogoff, it examines 26 different “debt overhangs” that have occurred around the world since 1800, with “debt overhang” being defined as public debt exceeding 90% of GDP for at least five years…..What Reinhart, Reinhart and Rogoff found was that the average duration of a debt overhang was 23 years, and that the end result was a 24% reduction in the size of national economies, compared to what they would have been if they had grown at their average growth rates when not crippled by large government debts.

via Three Converging Factors May Slash Economic Growth By 71% | Daniel Amerman | Safehaven.com.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 19, 2012

Forex: Euro, Pound Sterling, Canadian Loonie, Australian Dollar, South African Rand and Japanese Yen

The Euro retraced to test its new resistance level at $1.23. Respect would confirm a decline to test the 2010 low at $1.19*. Declining 63-day Twiggs Momentum continues to signal a strong down-trend. Breach of the 2010 low would become likely if the ECB indicated an intention to directly or indirectly purchase government bonds — and would suggest long-term weakness.

Euro/USD

* Target calculation: 1.23 – ( 1.27 – 1.23 ) = 1.19

Pound Sterling’s up-trend against the Euro is accelerating, with steep advances followed by short corrections. Rising 63-day Twiggs Momentum confirms. Target for the current advance is €1.295*.

Pound Sterling/Euro

* Target calculation: 1.255 + ( 1.255 – 1.215 ) = 1.295

Canada’s Loonie continues to weaken against the Aussie Dollar but long-term bullish divergence on 63-day Twiggs Momentum (and breach of the descending trendline) warns of reversal to an up-trend. Breakout above parity would confirm.

Canadian Loonie/Aussie Dollar

The Aussie Dollar broke resistance at $1.03 USD and is headed for a test of $1.05*. Recovery of 63-day Twiggs Momentum above zero would suggest a primary up-trend, but we first need a correction to form a higher low (trough).

Aussie Dollar/USD

* Target calculation: 1.03 + ( 1.03 – 1.01 ) = 1.05

The Aussie Dollar is testing resistance at R8.50 South African Rand after respecting support at R8.30. Breakout would offer a target of R8.70*.

Aussie Dollar/South African Rand

* Target calculation: 8.50 + ( 8.50 – 8.30 ) = 8.70

The Australian Dollar/Japanese Yen is a good reflection of global risk tolerance. Euphoric highs of 2007 were followed by blind panic in 2008/2009 before settling into a mid-range oscillation between ¥72 and ¥90 — suitable for range traders. The higher low in 2012 reflects a more bullish stance but we are a long way from breakout above ¥90. 63-Day Twiggs Momentum oscillating around zero mirrors the uncertainty.

Aussie Dollar/Japanese Yen

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 17, 2012

UK & Europe momentum rising

Dow Jones Europe Index is headed for a test of the long-term descending trendline at 240. Upward breakout would support the bullish divergence on 63-day Twiggs Momentum, indicating a primary up-trend. Breakout above 265 would confirm. Respect of resistance at 240, however, would warn of another test of primary support at 210.

Dow Jones Europe Index

The FTSE 100 penetrated its descending trendline, suggesting that a bottom is forming. Retracement that respects support at 5250 would confirm. Recovery of 63-Day Twiggs Momentum above zero would also favor an up-trend.

FTSE 100 Index

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 16, 2012

A lack of money isn't the problem: it's time to shrink – The Drum – ABC News

Alan Kohler: Debt was built up through 30 years of current account imbalances after currencies were finally unshackled from the gold standard in 1971, and the depression of the 70s came to an end in 1982.

Central banks, principally the Federal Reserve, complied in the process of debt build-up by holding down interest rates and allowing asset prices to rise, keeping balance sheets in the black.

The credit crisis of 2007-08 brought asset prices down rapidly and rendered banks suddenly insolvent, so they had to be recapitalised by governments. Now the governments of Europe, the US and Japan are insolvent, and the only question is when the central banks will monetise their debt – that is, print more money and buy their debts…..

via A lack of money isn’t the problem: it’s time to shrink – The Drum – ABC News (Australian Broadcasting Corporation).

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 12, 2012

Forex: Euro, Pound Sterling, Canadian Loonie, Australian Dollar and Japanese Yen

The Euro broke medium-term support at $1.23, signaling a test of the 2010 low at $1.19/$1.20. Declining 63-day Twiggs Momentum warns of a strong down-trend. Breach of the 2010 low becomes likely if the ECB had to indicate an intention to directly or indirectly purchase government bonds — and would suggest a long-term decline.

Euro/USD

Pound Sterling broke through €1.26 against the Euro and is now retracing to test the new support level. Rising 63-day Twiggs Momentum indicates an accelerating up-trend. Respect of support is likely and would offer a target of €1.29.

Pound Sterling/Euro

* Target calculation: 1.26 + ( 1.26 – 1.23 ) = 1.29

Canada’s Loonie is weakening against the Aussie Dollar but long-term bullish divergence on 63-day Twiggs Momentum (and breach of the descending trendline) warns of reversal to an up-trend. Breakout above parity would confirm.

Canadian Loonie/Aussie Dollar

The Aussie Dollar broke support at $1.02 USD and its recent broadening wedge on the 2-hour chart. Expect a decline to $1.01; confirmed if short-term support at $1.015 is broken.

Aussie Dollar/USD

* Target calculation: 1.02 – ( 1.025 – 1.015 ) = 1.01

A long-term chart shows the US dollar forming a bottom against the Yen after long-term bullish divergence on 63-day Twiggs Momentum and breach of the descending trendline. Breakout above the current descending trendline and resistance at ¥80 would indicate another test of ¥84/¥85, while breach of that level would confirm a primary up-trend.

Aussie Dollar/Japanese Yen

* Target calculation: 84 + ( 84 – 78 ) = 90

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 7, 2012

Roubini Says 2013 `Storm' May Surpass 2008 Crisis

Nouriel Robini on Bloomberg TV: The Euro summit was a failure… markets were expecting much more. Either you have debt neutralization [EFSF purchases of government bonds] or debt monetization by the ECB or EFSF/ESM be doubled or tripled using leverage ….or you will have a worse crisis in the next few weeks.

The ability of politicians to kick the can down the road will run out of steam in 2013…..next year could be a global perfect storm

Bloomberg TV: Roubini Says 2013 `Storm’ May Surpass 2008 Crisis

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.