The euro-zone PMI for September slid 1.5 points to 49.2, according to data provider Markit, signaling contraction by falling below the 50 mark for the first time since July 2009. The new-orders component of the survey also declined, suggesting further weakness ahead.
Europe falls heavily at open
Dow Jones Europe Index collapsed at the open of European markets, breakout below 225 signaling another down-swing with a target of 185*. 63-Day Twiggs Momentum declining below zero indicates a strong primary down-trend.
* Target calculation: 225 – ( 265 – 225 ) = 185
Euro troubles Pound Swiss Franc
Concerns about its European trading partner dragged the Pound lower against the greenback. Target for the initial primary decline is $1.53*.
* Target calculation: 1.59 – ( 1.65 – 1.59 ) = 1.53
The Swiss Franc is now headed for a test of parity against the greenback, dragged lower by its peg at €1.20.
* Target calculation: 1.20 – ( 1.40 – 1.20 ) = 1.00
Race to the bottom
The euro is outstripping the dollar in their race to the bottom. Having respected resistance at $1.40, breakout below $1.35 would signal a test of the next major support level at $1.30*. The 63-day Momentum peak below zero confirms a strong down-trend.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30
The Next Selling Wave Is About to Begin | Toby Connor | Safehaven.com
As the stock market moves down into the next daily cycle low and the selling pressure intensifies, this should drive the dollar index much higher. It remains to be seen if gold can reverse this pattern of weakness in the face of dollar strength, especially since the dollar will almost certainly be rallying violently during the intense selling pressure that is coming in the stock market.
via The Next Selling Wave Is About to Begin | Toby Connor | Safehaven.com.
When the dollar strengthens, gold normally falls. Except in times of high uncertainty (like the present), when demand for gold as a safe haven overcomes downward pressure from a stronger dollar. Buying gold at current prices is a bet that either Greece will default — a pretty safe bet — or that the Fed is again forced to use its printing press (not quite as certain).
Of course it’s right to ringfence rogue universals – Martin Wolf
Thank you, UBS. As a member of the UK’s Independent Commission on Banking, under Sir John Vickers, I could not have asked for a better illustration of the unregulatable risks to which investment banks are exposed than Thursday’s announcement of a loss of $2bn in “unauthorised trading”. No sane country can allow taxpayers to stand behind such risks.
That is the kernel of the case for ringfencing of retail banking from investment banking, recommended in the ICB’s final report.
via Of course it’s right to ringfence rogue universals – FT.com.
IMF Urges European Banks to Raise Capital – WSJ.com
European banks face about €300 billion about $409 billion in potential losses from the euro-zone debt crisis, the International Monetary Fund said Wednesday as it urged banks to raise capital to protect the global economy from more turmoil.The fund said fiscal strains emanating from weaker euro zone members have had a direct impact of about €200 billion on banks in the European Union since its debt crisis started last year. In addition to the holdings of government debt, lower bank asset prices raised credit risks between banks for an overall hit of €300 billion.
How to Prevent a Depression – Nouriel Roubini – Project Syndicate
The risks ahead are not just of a mild double-dip recession, but of a severe contraction that could turn into Great Depression II, especially if the eurozone crisis becomes disorderly and leads to a global financial meltdown. Wrong-headed policies during the first Great Depression led to trade and currency wars, disorderly debt defaults, deflation, rising income and wealth inequality, poverty, desperation, and social and political instability that eventually led to the rise of authoritarian regimes and World War II. The best way to avoid the risk of repeating such a sequence is bold and aggressive global policy action now.
via How to Prevent a Depression – Nouriel Roubini – Project Syndicate.
Beijing warned on foreign investment – FT.com
China’s refusal to open its economy to foreign investment could backfire by encouraging European politicians to curb Chinese investments on the continent, the European Union’s trade chief has warned.
IMF slashes Australian growth – macrobusiness.com.au
In short, the West must stimulate with a credible longer term deficit reduction plan, the East must dump its mercantilism and banks must be reigned in everywhere. All eminently sane — and the opposite of what’s happening.