National Bank Of Greece And Downgraded Banks Plummet Leading Stocks And Currencies Lower … Four EU Leaders Publish Draft Proposal For EU Banking Union … Soros Calls For A European Debt Union

Financial Market report for June 25, 2012

The National Bank of Greece, NBG, Banco Santander, SAN, Bank of America, BAC, Citigroup, C, Credit Suisse, CS, UBS AG, UBS, Barclays, BCS, Lloyds Banking Group, LYG, Nomura Holding, NMR, Itau, ITUB, Banco Bradesco, Deutsche Bank, DB, led European Financials, EUFN, Emerging Market Financials, EMFN, World Financials, IXG, and US Financials, XLF, lower.

The chart of Brazil’s Itau, ITUB, shows three black crows; this bank is severely decapitalized.  Forbes reports Harder times coming for Brazil, says Bank For International Settlements. Brazil is not going to escape the onrushing collapse of the developed economies, warns the Central Bank of Central Banks, known as the Bank for International Settlements. In its 214 page annual report released over the weekend, BIS said that Brazil, EWZ, and India, INP, would suffer an accentuated decline in economic growth due to the problems in the Western powers, most notably in Europe. (Hat Tip to Between The Hedges). I comment that over the last year the Brazilian Real, BZF, has lost 17% to competitive currency devaluation, the most of any currency.

China Minerals, CHIM, led Aluminum, ALUM, Copper, COPX, Coal, KOL, Uranium, URA, and Rare Earths, REMX, lower. Semiconductors, XSD, Shipping, SEA, Small Cap Energy, PSCE, Energy Service, IEZ, OIH, traded lower. Electric Utilities, SO, DTE, and XEL, led Utilities, XLU, lower.  Smartfone, FONE, Cloud Computing, SKYY, and Networking, IGN, traded lower.

Greece, GREK, Spain, EWP,  and Italy, EWI, led Sweden and South Korea lower. Brazil, EWZ, led the BRICS, EEB lower. Argentina, ARGT, traded lower on the trade lower in its banks, BBVA, BFR, BMA. Reuters reports Coeur d’Alene looking at options for Argentine mine.

The weekly chart of International Telecom, IST, shows the death of money in March of 2011; and weekly chart of Energy Service, IEZ, shows the death of credit, that is debt, in March of 2012.

The chart of the small cap pure value shares, RZV, shows a trade close at 36.17, which is just above the middle of a broadening top pattern going back to May 2006; as Street Authority relates when you see the broadening top, the market will eventually drop.

Through fate, Revelation 2:26-28, and Revelation 6:1-2; and not any human action; the debt trade that underwrote capitalism, is the paradigm of a bygone era.  The new paradigm of debt servitude that is underwriting regional governance is coming to the forefront of a new era of human political and economic activity.

The seigniorage of Neoliberalism, that is the moneyness of the Milton Friedman Free To Choose floating currency regime is history. The seigniorage of Neoauthoritarianism, that is the Guido Westerwelle, ECB, and Troika diktat money system is rising to rule the Eurozone.

China Infrastructure, CHII, and China Industrials, CHIX, traded lower as Marketwatch reports China steel sector slows, profits down. Growth of China’s crude-steel output slowed in the irst five months as demand dropped amid a cooling domestic economy, according to data from the country’s top economic planner. Crude-steel output increased by 2.2% year-on-year to 296.26 million tonnes during the January-May period, down from 8.5% growth during the same period last year, data with the National Development and Research Commission showed. In May, crude-steel output rose 2.5% from a year earlier, 5.3 percentage points lower than last year. Aside from output, the sector’s profits also slipped. Steel producers had profit drop 49.5% from a year earlier to 39.5 billion yuan (6.27 billion U.S. dollars) in the first four months. (Hat Tip to Between The Hedges)

Egypt, EGPT, jumped higher as Edmund Blair and Marwa Awad of Reuters relates Egypt’s new president starts building government.
Mohammed Mursi, Egypt’s first freely elected president whose powers have already been curbed by the army, began work on a coalition on Monday after touring his new palace, once home of Hosni Mubarak who banned his movement for three decades. Declared winner on Sunday a week after a tumultuous run-off vote that pitted him against a former air force chief, the Islamist faces the challenge of meeting sky-high expectations in a nation tired of turmoil while the economy is on the ropes. But his campaign pledge to complete the revolution that toppled Mubarak last year but left the pillars of his rule intact will come up against the entrenched interests of the generals who are in charge of the transition to democracy.

Shortly before the historic presidential vote, a newly elected Islamist-led parliament was dissolved by the army based on a court order, and the generals issued a decree setting limits on the president’s remit, which cuts into Mursi’s powers to act but exposes him to blame for any failures. Critics at home and in the West called it a “soft coup”. One pressing concern – on which many Egyptians are likely to judge his performance – will to be to revive the economy of the world’s most populous Arab nation. Monday’s stock market rally, at least partly fuelled by relief that the vote and result passed off without violence, may encourage the new president, but he still has to prove to wary longer-term investors that Egypt is on the road to recovery. Egyptian newspapers welcomed Mursi’s win over Ahmed Shafik, Mubarak’s last prime minister, as a victory for the people, although many more liberal-minded Egyptians worry his conservative group will slowly whittle away at social freedoms.

An aide said Mursi then went to the Defence Ministry for talks with the head of the ruling military council’s Field Marshal Hussein Tantawi and the army-appointed Prime Minister Kamal al-Ganzouri. They discussed forming a new government at the meetings, which Egyptians will see as a sign that real power still lies with the army. As president, Mursi can appoint the cabinet. His aides say he has already reached out to politicians from outside the Brotherhood such as reformist Mohamed ElBaradei, who has yet to publicly respond. But legislative powers remain with the army while the parliament is dissolved, restricting his power to act. Egypt’s army-appointed government, led by al-Ganzouri who also served in the 1990s as prime minister under Mubarak, submitted its resignation on Monday but was asked to stay on temporarily until Mursi, who has yet to take the oath of office, put a team together, Information Minister Ahmed Anis said “The revolution reaches the republican palace,” wrote Al-Shorouk newspaper. Another, Al-Akhbar, quoted from Mursi’s victory speech: “I am a servant of the people and an employee of the citizens”.

The US Dollar, $USD, and Bonds, BND, rose today, with margined bonds, BOND, and Mortgage Backed Bonds, MBB, rising to new highs. The Interest rate on the 10 Year US Government Note, ^TNX, traded lower to 1.60% as US Government Debt, ZROZ, EDV, TLT, rose … Commodities, DBC, rose as Oil, USO, Timber, CUT, and Base Metals, DBB, traded unchanged, and as the chart of Agricultural Commodities, RJA, JJA, shows their blast higher. Silver, SLV, and Gold, GLD, traded higher from last week’s sell off.

In today’s news

Open Europe relates Four EU leaders publish draft proposal for EU banking union; Greater EU control over spending and taxation demanded by Germany will require Treaty change.
Ahead of this week’s EU summit, EU Council President Herman Van Rompuy, European Commission president José Manuel Barroso, ECB President Mario Draghi, and Eurogroup head Jean-Claude Juncker, have published a draft proposal setting out plans for a banking union including the creation of a single supervisor and rulebook for banks in the EU, and a common deposit insurance and bank resolution fund. Britain and other non-eurozone countries would be free to opt out. The paper also included longer term plans for Eurobonds and a eurozone redemption fund, but admitted that greater EU control over taxation and spending – demanded by Germany before any steps for debt pooling can go ahead – are likely to require EU treaty changes. The draft also calls for the ESM – the eurozone’s permanent bailout fund – to be allowed to lend cash directly to banks.

In an interview with Der Spiegel, German Finance Minister Wolfgang Schäuble conceded that moves towards further political and economic integration would require amendments to the German constitution – which would have to be approved via a referendum – “much sooner than I had anticipated… a few months ago I would have said never in my lifetime, now I’m not so sure”. Schäuble argued that “To date member states have always had the last word on European issues. This cannot remain the case. In important policy areas we need to transfer more competencies to Brussels without every member state being able to block decisions”.

Open Europe’s Director Mats Persson was cited by Polish daily Rzeczpospolita discussing the potential for fiscal and banking union within the eurozone as well as Polish news website Wiadomosci24. Open Europe’s research was also cited by Spain’s Capital Bolsa. EUobserver FT CityAM Irish Times Irish Times 2 Spiegel WSJ WSJ 2 WSJ 3 IHT IHT Reuters FAZ SvD Näringsliv Kathimerini Bloomberg: Johnson Mail Rzeczpospolita

Open Europe relates Poll shows Europeans distrust Greeks; Documents show Greece violated agreements by hiring 70,0000 civil servants in 2010 to 2012.
An Ifop Institute poll of 4,000 people in Germany, France, Spain and Italy showed 78% of Germans and 65% of French people wanted Greece to leave the Eurozone, with 51% in Spain and 49% in Italy also backing a Greek exit. Large majorities in all countries surveyed expect Greece to never pay its debts. Schäuble suggested the poll showed “how much trust Greece has forfeited among Europeans.”

Separately, Greek daily To Vima reports that, according to two separate internal documents,  one from the EU-IMF-ECB Troika and another one from Greece’s interim Finance Minister George Zanias, Greece violated the agreements with its creditors as it hired a total 70,000 civil servants in 2010-2011.

Open Europe relates Bond deal with German länder paves way for approval of fiscal treaty.
At a meeting on Sunday with representatives of Germany’s 16 Bundesländer, German Chancellor Angela Merkel agreed to the introduction of bonds issued jointly by the regional administrations and the federal level government in exchange for their support for ratifying the fiscal treaty in the Bundesrat, the upper house of the German parliament. However the both the fiscal treaty and the ESM treaty will still have to be given the all-clear by the German Constitutional Court. Euobserver EUobserver 2 FAZ Handelsblatt

Open Europe relates In an interview with the BBC’s Andrew Marr show, Tony Blair said, “The only thing that will save the single currency now is a sort of grand plan in which Germany is prepared to commit its economy fully to the single currency”, adding, “If they sort it all out and Europe moves forward again then Britain is going to have a very interesting choice to make”. BBC: Andrew Marr Telegraph Guardian Times Mirror

Euro Intelligence relates El Pais reports Spain’s new toll road schemes face catastrophic losses as the economy goes  from boom to bust.
(I comment that crony capitalist infrastructure investment in Spain led to the construction of ghost roads, ghost cities, and ghost airports, via schemes of municipal lending. New schemes of debt servitude coming through announcement of regional framework agreements will apply debt to all residents of the Eurozone)

Euro Intelligence relates Simon Johnson in Bloomberg article says JP Morgan and US Banks may not survive the collapse of the euro.

Euro Intelligence relates Wolfgang Münchau in FT argues that Mario Monti should stand up to Angela Merkel and say that Italy cannot remain in the euro without joint debt.
It falls to the Italian prime minister to speak truth to power and stand up to Angela Merkel and tell her that the eurozone cannot continue with debt mutualisation. Munchau says the problem is that Germany’s internal debate has gone off in a wrong direction some time ago, and that it will be very difficult for Angela Merkel to do what needs to be done. But she is afraid of an Italian exit. Monti must stand up at the summit and say he cannot remain prime minister if this summit fails to agree a crisis resolution, and that Italy cannot remain a member of the eurozone.

Euro Intelligence relates George Soros in FT says Germany threatens European stability.
A lot is at stake in this week’s European summit. He says that even if a catastrophic accident can be avoided, there is a danger that the eurozone creates its permanent mezzogiorno as debtor countries cannot recover their competitiveness. He makes a concrete proposal to establish a fiscal authority that managers the banking and the fiscal union. This is how it would work: “There is a missing element in the current plans for the June summit: a European Fiscal Authority (EFA) which, in partnership with the ECB, can do what the ECB cannot do on its own. It could establish a debt reduction fund – a modified form of the European Debt Redemption Pact that was proposed by Chancellor Merkel’s Council of Economic Advisors and is endorsed by the Social Democrats and Greens. In return for Italy and Spain undertaking specified structural reforms, the fund would acquire and hold a significant portion of their outstanding stock of debt.”

Reuters relates Greek Finance Minister Vassils Rapano Resigns Over Poor Health, Deepening Debt Crisis.

Ambrose Evans Pritchard writes German Chancellor Angela Merkel has shot down calls for full mobilisation of the eurozone’s bail-out funds to halt the raging bond crisis in Spain and Italy, ignoring unprecedented pleas for action from the International Monetary Fund.as Bloomberg reports Soros warns of Fatal Fiasco unless EU forms joint debt fund.

Bloomberg relates Merkel woos German States to back Fiscal Pact, Spiegel says. Chancellor Angela Merkel is offering federal aid to Germany’s states in a bid to win their parliamentary support for the European Union’s fiscal pact, Der Spiegel reported, without saying how it got the information. Merkel proposed this month that the federal government pick up all of any fine that’s due if Germany’s total public deficit exceeds limits set in the pact, the magazine said today. The federal government normally pays just 65 percent of such fines with the rest falling to the states. Merkel lacks a majority in the upper house of parliament, or Bundesrat, which groups delegates of Germany’s 16 states. Two-thirds majorities in both houses are needed for Germany to ratify the fiscal pact.

The Telegraph relates Germany tells Greece to stop asking for help and start cutting budgets. Germany has told Greece to stop asking for more help and get on with implementing the reforms it has already promised as tensions mount before this week’s crucial summit of European Union leaders.

Zero Hedge reports Wolfgang Schäuble tells Spiegel If a united Europe is to work, there must be an abdication of national sovereignty.  Spiegel asks, With all due respect to your vision, is there truly more willingness today among EU member states to give up sovereignty than there was in the 1990s? Schäuble responds, The recognition that this is necessary, and the willingness to do so, has certainly grown due to the crisis, and not just in Germany. I would much prefer that we not have so many crises, and particularly not such severe ones. But every crisis also includes the opportunity to recognize what is necessary [regarding European sovereignty]. That’s what led to the fiscal pact, in which 25 EU countries pledged to improve their fiscal discipline. And that’s also how the new Europe will come about.” Is it finally becoming clear to even the most inept financial journalists what the German endgame is?

Mike Mish Shedlock relates Capital controls hit Spain.

Lancaster Online relates Foreclosures leave empty eyesores.

IB Times asks Will curbing gold imports save India’s economy?

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