Financial Market report for November 16, 2011
1) … Stocks, currencies, and world government bonds, fall lower.
World stocks, ACWI, and VT, fell lower, led by Health Care Provider, IHF, Financials, XLF, Materials, XLB. The sell off included Transports, IYT, and Industrials, IYJ, and included shares across the globe, EWA, EZA, ENZL, EWC, EWU, EWY, EWT, as Bloomberg reports Fitch’s Warns About US Banks’ European Exposure.
Mike Mish Shedlock reports JPMorgan, Goldman Keep Investors In Dark On European Debt Risk ; Net Position Disclosure Hides True Risk.
And Mike Mish Shedlock reports on sovereign insolvency European Government Bond Market “Frozen” Says Bank Of Italy Managing Director; ECB Steps In But Rally Fails To Hold Spreads between bid and ask government bond prices indicate markets are “frozen,” said Franco Passacantando, Bank of Italy’s Managing Director for Central Banking, Markets and Payment System in Milan today. The European Central Bank is “almost exclusively buying Spanish and Italian bonds,” he added.
The Emerging Markets, EEM, EWX, and the BRICS, YAO, FXI, HAO, CHIM, CHIE, CHIX, CHII, CAF, EWH, INDY, RSX, EWZ, traded lower.
Europe shares included EWD, EWN, EWO, EWI, EWP, EWO, EWG, EWQ, VGK, FEU,
Small Cap Shares included VSS, SKOR, SCIF, SCIN, KROO, TWON, BRF, RSXJ, GERJ, HAO, HKK, RSXJ, GERJ, IWM,
Financials included EUFN, FGEM, IXG, EPI, BRAF, CHIX, RWW, RWJ, IAI, KCE, JPM, MS, GS, BAC, C,
Materials included, MXI, REMX, URA, COPX, KOL, SIL, GDX, GDXJ, ALUM, EMT,
World leading shares included SLX, XME, FAA, SEA, TAN, AMX, ABB, BEAV, BA, DIS,
The credit providers, PHH, AXP, NNI, COF, SLM, ECPG, NICK, MA, V, AMT, ADS, CATM, AINV, ARCC, AINV, seen in this Finviz Screener, turned lower. And Health Care Providers, IHF, in this Finviz Screener, traded lower: UNH, WLP, ESRX, HUM, CVH, HNT, WCG, AGP, CI, CNC, MOH, turned lower.
The risk trade in Junk Bonds, JNK, and Leveraged Buyouts, PSP, is over.
The world government bonds, BWX, fell lower on sinking world currencies, DBV FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF, FXRU. The Yen, FXY, and the US Dollar, $USD, UUP, rose.
Oil, USO, popped 2.3% higher in what may be an evening star, while silver, SLV, fell 2.6%.
2) … News of the day.
Tyler Durden reports German Chancellor Angel Merkel said that she believes treaty changes are needed to win back market confidence, and Germany therefore, is willing to give up some national sovereignty
Tyler Durden reports Goldman Introduces Italy’s New Technocratic Government. Goldman’s Francesco Garzarelli relates Italian PM designate Mario Monti has unveiled the composition of his Cabinet. Key Ministries are taken by high profile and widely respected figures, mostly from academia and the civil service. In a departure from the ‘technocrat’ government of Ciampi in 1993, the Monti government has no elected representatives. PM Monti will lay out his government’s program tomorrow in the Senate, ahead of a vote of confidence. Broad bipartisan support for the new government is expected, at least initially. PM Monti is likely to hold office until general elections are held in the Spring of 2013.
Prime Minister: Prof. Mario Monti – former EU Commissioner (1994-2004) and President of Bocconi University. His deputy will be Prof. Antonio Catricalà, currently head of the antitrust regulator.
Finance Minister: Mario Monti. Junior ministers will be appointed in the coming days and, according to the press, could include well-known economics professors.
Labor and Welfare Minister: Prof. Elsa Fornero, a highly respected expert in social security. Prof Fornero heads the Centre for Research on Pension and Welfare policies – an Italian research institute at the University of Turin.
Economic Development Minister/Infrastructure/Transport: Corrado Passera, currently CEO of Intesa Sanpaolo – the largest Italian domestic bank.
Foreign Minister: Giulio Terzi di Sant’Agata, the current Italian Ambassador to the United States. Justice Minister: Prof. Paola Severino, who lectures in law at LUISS University in Rome.
Interior Minister: Anna Maria Cancellieri, who has been prefect (a senior law enforcer appointed by the central government) in several Italian provinces (the layer of local government between municipalities and regions, which the previous government planned to scrap).
Consillium provides video of Herman Van Rompuy, President of the European Council, during a debate on European economic government at the European Parliament.
Reuters reports Van Rompuy urges euro zone to pool sovereignty. And G7 Finance reports Mr Van Rompuy saying in a speech to a conference held by a Brussels think tank. “The euro zone has to move towards real economic union commensurate with monetary union.” … “We need to give both our citizens and the markets a clear message about the irreversibility of the euro,” … “This will imply in some of these areas a pooling of sovereignty in exchange for a stronger, more stable monetary union,” Van Rompuy stated “(Deepening economic union) will require a combination of two things, a significant strengthening of our rules and mechanism for fiscal responsibility and a large step in terms of integration in economic policies.” … “We have to fight for our economic and monetary union and Europe’s place in the world,” … “In Italy, it is an hour of truth.”
Business Insider reports To save Europe they had to kill democracy.
Reuters reports UniCredit Seeks Wider ECB Funding for Italian Banks. The CEO of Italy’s UniCredit will ask the European Central Bank at a meeting on Wednesday to extend access to ECB funding for Italian banks by widening the range of collateral that can be offered to get funds, a source close to UniCredit said. Italian banks have increased their reliance on the ECB for cheaper funding since the summer as Italy was sucked ever deeper into the euro zone debt crisis and its lenders faced sharply higher funding costs.
Open Europe reports City AM and Conservative Home: Browne relate that the panel of top European economists who will judge the Wolfson Prize was unveiled this morning; they will award £250,000 to the economist who offers the most feasible plan that a country could follow if it wanted to leave the eurozone. The judging panel will be chaired by Open Europe’s Vice-Chairman Derek Scot.
Open Europe asks Euro, Neuro, Guilder or…Dukaat? The big Dutch currency debate]
Open Europe reports Kathimerini reports that the Greek economy shrank by 5.2% during the third quarter. This means that the 5.5% target is now virtually impossible to attain. (We assume these data are either annualised or relative to the previous year. They cannot be quarterly rates.) It is clear that such figures are inconsistent with the target of a 5.5% contraction for the year, given that the fourth quarter pressure on the real economy is likely to be even stronger.
Wall Street Journal reports Greek Deficit Could Exceed 9%. Greece’s budget deficit could exceed 9% of gross domestic product this year compared with an 8.9% to 9% estimate as the economy is expected to sink deeper into recession, a senior government official said Wednesday. “It will likely be above 9% as the recession this year will be around 6%. First estimates call for a budget deficit of around 9.2%,” the official with direct knowledge of the country’s finances and planning said. “Tax collection remains the main problem,” he said. (Hat Tip to Between The Hedges)
Dr Housing Bubble reminds Mark to fantasy model of real estate accounting.
Bloomberg reports on US Dollar Hegemony. U.S. Marines to Be Deployed in Australia. President Barack Obama said the U.S. is sending a “clear message” of its intent to lead in the Asia-Pacific region with an agreement he and Australian Prime Minister Julia Gillard announced to deploy American Marines on Australian bases next year. Moving to counter China’s regional influence, the defense accord will anchor an American presence in the western Pacific that can help safeguard sea lanes that carry more than $5 trillion of commerce, about $1.2 trillion of it U.S. trade. “The United States is stepping up its commitment to the entire Asia Pacific,” Obama said at a news conference yesterday with Gillard in the Australian capital of Canberra. “This is a region of huge strategic importance to us.”
3) … Sovereign insolvency will be the catalyst for Financial Nuclear Winter and the pooling of sovereignty as called for by Herman van Rompuy.
A Financial Nuclear Winter is imminent. The downturn in world financials that began November 16, 2011, Fitch’s Warning About US Banks’ European Exposure, will propel highly volatile stocks quick lower, these include, CHIX, XME, COPX, EWX, HAO, CHIM, ETN as seen in this ongoing Yahoo Finance Chart of World Financials, IXG, Chinese Financials, Metal Manufacturing, Copper Mining, World Small Cap Leaders, China Small Caps, China Materials, and industrial electrical equipment company Eaton, which is a Morgan Stanley Cyclicals Index component.
The metal manufacturing stocks and the industrial electrical equipment companies have been among the stocks leading the S&P higher in the most recent rally, as these have been the Industrial Production Subcomponents showing faster growth than the headline number (3.9%), Bespoke Investment Group reports.
John Nyaradi, writing in Market Watch, used the term Financial Nuclear Winter relating, “As a beautiful autumn slowly moves towards the dark days of winter, global investors will likely find themselves facing a nuclear winter of extreme danger and volatility. Nuclear winter is the term used to describe the ice age-like temperature drops, severely cold weather, reduced sunlight and catastrophic agricultural failures that are theorized to be the aftereffects of nuclear war. In the financial world, nuclear winter will be a long period of years, even decades, of sub par growth, high unemployment, global recession/depression and a long-term secular bear market brought about by the financial equivalent of multiple nuclear blasts. Greece is the immediate trigger point for this series of fiscal nuclear explosions.”
Sovereign insolvency will be the catalyst for Financial Nuclear Winter, and the pooling of sovereignty as called for by Herman van Rompuy.
In the age of sovereign insolvency, with nation states unable to issue Treasury Debt, sovereign authority comes from the 1974 Clarion Call of the Club of Rome for regional economic government. Regional leaders will meet in summits, and announce regional framework agreements and mandates for regional security and stability. Sovereign leaders and sovereign bodies, such as the EU ECB and IMF Troika, will pool national sovereignty, and govern through diktat, establishing the New Europe as envisioned by Angela Merkel.
Bank exposure to the European Sovereign Debt Crisis will mean the Money Market Funds will break the buck, that is fail to maintain their constant one dollar value. Money Market Fund, MMFs, and banks world wide will be integrated into governments and be known as the government banks or gov banks for short.