Posts Tagged ‘Eurozone’
First the Japanese Yen and then Gold – There is No Safe Haven Currency Panacea

Beware of the one-way, one-speed runaway train! Usually in the normal chain of events the train stops, lets the passengers off, turns around, and starts going the other way. In a rare circumstance, all hell breaks loose and the train can’t be turned around and runs off the track and over the cliff. In the…
Read MoreWhen Greek Debt Servicing Resolves – Spain is the Key to the Eurozone Compact

The Spanish Empire reached the height of its powers in the 1500’s. Naval supremacy, decades of rapidly rising wealth, discovery of gold, and influence over the Catholic papacy led to Spain becoming a dominant world power. It wasn’t until Philip II and The Great Armada’s defeat against the English in the Anglo-Spanish War that Spain’s…
Read MoreSpain & Germany – In Sickness and in Health

The plan forward with the Eurozone crisis is the German plan forward. Germany proposed closer fiscal union and increased austerity for EU-17 nations with high deficits and/or high debt burdens. This path suits German interests well because there is little that needs to be changed. Unfortunately from Spain’s standpoint, the German path forward is not…
Read MoreInvesting Ahead of a European Recession

Investing ahead of a recession is like a trip to the dentist for a filling when the Novocain isn’t quite right. You know you are in for some pain, but it’s unclear just how much, and how long it will last. Europe is accepting the German path forward, which will at a minimum, lead to…
Read MoreThe Rest of Europe Can’t be German

The EU Summit and ECB meeting which transpired last week are likely to be the final supporting actions by Eurozone officials this year. The tack forward for Europe has been clarified; move ahead with the long and arduous process of fiscal unification, supported by a reactive ECB. The path ensures two outcomes; that there will…
Read MoreECB Cuts Rates 25 Basis Points to 1% – Hawkish Press Conference Q&A Squashes Hopes of Sovereign Debt Purchases in Larger Amounts

The ECB issued a terse press release detailing an interest rate cut for the main refinancing operations of the Eurosystem (from 1.25% to 1.0%) commencing on December 14th. In addition, the ECB cut rates on the marginal lending facility and deposit facility by 25 basis points. This move was widely expected and had a limited…
Read MoreMario Monti Announces Serious Austerity Plan for Italy – 2013 Balanced Budget Target Leads to Sovereign Debt Rally

Italian Prime Minister, Mario Monti, announced sweeping austerity measures and reforms, bolstering confidence in Italian sovereign debt markets. Monti’s plan includes tax increases, government spending cuts, pension savings and raising the retirement age. Italy needs to enact these reforms over the next couple of years, and there are some political risks to implementation, but the…
Read MoreISM New Orders – A Strong Indicator of GDP Growth Improved Sharply in November

The financial crisis in Europe detracts from a normal focus on the underlying strength of the US and global economy. Despite the US economy being relatively solid, an escalating Eurozone crisis has the potential to derail economic growth because of the enormity of the impact from a financial seizure. While the solution to the Eurozone liquidity…
Read MoreGermany’s First Failed Bond Auction – The European Crisis Continues to Spread

Germany failed to get bids for 35% of the 10-year bonds auctioned today. Yields are up about 10 basis points this morning. The increase in borrowing cost is insignificant for Germany. Yields are still well below 2%, and Germany continues to benefit from the combination of very low borrowing costs, and a declining euro which…
Read MoreQue Lastima – Spain in a Vice as Interest Rates and Unemployment Soar

I’ve been writing about the impossibility of the ECB running appropriate monetary policy for 17 different nations. The dilemma couldn’t be more evident when contrasting the economy of Spain with the economy of Germany. Spain actually has less sovereign debt relative to GDP than does Germany. The problem for Spain isn’t the level of debt…
Read MoreEurope’s Crisis Spreads as Spain, Belgium, France, the Euro and EU-17 get Questioned – How Does It End?

For a number of months, the financial crisis in Europe has been explained under the guise of sound versus unsound policy. If this were indeed the case, the fix would be simple; eliminate unsound and unsustainable policy and voila, the problems would just go away. European leaders have shifted blame continuously from one problem to…
Read MoreEurope Must Decide Its Future – Self Induced Financial Crisis Has Led Europe to the Brink

After Wednesday’s market action around the world, it’s a good time for a big picture assessment on the state of the financial markets. The attitude out of Europe has pendulated between nonchalance and vitriolic attacks among the EU-17. Italian sovereign rates spiraling above 7% have brought the eleventh hour upon the region. Escalation of the…
Read MoreMarket Confidence in Italy Hits New Lows – Berlusconi to Face New Rounds of Confidence Votes

Italian 10-YR bond yields hit 6.62% this morning, which marks a new high since concerns over the sustainability of European sovereign debt began to unfold. This wasn’t supposed to work this way after the Eurozone leaders announced a new structured investment vehicle to be put in place to leverage up the EFSF. It remains unclear…
Read MoreMagnifico! – Getting to Know Mario Draghi & Analysis of the ECB Monetary Policy Press Conference

The global equity markets have been held hostage by fears of a crisis since the summer. Taking another step back; crisis fears, macro, and policy responses have really been driving all financial markets since the summer of 2008. To be clear, the economy always has a meaningful impact on the investing environment, but the recent…
Read MoreECB Cuts Rates 25 basis points – Dovish Comments From Draghi

The ECB cut interest rates by 25 bps down to 1.25%. This was somewhat of a surprise cut as many expected Draghi to start his tenor by demonstrating some hawkish resolve – consistent with the views of departing ECB President Jean-Claude Trichet. Draghi presents a viewpoint that inflation is expected to fall further while highlighting…
Read MoreWhen Will the Market Start to be Forward Looking – Early Signals from Asia?

The markets have been through a period of wicked volatility with a significant pullback almost to the point of entering a new bear market. Intraday the S&P 500 was down 20% from its high but closed above those levels and went up from there. From the market’s closing bottom of 1,099 the S&P had a…
Read MoreEurozone PMI – Continues to Slow as Europe Bickers

Economies don’t function well in a “crisis steady state”. In Europe, the business environment has been surprisingly good during the third quarter despite what seems like a concerted effort to induce a collapse. A number of consumer and industrial companies pointed out that growth hasn’t fallen off a cliff and if Europe can simply instill…
Read More