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Post by jeffolie on Aug 19, 2013 7:10:49 GMT -6
Aug. 19, 2013 German election will settle nothing on euro’s fate Commentary: All decisions put off until after Merkel’s victory(MarketWatch) — German parliamentary elections are less about kicking government chiefs out of office, more about establishing grand and persistent political trends. We will almost certainly see a similar pattern on Sept. 22 in the 18th German federal election since the establishment of the post-war Federal Republic. Chancellor Angela Merkel, in power since 2005, seems 90% likely to be returned as Germany’s leader, on track to become the country’s third longest-serving chancellor (after Helmut Kohl and Konrad Adenauer) since 1949. But Germany’s welcome political stability doesn’t mean that the election outcome will have no impact on financial markets. Angela Merkel is almost certain to win re-election next month.
Then what? The lesson of recent decades is that European financial problems arise not during times of general economic stagnation, but instead coincide with periods when Germany is growing at a significantly higher rate than its peers. German elections, too, often have a significant impact on the continent’s financial fortunes. So the official ending of the 18 month-long euro-area recession signaled by European statistics last week is not unequivocally good news for the overall health of the euro EURUSD +0.07% . If German economic conditions demand higher interest rates in the core country of the euro, at a time when much of the rest of the continent is still stuck in a downturn, then that will be another big test for euro cohesion. Positive economic figures, and near-full employment in Germany, give Merkel a considerable fillip. The opposition Social Democrats, campaigning under former Finance Minister Peer Steinbrueck, are struggling in the opinion polls, reflecting voters dislike of their leftward tilt in economic policies and particularly their pledge (although softened in recent days) to increase taxes. Merkel’s reign looks set to continue either at the helm of the present coalition between her conservative Christian Democrats with the liberal Free Democrats (the most likely outcome), or in a grand coalition with the Social Democrats. That would be the result if the Free Democrats fail to reach the threshold of 5% of votes needed to secure parliamentary representation. A likely Merkel triumph would confirm the generational tendencies that sweep across German politics. A two-decade spell of Christian Democrat dominance after 1949, mainly under Adenauer, gave way to 13 years of Social Democrat stewardship between 1969 and 1982 — and then 16 years of Chancellor Kohl. Gerhard Schroeder, the Social Democrat leader who presided over Germany’s successful economic restructuring a decade ago, was in power for seven years. Merkel looks likely now to chalk up at least a decade of political leadership, entering the history books for longevity behind Kohl and Adenauer. Peer Steinbrueck has run a baffling campaign for chancellor as the head of the Social Democrats. But there will be little time to enjoy the victory champagne. On the euro bloc, Germany is deliberately postponing until after the election any deliberations on long-running problems, particularly on a further write-down of government borrowing totals for Greece (and possibly other hard-hit European debtors) to fulfil the International Monetary Fund’s well-publicized conditions on debt sustainability for these countries. Merkel and her allies seem to be banking on U.S. growth and, no doubt, a stronger dollar DXY -0.04% (helping European exports, as was the situation in the late 1990s just before the euro came into force) to help out the European economy. That’s optimistic, to say the least. In the past, German elections have represented turning points for financial markets. The landmark d-mark revaluation of 1969 took place just after an election, leading to the demise of Kurt-Georg Kiesinger as chancellor. Kohl’s confirmation in the March 1983 election was followed by a major realignment in the European Monetary System. Another d-mark revaluation took place just before the January 1987 poll. Another Kohl win, in the first elections for united Germany in 1990, was followed by the spending excesses on German unification that led directly to the foreign exchange upsets of 1992-93. Schroeder’s second victory in 2002 paved the way for his Agenda 2010 policies that eventually exposed the competitive gulf that was opening up, unseen by many observers, in the euro bloc. Click to Play The German election's lone voice against the euro A new party called the Alternative for Germany is a lone voice in the national election campaign challenging Europe's common currency. Anton Troianovski talks to its founder, Bernd Lucke. This time may be another watershed. Leading German ministerial figures (and the Bundesbank) are speaking privately about an inconvenient truth — the need for a further Greek write-down in 2014 — where both the European Central Bank and other central banks would have to take a hit on their holdings of Greek bonds. In election statements and speeches, both Merkel and Steinbrueck (the former, quite legitimately, the latter, totally bafflingly) are playing down the Greek write-down scenario. Meanwhile a top adviser to the German finance ministry, Max Planck Institute economist Kai Konrad, told Die Welt newspaper over the weekend that he expects the breakup of the euro area. Konrad has made this type of comment before and this is clearly not an official statement. Nonetheless, the timing of the interview is somewhat odd. Merkel goes into the election the clear favorite, and Germany’s economic performance is providing strong backing to her candidature. Low inflation, low interest rates, low unemployment and reasonable growth represent a dream scenario for re-election. In a year or so, and depending on how the Germans react to the coming Greek write-down, the environment may look a lot less benign. www.marketwatch.com/story/german-election-will-settle-nothing-on-euros-fate-2013-08-19?link=MW_home_latest_news
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Post by jeffolie on Aug 19, 2013 7:13:51 GMT -6
The swoon now documented in Housing Industry validates, confirms my jeffolie view of 2013's economics plus politics. THE HOUSING SWOON, COLLAPSE OF 2013 my jeffolie view featured that normal seasonality would work in 2013 and not be overriden by bigger influences in 2013. The below piece documents the collapsing stock prices for housing industies corporation peaking exactly as predicted for the normal seasonality season. Impact: Jobs destroyed and seasonal commodities including metals my jeffolie view featured a serious and significant decline in lumber, copper and SILVER UNDER $20 ... all came true. Jobs in the construction and related supplies & materials industries have swooned as impacted as predicted. OVERALL JEFFOLIE VIEW OF 2013 ... see Jan 1 Predictions thread Overall my jeffolie view of 2013 featured a gridlock, slow GDP and lifestyle decline compared to last year of 2012. Overall my jeffolie view of 2013 featured a calm, slow decline until potential 'political event triggers' after the German Elections of Sept 22. Overall my DANGER ZONE of a 'political trigger' remains from Sept 22 through the Spring of 2014.
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Post by jeffolie on Aug 20, 2013 10:45:32 GMT -6
8/20/2013 Surprise Awakening Awaits Merkel in September Election: No Stable Government In response to my August 13 post Tale of Colours, All in Denial; Assessing Merkel's Chances reader Bernd from Germany (not AfD chairman Bernd Lucke) offered these comments ... Hello Mish
Main stream parties have had success pushing AfD into the “right wing” corner. It would appear that many voters or potential voters are “embarrassed” to be seen in that environment, rightly or wrongly. As is tradition in Germany, under such circumstances potential voters will lie to polls and pollsters.
Internal polls by AfD – professionally done by independent pollsters – show AfD consistently at above 8%. Correspondingly CDU/CSU is lower by approximately that same figure.
I do not say AFD will be in the next Parliament with 8% of seats, however, I believe AfD will do a lot better than expected by anyone in main stream at this moment. I also believe that “other parties” will clock much better results than polled right now. A party to watch are “Die Piraten”, which are coming out of their very low figures.
If there is a considerably higher voter turnout than expected (expected is 60%), it might be a “blood bath” for main stream parties. Please note: there are about 20 additional parties on the election ticket, more than at any time before. If 2 of them get 4% and the remainder each get 0.5% you will have 17% of voters not represented in Parliament due to Germany’s 5% hurdle. If that outcome comes true, all current predictions are out the window, irrespective of who made them, especially for coalition possibilities.
I maintain it will be a surprise awakening by Mm Merkel and her CDU/CSU as well as by many other “main stream” parties. I stick to my predictions made months ago. There will be no stable Government in Germany after the elections, save for the CDU/CSU-SPD one (grand coalition). I doubt such a coalition can happen under Mm Merkel’s leadership.
Best wishes Bernd AfD appears unlikely to get to the 10% I thought possible a few months ago, but even 5% will prove very problematic to Merkel, even more so if FDP does not get the 5% it needs.
The September election will be interesting to say the least. Mike "Mish" Shedlock Read more at globaleconomicanalysis.blogspot.com/#01GtgeCOFskuYDvk.99
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Post by jeffolie on Aug 25, 2013 6:53:44 GMT -6
Merkel ally fuels Greek aid row before election ReutersReuters – Sat, 24 Aug, 2013 BERLIN (Reuters) - Germany's commissioner to the European Commission said on Saturday he expects a new bailout for Greece to amount to a little more than 10 billion euros, fuelling a debate that could hurt Chancellor Angela Merkel in next month's election. Although Guenther Oettinger, EU Energy Commissioner, does not deal directly with euro zone debt issues, his comments are the most concrete about the likely size of any new bailout from a senior German politician since the issue burst into the election campaign last week. Finance Minister Wolfgang Schaeuble provoked a storm by saying more explicitly than before that Greece would need a third bailout, going much further than Merkel had done. The government has since sought to play down his remark. Oettinger, a member of Merkel's conservatives, said he thought another package for Greece would be significantly smaller than the second bailout. "It will be a manageable sum. I personally expect the figure to be a little over 10 billion euros. The program should cover the years 2014-2016," he told the Welt am Sonntag weekly. He added that it had not been necessary to bring up the thorny question of Greek aid so soon before the election. Opposition parties have seized on Schaeuble's comments, saying Merkel has been hiding the risks of more aid before the September 22 election in which she is tipped to win a third term. As Europe's largest economy, Germany has the biggest exposure to Greece and voters are reluctant to provide more aid. Pollsters say Merkel could lose votes if people think she is being less than open about the Greek risks. Merkel's conservatives have a lead of at least 15 points over the SPD, but it is unclear whether she will win sufficient votes to continue her center-right coalition with her preferred partners, the Free Democrats (FDP). Analysts have long predicted Greece will need more aid, albeit on a smaller scale than previous bailouts totaling about 240 billion euros. The IMF estimated last month Greece would face a funding gap of nearly 11 billion euros for 2014-2015. Merkel and Schaeuble have repeatedly ruled out a debt writedown for Greece, but Oettinger said the possibility should not be excluded forever although it was not a question for now. In an interview with Wirschaftswoche weekly, Schaeuble reiterated that it was still too early to say what aid might be needed after the current Greek program expires in 2014 but that the possibility of a financing gap had never been hidden. "Citizens should know that there are no secret plans for after the election and that we are not delaying any decisions in Europe because of an election in Germany," he said. Schaeuble also said it would be a priority after the election to push through plans to cut income tax which had been blocked by the opposition in the Bundesrat upper house. Merkel's government has long wanted to stop the effects of "cold progression" under which tax thresholds are not adjusted for inflation. That means workers with pay rises can see their net pay fall because they have entered a higher tax bracket. ca.news.yahoo.com/merkel-ally-fuels-greek-aid-row-election-123913369.html
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Post by jeffolie on Sept 4, 2013 16:19:55 GMT -6
www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/08-2/20130904_Merkel1.pngIs This The Chart That Has Spooked German Stock Bulls? 9/04/2013 After strong performance for the last 3 months as investors around the world turn their eye towards Europe as the hot-money inflow area for clean dirty shirt macro tourists, the core of Europe's hope, Germany, has seen its equity market stumble a little recently. Since Monday alone, the DAX is down 2%, underperforming such stalwart economies as Spain and Greece. The reason, aside from international money flows and "war-" and "Taper"-premia, appears to be worries that Merkel may be losing popularity. After 17 million watched the German debates on Sunday night, opinion polls show Merkel's opposition, Peer Steinbruck, surged in popularity... Via Open Europe,
The debate only briefly touched on the Eurozone crisis and EU policy, with Steinbrück criticising Merkel’s policy over Greece in particular. Though some Anglo-Saxon commentators have written this up as the SPD candidate “criticising austerity” , in fact, he was more criticising the pace of austerity and its balance with more 'growth orientated' policies – not austerity itself.
As we've argued before, you just don’t criticise Sparpolitik in Germany – next to plagiarism, this is the best way to end a mainstream political career. Steinbrück did, however, criticise the pace and scale of Merkel’s austerity policies, again repeating his calls for an as yet very vague new “Marshal Plan” for Europe. “There must be budget consolidation”, he said, but must not be “a deadly dose”. Merkel hit back, saying that if, as Steinbrück claims, the need for a third Greek bailout is a sign of her Eurozone policies failing, why did he and his party vote in favour of all the bailouts so far?
So who won the debate?
The view in the German media and commentariat seems to be pretty unanimous that though the debate itself was pretty much a draw... However, Steinbrück saw a major boost to his head-to-head ratings. An ARD poll has a massive swing in favour of Steinbrück on the question: who would you vote for if the Chancellor could be elected directly? So is that what is spooking the long-term bulls that their money-fairy Merkel may not be as beloved as everyone assumes? www.zerohedge.com/news/2013-09-04/chart-has-spooked-german-stock-bulls
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Post by jeffolie on Sept 14, 2013 8:09:00 GMT -6
September 13, 2013 Political Poker in Germany; Grand Coalition Possibilities Increase On several occasions I stated there would not be a "grand coalition" following the next Germany election. The "grand coalition" is defined as a Merkel's CDU/CSU party forming an alliance with the opposition SPD party. The reason I came to that conclusions for five reasons. 1.The leader of SPD ruled out a grand coalition 2.The eurosceptic AfD party was (and still is) likely to make parliament 3.There is a chance SPD + Greens + the Far Left (Die Linke) could put together an unstable majority 4.CDU/CSU + AfD (with or without FDP) could form a stable coalition 5.Even if the grand coalition thesis had the highest probability, the odds were still under 50% Odds Change I am not changing my prediction, but I am changing the odds. When the data changes, you have to reconsider. And the data changed. SPD leader Peer Steinbrück has changed his mind about entering a grand coalition.
Via unmodified choppy Google-Translate from Der Spiegel, please consider Discussions about possible grand coalition: Steinbrueck rises leadership. The goal of Peer Steinbrueck choice is clear: The SPD's top candidate wants after the election on 22 September chancellor of a red-green coalition will. Should there not be enough for it, he has a cabinet post in a grand coalition with the CDU have always excluded. Nevertheless Steinbrueck wants to be in the event of an election defeat SPD negotiator in talks with the Union.
"I'll stay in the driver's seat after the election," the challenger Angela Merkel said after SPIEGEL ONLINE information on recently familiar. Even if it is not enough for red-green, wants Steinbrueck the possible coalition negotiations with the CDU and CSU say in authoritative. Political Poker Was Steinbrück lying then, or now? Or both? Is this a game to win votes? Or a real change of heart? Or no change of heart, just a lie the entire time? Quite frankly, I do not know. What I do know is that, in general, politicians will lie cheat and steal to stay in power. Should the opportunity present itself, would Steinbrück enter a coalition with Die Linke even though he said he wouldn't? Why not? He said he would not enter one with CDU/CSU and changed his mind. Might not he do so again? Might this all be a game of political poker? Perhaps Steinbrück is angling for a small CDU/CSU turnout – hoping all the SPD voters show up. Regardless, there is some chance Steinbrück really did change his mind. And if so, the odds just shifted. How much I do not know. For now, I am still sticking with "no grand coalition", even though the odds of a "grand coalition" just got better, perhaps on a political bluff. Mike "Mish" Shedlock globaleconomicanalysis.blogspot.comRead more at globaleconomicanalysis.blogspot.com/#qSQhHtFehW2Hm4iz.99
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Post by jeffolie on Sept 14, 2013 8:20:30 GMT -6
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Post by unlawflcombatnt on Sept 14, 2013 11:09:16 GMT -6
I don't know that much about German politics.
And though the subject of the "Euro" may not directly apply here, I'd still like to briefly mention it.
Germany benefits from the existence of a common currency for Europe (i.e., the Euro), because its value is lower than it would be for a solely German currency.
Currency values are strongly related to the GDP of the countries using them. Since Germany's GDP is much higher than most other Eurozone members, a German-only currency (e.g., the Mark)would be much higher in value than the Euro. This would make German exports more expensive to other countries, thus reducing German exports.
But since the value of Euro is related to the GDPs of all Euro-using countries-- all with lower GDPs than Germany-- it suppresses the value of the currency that Germany actually uses (the Euro).
Germany's exports would decline if it used a Germany-specific currency.
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Post by jeffolie on Sept 15, 2013 6:32:20 GMT -6
I don't know that much about German politics. And though the subject of the "Euro" may not directly apply here, I'd still like to briefly mention it. Germany benefits from the existence of a common currency for Europe (i.e., the Euro), because its value is lower than it would be for a solely German currency. Currency values are strongly related to the GDP of the countries using them. Since Germany's GDP is much higher than most other Eurozone members, a German-only currency (e.g., the Mark)would be much higher in value than the Euro. This would make German exports more expensive to other countries, thus reducing German exports. But since the value of Euro is related to the GDPs of all Euro-using countries-- all with lower GDPs than Germany-- it suppresses the value of the currency that Germany actually uses (the Euro). Germany's exports would decline if it used a Germany-specific currency. I agree ... Germany benefits by exporting under the euro Merkel and the main stream, status quo German economy will suffer export declines if the EU implodes resulting in the reorganized North EU countries becoming less profitable. my jeffolie view: continues to place Germany in a Death Spiral including the SWAG that the EU will implode ... for a long time my 'Danger Zone' time period did not begin until after the Sept 22, 2013 election
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Post by jeffolie on Sept 15, 2013 16:52:34 GMT -6
Strong Showing for Merkel’s Conservative Allies in Bavaria September 15, 2013 BERLIN — Chancellor Angela Merkel’s conservative allies appeared set to capture an absolute majority in Germany’s economically powerful state of Bavaria on Sunday, according to exit polls conducted by the country’s two main public television networks, in a race that was being scrutinized as an indicator of the country’s mood a week before the national elections. The Christian Social Union, the Bavarian party that governs in partnership with Ms. Merkel’s Christian Democratic Union, had secured around 49 percent of the vote in the 180-seat state legislature, according the exit polls conducted by the networks ARD and ZDF. That result would translate to 102 seats for the conservatives, well above the 91 needed to form a majority government. Under Germany’s election system, voters are able to cast two votes, one for a party and one for a candidate. This can lead to results in which the percentage of voters does not always correlate directly with the number of seats a party wins. The conservative parties’ main rivals, the Social Democrats, were projected to win about 20 percent of the vote on Sunday. “The year 2008 is history. We are back,” a beaming Horst Seehofer, Bavaria’s state premier and leader of the Christian Social Union, said minutes after the first exit polls were announced. The party’s lead was clear enough to be proclaimed a victory, although initial official results were not expected until much later Sunday. Five years ago, the Bavarian conservatives lost the absolute majority they had enjoyed for 56 years, turning to the pro-business Free Democrats to form a government that mirrored Ms. Merkel’s coalition in Berlin. The Free Democrats won only 3 percent support in Bavaria on Sunday, the exit polls suggested, a bitter loss that is likely to see them ejected from the state legislature. The outcome raised alarm bells in Berlin, where the continuation of Ms. Merkel’s current coalition government is dependent on a strong showing by the smaller party when the country elects a new Parliament on Sept. 22. The Free Democratic Party has also been struggling at the national level. Despite Ms. Merkel’s comfortable lead in the polls over her main rival, Peer Steinbrück, concerns are growing that she may have no choice but to try to form a government with his center-left Social Democratic Party if the Free Democrats fail to make the crucial 5 percent threshold for the national Parliament, the Bundestag. The Free Democratic Party’s leader, Philipp Rösler, sought to rally supporters across the country by singling out Bavaria as unique. “We all know that things are different in Bavaria, and from now on, it’s all about Germany,” Mr. Rösler said, adding that “this result is a wake-up call.” The exit polls showed the Greens receiving about 8.5 percent of the vote, while the Free Voters, a Bavarian party that opposes Germany’s euro-zone policy, also was getting about 8.5 percent. The conservatives’ strong showing will not necessarily translate into equal success for Ms. Merkel next week. There is some fear that Bavarians, who make up Germany’s second-strongest voting bloc, could be less inclined to go to the polls two weeks in a row. In addition, an overly strong showing by Mr. Seehofer could prove problematic for Ms. Merkel even if she is returned to office. His interpretation of conservatism has remained more traditional, while Ms. Merkel has steered her party toward more leftist issues, like creating more publicly run day care centers and deciding to shutter Germany’s nuclear power plants. While Bavaria’s capital, Munich, has become a diverse metropolitan area, home to some of Germany’s most powerful industrial and high-tech companies, much of the rest of the state is rural and socially conservative. The area still holds strong ties to the Roman Catholic Church and its unique cultural identity, stemming from its history as an independent kingdom. Bavaria has the lowest unemployment rate of Germany’s 16 states, with only 3.8 percent of its 12.5 million inhabitants out of work, and there has been growing unease in the state with Germany’s system under which economically stronger states distribute some of their tax earnings among weaker regions. www.nytimes.com/2013/09/16/world/europe/strong-showing-for-merkels-conservative-allies-in-bavaria.html?_r=0
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Post by jeffolie on Sept 16, 2013 5:55:26 GMT -6
The German stock index hit NEW HIGHS this morning ... 1 week before the election Coincidence? Manipulation to assist election of Merkel?
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Post by jeffolie on Sept 19, 2013 5:31:32 GMT -6
The German stock index hit NEW HIGHS this morning ... 3 days before the election Coincidence? Manipulation to assist election of Merkel? ============================ Sept. 19, 2013 German DAX at record as Europe stocks rally LONDON (MarketWatch) — Europe’s benchmark stock index was on track for its highest close in more than five years Thursday after the U.S. Federal Reserve, in a surprise move, didn’t announce a cut in its monthly asset purchases. The Stoxx Europe 600 index /quotes/zigman/2380150 XX:SXXP +0.95% rallied 0.9% to 316.18, while Germany’s DAX 30 index /quotes/zigman/2380246 DX:DAX +1.13% jumped 1.2% to 8,736.95, trading at an all-time high. The U.K.’s FTSE 100 index /quotes/zigman/3173262 UK:UKX +1.48% added 1.5% to 6,656.98 and France’s CAC 40 index /quotes/zigman/3173214 FR:PX1 +0.97% climbed 1.1% to 4,214.75. The solid gains came after the U.S. Fed late Wednesday abstained from reducing its $85-billion-a-month asset purchases and said it would wait for more evidence of economic progress. The central bank cited rising mortgage rates reduced federal spending as headwinds that “could slow the pace of improvement in the economy.” “This move by the Fed comes as a shock to investors who had positioned themselves and effectively accepted that Chairman Bernanke would start the reduction,” said Alex Conroy, financial sales trader at Spreadex, in a note. U.S. stocks closed at record levels after the Fed call, and stock futures pointed to a higher open on Thursday. Bloomberg Fed Chairman Ben Bernanke The decision also boosted gold and silver prices, triggering a rally for Europe’s precious miners. Polymetal International PLC /quotes/zigman/7150988 UK:POLY +10.55% surged 10%, Randgold Resources Ltd. /quotes/zigman/349729 UK:RRS +7.82% jumped 7.8% and Fresnillo PLC /quotes/zigman/510593 UK:FRES +5.26% gained 4.9%. Banks were gained, with Intesa Sanpaolo SpA /quotes/zigman/172768 IT:ISP +3.47% up 3.5% in Milan, Standard Chartered PLC /quotes/zigman/22532 UK:STAN +4.16% climbing 4.1% in London and Deutsche Bank AG /quotes/zigman/207036 DE:DBK +1.33% /quotes/zigman/207002/quotes/nls/db DB +0.02% ticking 1.4% higher in Frankfurt. Among other notable movers in Europe on Thursday, shares of Roche Holding AG /quotes/zigman/278482 CH:ROG +0.84% gained 0.8%. A report in Dealreporter said the Swiss drug maker was eyeing a takeover of U.S.-listed BioMarin Pharmaceutical Inc. /quotes/zigman/64370/quotes/nls/bmrn BMRN +11.10% . A representative from Roche declined to comment on the report, while BioMarin wasn’t immediately available for comments. The broader markets shook off downbeat retail data from the U.K., showing sales dropped 0.9% in August after a solid 1.1% rise in July. Meanwhile, a monthly survey from the Confederation of British Industry showed U.K. manufacturers are the most upbeat in 18 years. www.marketwatch.com/story/europe-stocks-rally-as-fed-abstains-from-tapering-2013-09-19?link=MW_home_latest_news
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Post by jeffolie on Sept 20, 2013 6:59:07 GMT -6
Bullard: Taper possible in October Sept. 20, 2013 (MarketWatch) -- The Federal Reserve could begin to slow asset purchases at its October meeting depending on economic data, said St. Louis Fed President James Bullard Friday on Bloomberg Television. "October is a live meeting," he said. "This was a close decision here in September, so it's possible you get some data that change the complexion of outlook and make the committee be comfortable with a small taper in October." www.marketwatch.com/story/bullard-taper-possible-in-october-2013-09-20?link=MW_Nav_FP============================================= Quad Witching Day Has Quiet Start 09/20/2013 It has been a quiet start to Quadruple Witching Friday (expiration of stock index futures, stock index options, stock options and single stock futures) but expect that to change, as erratic price action is a recurring hallmark of Quad Witches, especially with persistent low volume and markets that tend to shut down for no reason. So far stocks have traded steady in Europe this morning, credit spreads widened and Bunds traded in positive territory as market participants positioned for the much-anticipated German elections which are to be held on Sunday, with exit polls to be made available after the close of polling stations at 6pm local time. Ahead of that, and as reported here previously, Germany’s AfD Eurosceptic party could win enough support in the general election on Sunday to gain seats in the German Bundestag, an opinion poll published for a leading newspaper has forecast for the first time. Basic materials and utilities underperformed in Europe, with RWE trading sharply lower in Germany after the company announced plans to cut its dividend by half (and with the Adidas fiasco yesterday, one wonders just how bad things in Europe really are). Moments ago, European banks surprised market watchers after they announced plan to repay €7.91b in the two 3Y LTRO loans next week, much higher than the expected €2.5 billion in combined repayments, which was the highest weekly repayment since May 29. This sent the 1y1y EONIA swap higher following a drop lower, paring gains to hit 41bps from 38.5bps before ECB announcement. It also pushed the EURUSD higher by 30 pips from 1.352 to the mid 1.35s. Should this pace of liquidity withdrawal accelerate, excpet the ECB to do the counterintuitive and force yet another LTRO down the throats of European banks who are making it quite clear they have zero interest in the current reverse carry trade arrangement. Out in India, the RBI surprised everyone when in an ongoing attempt to both fight inflation, and keep the market liquid, it both raised the repo rate by 25 bps in a surprising move, while cutting the marginal standing facility by 75 bps to 9.50%. More on this shortly. Turning to the day ahead, there isn’t very much on the economic calendar but there will be a full buffet of Fed talking heads justifying why the Fed did a U-turn on taper and shocking the market. The relatively hawkish Esther George from the Kansas City Fed will be speaking, as will Fed Governor Tarullo and the St Louis Fed’s Bullard (all are FOMC members). Minneapolis President Kocherlakota speaks in New York today as well.
Overnight highlights bulleting from Bloomberg and RanSquawk: •Treasuries higher, with 10Y notes headed for biggest weekly gain in two months after the Fed refrained from tapering; 5Y yields fell 22.6bps, 7Y 19.8bps. •$27.5b of USD investment-grade bonds priced this week, including $15.3b yesterday, as issuers took advantage of lower rate structure; Trace reported trading volume of $17.4b yesterday, led by Verizon’s new 30Y •Heavy slate of Fed speakers today, with St Louis Fed’s Bullard on Bloomberg Television at 7pm, George and Kocherlakota in early afternoon •India’s central bank Governor Raghuram Rajan surprised analysts by raising the benchmark interest rate in his first policy review, seeking to rein in inflation that’s hurt the poor and dimmed economic prospects •Fed watcher Hilsenrath said Fed officials created new uncertainty about further push of easy-money policies and that the Fed's action is the latest in a series of communications missteps. •Germany’s AfD Eurosceptic party could win enough support in the general election on Sunday to gain seats in the German Bundestag, an opinion poll published for a leading newspaper has forecast for the first time. Polls suggest the election is Merkel’s to lose; Schaeuble may hold on to his post as finance chief. Election preview here •The U.K. Independence Party, which wants Britain to leave the EU, plans to put up a candidate for every parliamentary seat in the 2015 election in a bid to maximize support, its leader Nigel Farage said •Britain’s budget deficit narrowed in August as tax income rose and the government cut spending •The same federal contractor that vetted Edward Snowden, who leaked information about classified U.S. spying programs, also performed a background check that let the Washington Navy Yard shooter obtain a security clearance •The EPA is scheduled to unveil limits on greenhouse gas emissions from coal-fired power plants, a signature element of Obama’s plan to curb climate change; the industry claims rules will be so costly that no new plants will be built •Sovereign yields mixed. EU peripheral spreads widen. Nikkei -0.2%; Hong Kong, China and Taiwan closed for holiday. European stocks mostly higher, U.S. equity-index futures gain. WTI crude and gold fall, copper rises Asian Headlines BoJ's Kuroda said he hopes upward pressure on JGB yields is offset from Japan's economic improvement and rises in overseas yields. Kuroda added that long-term inflation expectations, not just underlying CPI must be around 2% for BoJ policy objective to be met. EU & UK Headlines Germany’s AfD Eurosceptic party could win enough support in the general election on Sunday to gain seats in the German Bundestag, an opinion poll published for a leading newspaper has forecast for the first time. According to the report, if the Alternative für Deutschland party (AfD) can cross the 5% hurdle to enter parliament, it would almost certainly mean German Chancellor Merkel would be forced to negotiate a grand coalition with the centre-left Social Democratic party. (FT-more) The German finance ministry said that hard industrial indicators showed a weaker start to Q3 and that German Q3 economic growth is weaker than Q2. ECB's Liikanen said the worst may be over and that he sees 'soft signs' of Euro area economic recovery. Liikanen further added that the ECB's accommodative policy supports the economy. The ECB said that banks are to repay EUR 2.65bln from 1st 3y LTRO and EUR 5.26bln from 2nd LTRO. According to latest polls, it was expected that banks would repay just EUR 1.0bln in the 1st LTRO (low estimate of EUR 0.2bln and high estimate of EUR 2.0bln) and EUR 1.50bln in the 2nd LTRO (low estimate of EUR 0.15bln and high estimate of EUR 3.00bln). UK Public Finances (PSNCR) (Aug) M/M -3.0B vs. Exp. 5.2B (Prev. -19.6B, Rev. -21.1B) - UK PSNB ex Interventions (Aug) M/M 13.2B vs. Exp. 13.3B (Prev. 0.1B, Rev. 0.2B) - UK Public Sector Net Borrowing (Aug) M/M 13.2B vs. Exp. 13.3B (Prev. 0.5B, Rev. 0.7B) - UK PSNB ex Royal Mail, APF (Aug) M/M 11.5B vs. Exp. 11.9B (Prev. 1.6B, Rev. -1.1B) Fed watcher Hilsenrath said Fed officials created new uncertainty about further push of easy-money policies and that the Fed's action is the latest in a series of communications missteps. Hilsenrath also commented that officials sent a clear message on Wednesday about how they see short-term interest rates moving in the years ahead with the bottom line being not much at all, adding that with the new vaguer guidance, the outlook for the Fed's balance sheet is now a bit less clear. Equities Although stocks traded steady in Europe this morning, credit spreads widened and Bunds traded in positive territory as market participants positioned for the much-anticipated German elections which are to be held on Sunday, with exit polls to be made available after the close of polling stations at 6pm local time. Basic materials and utilities underperformed in Europe, while the cautious sentiment supported the move defensive sectors such as health-care. Adidas and RWE led the move lower in German after the world’s second largest sportswear group by sales issued a profit warning, while RWE is reportedly planning to cuts it dividend in response to a slide in profits. FX EUR/USD and GBP/USD traded steady this morning as market participants refrained from placing directional bets ahead of this weekend's elections in Germany. Of note, India's new central bank governor has raised key interest rates by 25bps to 7.50% in an attempt to reduce inflation. The cash reserve ratio was kept unchanged. Commodities US Secretary of State Kerry said UN Secretary Council must be prepared to act on Syria next week. Separately, Syria would call for ceasefire at Geneva according to the Deputy PM. Iran offered to help start talks between the Syrian regime and rebels. Iranian President Hassan Rouhani announced his government’s readiness to help facilitate dialogue between the Syrian government and the opposition. The FT's commodity editor tweeted circulating market talk that Exxon Mobil are taking an interest in BP. South African police lied about the Marikana shootings last year, in which 34 striking miners were killed, a commission of inquiry has said. * * * The complete recap of last day's events from DB's Jim Reid: The price action yesterday did suggest that the market is sceptical that the Fed can sustain their decision not to taper for very long. US equities, credit and Treasuries all struggled to follow through their post-FOMC gains. Indeed, the S&P 500 (-0.18% on the day) started the day pushing up towards the 1730 mark before it faded back down to 1720 towards the end of the session. 10 year US treasury yields went out at the highs of 2.75% (+6.4bp) after erasing roughly half of Wednesday’s post-FOMC tightening. In credit, the initial reaction in Europe saw credit indices gap tighter however flows balanced out by the middle of the European session, and indices closed about 1-2bp off the initial tights. EM markets held onto most of Wednesday’s gains but the sentiment there also faded a during the US session typified by the price action in currencies such as the MXN (-0.3%) and BRL (-0.7%). Nevertheless, a number of EM sovereign and quasi-sovereign credits were able to capitalise on the better market sentiment to launch or plan new dollar bond deals including Armenia, Colombia, a Brazilian development bank, and the Hungarian Development Bank. The risk fade during the US session is continuing in Asian markets this morning. However, overnight trading volumes are very subdued due to holidays in Mainland China, Hong Kong, Korea, Taiwan and South Korea (mid-autumn festival celebrations). In addition, Japan enters a three-day weekend starting tomorrow. Those markets that are open are mostly edging lower following Thursday’s FOMC-inspired gains, led by the ASX200 (-0.2%) and the Nikkei (- 0.4%). 10yr UST yields are virtually unchanged (2.74%) as is the USD index (- 0.05%). Yesterday’s US manufacturing, housing and jobs data flow supported those who think tapering is merely delayed to some point later this year. The September Philadelphia Fed survey rose 13.1 points to 22.3 (vs 10.3 expected) which our economists point out is the highest level since March 2011. The underlying details of the report were equally as strong across new orders (21.2 vs. 5.3 previous), shipments (21.1 vs. -0.9), and employment (12.2 vs. -2.6) which all reached new highs for the year. Existing home sales increased 1.7% MoM (vs -2.6% expected) and there was further talk of inventory shortages. Initial jobless claims for the week of September 14 increased +15k to 309k, lower than the 330k expected, but the result was again affected by technology glitches in a couple of States. Coming back to credit, markets will be focused on today’s bi-annual index rolls where major CDS indices in the US, Europe and Asia-Pacific will be transitioning to new on-the-run series. That aside, US credit markets are gearing up for another jumbo bond deal, fresh from last week’s recordbreaking Verizon bond deal which continues to do quite well in the secondary. Just like the Verizon deal, the potential high yield bond deal from Dell will be used to finance a company buyout. According to Reuters, the Dell deal is expected to be north of US$3bn in size, forming part of a $14bn debt financing package for the management-led buyout of the PC-maker for close to $25bn. The deal seems to be well timed with latest retail flows data showing US highyield fund inflows more than doubled this past week, with a $1.4 billion inflow in the week ended Sept. 18 compared to just $632m for the week ended Sept. 11, according to Lipper data. The latest weekly inflow is the biggest in eight weeks, and it takes the four-week-trailing average back into the black, at positive $417m. In Europe, the much-anticipated German elections will be held on Sunday and the press is filled with analysis of potential scenarios ranging an existing Merkel-led conservative coalition; a potential grand coalition with the SPD, and a less market-friendly leftist coalition consisting of the SPD, Greens and Left Party. According to Reuters, for the first time a new German anti-euro party has cleared the 5% threshold for entering parliament, citing an INSA poll for Bild Daily. The poll put Merkel's conservatives on 38% and the FDP on 6%, giving a combined total of 44% - one ppt lower than the total for the three leftof- centre parties. The poll, conducted after last Sunday's state election in Bavaria, gave the eurosceptic Alternative for Germany (AfD) 5%, which is the threshold needed to enter the Bundestag. It put the opposition Social Democrats (SPD) on 28%, the Greens 8% and the hardline Left on 9%.
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Post by jeffolie on Sept 20, 2013 13:22:48 GMT -6
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Post by jeffolie on Sept 21, 2013 5:46:23 GMT -6
The Three Things You Should Know About This Weekend's Big German Elections Sep. 21, 2013 On Sunday, Germany holds national elections. German Chancellor Angela Merkel is widely expected to retain her place at the head of the German government, and financial markets don't seem too worried. However, even though Merkel's job is likely secure, there's a good chance that the elections will result in a different ruling coalition, which could present problems for Germany and for the eurozone. Merkel's current center-right coalition consists of her own Christian Democratic Union (CDU) party, its Bavarian sister party the Christian Social Union (CSU), and the Free Democratic Party (FDP). Though CDU/CSU remains atop the polls, the FDP's share of the vote has been on the wane, casting doubt on a continuation of the current government. If CDU/CSU and FDP combined are unable to gain a majority in parliament, Merkel's party may be forced into a grand coalition with the center-left Social Democratic Party (SDP). Here are the three things you need to know. 1. How the election will impact the eurozoneSociété Générale economist Anatoli Annenkov expects that if the current CDU/CSU coalition with FDP remains in power, Germany will be unlikely to budge from its current approach toward the eurozone. "As the current government has already shown flexibility on Europe – accepting some trade-offs of short-term austerity for long-term structural reform – we see no change in its determination to pursue reform in the crisis-struck countries, nor in its willingness to accept any form of debt mutualisation/forgiveness," says Annenkov. Morgan Stanley economist Elga Bartsch believes there will be "no post-election shift in [the] German stance on euro crisis," regardless of whether the composition of the government changes or not. "Many market participants and political counterparties seem to believe that Germany’s stance on the euro crisis will shift materially after the election," writes Bartsch in a note to clients. "In our view, a major shift on key issues, such as debt relief, joint issuance, or direct bank recaps, is unlikely given public opinion and constitutional constraints in Germany. In fact, we are concerned that a narrow majority for the centre-right may reinforce a relatively tough stance on additional aid."2. What the election will change in Germany"In our view, the election result will have greater implications for domestic than European policy," wrote BofA Merrill Lynch economist Laurence Boone in a report published earlier this month. "Euro-area policies have not been a major issue in the campaign so far," said Boone. "In our view, the main challenge facing the new government will remain the implementation of 'Energiewende' (energy transition). This could significantly impair Germany’s competitiveness and, absenting as yet undebated structural reforms, poses a risk to Germany’s recent economic miracle." SocGen's Annenkov asserts that "Germany will be less stable after the election." "With significant economic challenges ahead, there is a risk of greater political instability in Germany over the coming parliamentary term," says Annenkov. "With significant economic challenges ahead, there is a risk of greater political instability in Germany over the coming parliamentary term. This in turn risks leaving policy uncertainty high in Europe; thereby further negatively affecting German investment and economic activity." The SocGen economist says it would be worse if Merkel's CDU/CSU is forced into a grand coalition with SPD.
"A strong win for the CDU/CSU and FDP should ultimately result in more of the same. Domestically, the government would likely focus on increasing labour supply, reforming energy policy and improving investment conditions in Germany, while we only see limited progress with liberalising service markets," says Annenkov. "In contrast, the opposition is likely to pursue policies that are suboptimal for growth, relying excessively on tax increases to fund social reforms and public investment." 3. What it all means for marketsThe euro is probably the first place investors will be watching for the market's reaction to the outcome of the election. "Re-election of the current coalition would not have a meaningful impact on equity markets but would likely be negative for the [euro]," says Morgan Stanley's Bartsch. " A coalition between CDU/CSU and either Greens or the SPD would be bullish for the [euro]. In rates space, we would expect some spread widening, while outright price action will be dominated by the Fed’s decisions." BofA Merrill Lynch interest rate strategist Ralf Preusser doesn't expect to see much market reaction, regardless of what happens Sunday. "Beyond a short-term, initial reaction we do not see the German election as a major catalyst for markets one way or the other," says Preusser. Knee-jerk reactions could lead to underperformance of Bunds and out-performance of the periphery on election results that suggest a grand coalition is the most likely. A return of the current government would arguably be neutral for Bunds and potentially negative for the periphery, especially if the [Alternative für Deutschland] does well." www.businessinsider.com/the-implications-of-the-german-elections-2013-9?google_editors_picks=true
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Post by jeffolie on Sept 23, 2013 7:04:07 GMT -6
Sept. 23, 2013, 7:22 a.m. EDT Merkel’s big victory leaves her weaker than beforeCommentary: Likely coalition with Social Democrats will be touchy LONDON (MarketWatch) — Six to eight weeks of confusing coalition negotiations lie in store in Germany after Chancellor Angela Merkel’s victory in Sunday’s elections — raising an important hurdle to further measures to reinforce economic and monetary union (EMU). The most probable coalition partner for Merkel’s Christian Democratic Union (CDU) is the opposition Social Democratic Party (SPD), which has generally backed her euro EURUSD -0.30% rescue measures over the last 3 1/2 years. But, paradoxically, the SPD could be a much more troublesome partner in government than in opposition, since the party will be anxious to avoid taking the blame for measures such as expected debt relief for Greece that are bound to be unpopular and costly. German Chancellor Angela Merkel’s victory is bittersweet. Merkel’s better-than-expected victory margin of 16 percentage points over the SPD — taking her to within a few seats from an absolute majority in the Bundestag — is bittersweet. The German leader is at the height of her powers, but in many ways the polling triumph has weakened her. It was achieved at the expense of the demise of her coalition partner of the last four years, the liberal Free Democrats (FDP), which failed to win election to the Bundestag for the first time in post-war Germany. Coalition formation will be impeded by the likely move to the left by the SPD after the party’s defeated election candidate, former Finance Minister Peer Steinbrück, retires from frontline politics as expected. With the CDU’s voting lead over the SPD now the highest since 1957, many of Merkel’s supporters within and outside Parliament will be bitterly reluctant to make concessions to the SPD. The Social Democrats, for their part, which saw its support fall sharply during the last Grand Coalition that ended in 2009, will approach coalition negotiations with skepticism and suspicion — likely to making the process unusually contorted and upset-prone. Whatever the shape of the new government in Berlin, she faces a complicated time in office. The SPD looks likely to expand further its majority in the upper house of Parliament, the Bundesrat. This follows the failure of the CDU-FDP regional coalition government to maintain its majority in an important state election in Hesse yesterday, probably depriving the CDU of power in that state. Click to Play Merkel Searches for a New Coalition PartnerAngela Merkel emerged as the winner of the German election on Sunday, but her coalition partners, the Free Democrats, failed to make the 5% required for parliamentary representation. Matthew Karnitschnig explains what happens next and who is likely to be the chancellor’s coalition partner. Photo: AP In coming months, the present favorable German economic picture of low inflation, low unemployment, low interest rates and reasonable economic growth is likely to give way to a less-propitious environment. The present conjuncture marks Merkel’s golden age. From now on, it all gets much more difficult. Two-thirds of Greece’s 300 billion euros of government debt is owed to official creditors abroad, including various European rescue funds as well as the European Central Bank. So probable debt restructuring for Athens will for the first time require taxpayers in euro countries to take losses, both directly and indirectly (through the need to compensate for the losses taken by central banks). This would be a highly unpopular outcome in Germany, which Merkel so far has made every effort to play down. The other principal European countries subject to emergency credit programs, Portugal and Ireland, will almost certainly also require further official credits next year and may demand, too, a softening of debt conditions. The ant-euro Alternative party (AfD) narrowly failed to win the 5% of votes required for parliamentary representation, but will remain an important thorn in Merkel’s side. The fragmented growth picture in Europe will increase pressure on Germany to take a more activist stance. Profiting from much more diversified trade than most EMU members, Germany is doing relatively well, while peripheral countries are emerging much more gingerly from the downturn. The lesson of recent decades is that European financial problems arise not during times of general economic stagnation, but instead coincide with periods when Germany is growing at a higher rate than its peers. This was the principal factor that caused the epochal currency crisis in 1992-93 immediately after German unification, as well as the upsets in EMU in 2010-11 as Germany led the euro bloc out of the 2009 recession. German elections often have a significant impact on the continent’s financial fortunes. Unpleasant decisions affecting interest rates and currencies are often delayed until after polling day. Merkel and her allies seems to be banking on U.S. growth and, no doubt, a stronger dollar DXY -0.12% (helping European exports, as happened in the late 1990s just before the euro came into force) to help the European economy. That would be the optimistic outcome for the next two years. A more sobering assessment is that capital flowing into the euro periphery over the past 12 months will retreat back to the Germanic euro core in coming months. If that happens, Merkel’s crisis management qualities will be tested anew. www.marketwatch.com/story/merkels-big-vic-2013-09-23?reflink=MW_GoogleNews&google_editors_picks=true
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