Financial market report for Thursday December 8, 2011
1) … Today was a date with destiny in the Euro zone as two completing plans for a EU Fiscal Union emerge at the Leaders Summit for resolution of the European Sovereign Debt Crisis: one is for treaty changes and the other is for fiscal compact.
Bloomberg reports “It’s yet another date with destiny in the euro area,” said Julian Callow, chief European economist at Barclays Capital in London. “It’s clear there won’t be the ultimate resolution, but the proposals are going in the right direction”.
European Financials, EUFN, led World Financials, IXG, World Stocks, VT, ACWI, ACWX, and World Small Caps, VSS, EWX, lower, as fears of sovereign insolvency and banking insolvency increased, as Angela Merkel pushed German hegemony as a resolution to the European sovereign debt crisis.
Competing plans of Angela Merkel for treaty changes, and Herman van Rompuy for fiscal compact, are unable to prevent Eurozone default, which will result in sovereign armageddon and the eventual rise of regional global governance as called for by the Club of Rome in 1974.
Ambrose Evans Pritchard reports Italy’s 10-year bond yields spiked 47 basis points 6.43pc and Spain’s yields jumped 39 to 5.75pc, bringing the rally in Club Med debt to juddering halt. French spreads over German Bunds jumped 23 points to 122. British Gilt yields fell below 2.12pc for the first time in modern history on safe-haven flows. The FTSE 100 fell 1.1pc
2) … The financial markets traded lower today as fears arose of sovereign and banking insolvency.
Italy, EWI, Germany, EWG, France, EWQ, and Spain, EWP, led European shares, FEU, VGK, lower; and European Financials, EUFN, led World Financials, IXG, Financials, XLF, Emerging Market Financials, EMFN, FGEM, Chinese Financials, CHIX, Banks, KRE, KBE, IAT, QABA, Investment Bankers, KCE, the Too Big To Fail Banks, RWW, Stockbrokers, IAI, lower. UK Banks, LYG, Royal Bank of Scotland, being intertwined with Ireland, EIRL, and being London Financial centered, led the world banks BSBR, ITUB, BBD, IBN, HDB, UBS, RBS, STD, DB, BCS, HBC, IRE , BCA ,SAN, WBK, CS, BLX, RY, BMO,B K, BAC, C, QABA, KRE, RWW, IAI, KCE, MTU, NMR, MFG, BBVA, BMA, BFR, GGAL, SHG, KB, WF, CHIX, BAP, NBG, CIB, seen in this Finviz Screener lower.
European Banking stocks buckled despite the ECB’s support measures, with Intesa SanPaulo down 9pc and Unicredit down 7pc, and Deutsche Bank down 8pc and National Bank of Greece, down 8pc.
The downturn in financials turned the credit sensitive Russell 2000, IWM, strongly lower. Strong deflation came to mining stocks, MXI, FCX, VALE, BHP, CLF, AA, SCCO, POT, CF, RIO, BVN, SQM, ACH, MCP, seen in this Finviz screener.
Mining ETFS, KOL, URA, COPX, REMX, ALUM, traded lower, as seen in this Finviz Screener.
Synthetics MTX, GGC, NL, HWKN, seen in this Finviz Screener traded lower.
Airlines, FAA, Steel, SLX, Metal Manufacturing, XME, Wildcaters, WCAT, Small Ca[p Energy, PSCE, Nanotechnology, PXN, Wood Manufacturers, WOOD, Agriculture, PAGG, MOO, Medical Devices, IHI, were major sector losers. Small cap industrials, PSCI, such as BEAV, fell more more than their larger peers, XLI, and IYJ.
Metal Manufacturing shares NUE, STLD, RS, seen in this Finviz Screener fell strongly.
Small Tools LECO, SNA, SSD, SWK, seen in this Finviz Screener fell strongly.
Industrial electrical equipment manufacturers ETN, ROK, AME, TNB, AOS, BDC, ENS, FELE, seen in this Finviz Screener, turned lower.
Transports, IYT, Shippers, SEA, Railroads such as KSU, UNP, and Truckers such as GMT, JBHT, LSTR turned lower, evidencing Dow Theory logic that global debt deflation, that is currency deflation has recommenced. Confirmation comes from the currency demand curve, the ratio of small cap value relative to small cap growth shares, RZV:RZG, turning lower, and manifesting a likely evening star in the weekly chart. The optimized carry ETN, ICI, manifested a dark cloud covering candlestick in its weekly chart, suggesting that carry trade investing is derisking. Global competitive currency devaluation, that is competitive currency deflation, is underway again, as evidenced in the Japanese shares falling more than their small cap peers, as is seen in the ratio of EWJ:JSC, falling lower.
Vehicles, CARZ, and VROM, and automobile part manufacture TRW, JCI, DAN, TEN, MGA ,TWI, LAD, TSLA, CLC, F, SMP, VC, MTOR, WBC, WPRT, PCAR, GM, CVGI, ALV, CMCO, GPC, BWA, seen in this Finviz Screener traded lower.
Small Cap Loss leaders included Stock Brokers, IAI, such as RJF, SCHW, AMP, AMTD, and Small Cap Revenue, RWJ, such as Clear Channel Outdoor Holdings, CCO, credit and lending companies, such as AEA, NNI, COF, turned lower.
Carry trade disinvestment was a theme of the day, as the world currencies, DBV, emerging market currencies, CEW, and commodity currencies, CCX, seen in this Finviz Screener, FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, CYB, BZF, FXRU, fell more than the Yen, FXY. This ongoing Yahoo Finance chart of SZR, FXA, FXE, FXM, ICN, FXS, FXF, BZF, FXRU, FXC, shows that the South Africa Rand and the Indian Rupe have been the loss leaders of late.
Currency deflation of the South Africa Rand, SZR, is a leading factor in deleveraging out of South Africa, EZA, which is comprise heavily of Goldfields Mining, and Standard Bank of South Africa.
The Yuan, CYB, traded lower again today. And Bloomberg reports China Money Rate Rises on Speculation PBOC Favors Stability. China’s money-market rate rose for a third day as the central bank drained the most cash from the financial system in eight months, spurring speculation it will hold off from easing monetary policy further. “There’s limited scope for the repo rate to decline because the central bank hasn’t shown any sign that it will further ease monetary policy,” said Wang Botao, a bond analyst at China Post Securities Co. in Beijing.
The USD/JPY and the US Dollar, $USD, UUP, rose confirming an end to Banker and Floating Currency Regime of Neoliberalism, which came courtesy of the Milton Friedman Free To Choose script.
Neoauthoritarianism, which is the 1974 Clarion Call of the Club of Rome, for a Beast Regime of regional economic governance and corporatism is rising, as heralded by the July 2011 Merkel and Sarkozy Joint Communique for a “true european economic government” and by the Europeans struggling to provide a coordinated resolution to their sovereign crisis.
Health Care, XLV, Consumer Services, IYC, Retail, XRT, and Utilities, XLU, were the loss lagging sectors of the day.
Today marks the end of an era for biotech companies such as INFI and CELG.
The risk trade is now off, as gaming shares, BJK, small cap gold mining shares, GDXJ, and silver mining shares, SIL, turned lower. Investors are no longer taking out loans and risking money on vice, mining or banking.
Strong deleveraging came out of construction, enviornmental and industrial rehabilitation shares seen in this Finviz Screener. These shares included CX, ERII, URS, ACO, FLOW, NX, USG, NCS, VMC, TRN, AIMC, MTW, CRH, GLDD ,KAI, RBN, SXI, CLNE, AEGN, DY, SSYS, TNC, SHS, NDSN, AAON, PWR, GVA, TPC , CASC, TEX, CMCO, NC, CNH, NVR. Even highly successful Caterpillar, CAT, traded lower.
Derisking occurred in the Asia shares, EPP, being led lower by Singapore, EWS, and Shanghai, CAF. The most risky of emerging markets, EEM, and BRICS, BIK, EEB, traded lower. India, INP, PIN, has experienced the greatest currency deflation, as its rupe, ICN, has been a currency loss leader. India shares have fallen strongly as it has the greatest problems, greatest population, greatest corruption, greatest scarcity of resources, greatest inflation. Risk avoidance has turned to strong derisking out of India, INDY, India Small Caps, SCIN, India Earnings, EPI, and India Banks, such as ICICI Bank, ICI. And India reports that Industrial Output for October fell 7.0%, the first contraction since June 2009.
Hot money flow leader Turkey, TUR, fell strongly lower today. Investors are derisking strongly out this high risk country. Austria, EWO, Poland, EPOL, Eastern Europe, CEE, South Africa, EZA, and Brazil, EWZ, other carry trade leaders, fell strongly as well. Russia, RSX, Sweden, EWD, Norway, EWN, Vietnam, VNM, and Chile, ECH, traded strongly lower.
This ongoing Yahoo Finance chart of SZR, FXA, FXE, FXM, ICN, FXS, FXF, BZF, FXRU, FXC, shows that the South Africa Rand and the Indian Rupe have been the loss leaders of late. Currency deflation of the South Africa Rand, SZR, is a leading factor in deleveraging out of South Africa, EZA, which is comprise heavily of Goldfields Mining, and Standard Bank of South Africa.
Derisking has recommenced in Junk Bonds, JNK, and in leveraged buyouts, PSP.
Timber, CUT, Silver, SLV, and Copper, JJC, led base metals, DBB, and commodities, DBC lower.
World government bonds, BWX, and emerging market bonds, EMB, fell lower on falling currencies. Debt deflation, that is currency deflation, has popped the global government finance bubble, as the risk of sovereign insolvency looms greater. Bob Chapman writes Unstable Currency Markets.
The fiat money system is history; and the diktat money system is rising in its place, as is seen in the appointment of technocratic government in Italy and Greece. The Beast Regime of Neoauthoritarianism is rising out of the profligate Mediterranean Sea countries. It will occupy as a monster, having seven heads, symbolic of its occupation in mankind’s seven institutions, and ten horns symbolic of its rise to rule in the world’s ten geographic regions.
The seigniorage of fiat money, that is the moneyness of fiat money, has ended and the seigniorage of diktat is rising in its place. Interest rates in the US are going up as is seen in the 10 30 US Sovereign Yield, $TNX:$TYX, steepening, and the Steepner, STPP, rising from a double bottom.
The failure of the seigniorage of the fiat money system is seen in the loss of moneyness of stocks relative to treasury debt, the ratio of ACWI:BWX, is falling lower. Look for M2 Money, that is narrow money, which is largely comprised of US Treasuries, to fall lower. The US Federal Reserve policies of quantitative easing, and ZIRP, as well as carry trade lending from Austria, London and Japan, has failed, resulting in deleveraging out of the Emerging Markets, EEM, Emerging Market Financials, EMFN, FGEM, and Emerging Market Miners, EMMT.
Global deleveraging and derisking is leading to political devolution. World central bank capital, economic capital, and political capital is collapsing. Currency debasement is occurring globally, and calls for regional economic government are rising.
Insolvent sovereigns cannot govern, and insolvent banks cannot leverage growth. Inflationism has turned to destructionism, and democracy is giving rise to diktat. Out of crisis a new global order is coming. Globalism will be taking a wrenching turn right toward authoritarian rule. There will be no escaping for the Nordic countries such as Finland or Germany. Rather these will take the lead in rising to power in regional global governance over their Latin peers such as Portugal, Italy, Greece and Spain. European socialism will transform into totalitarian collectivism. The road to serfdom will come via fiscal compact, along the line of European thought leader Herman van Rompuy.
Bloomberg reports that EU Banks Must Raise $153B Of Extra Capital. This is an impossibility as Between The Hedges reports that the EU Banks Are Facing A Funding Freeze. The TED spread continues to trend higher and is at the highest since June 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is falling -6.64% to -116.50 bps. The Libor-OIS spread is very near the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. I add that banks need to roll over €230bn in bonds in the first quarter of next year;making for another impossibility. Banks will neither be able to raise capita,l nor roll over their debt, as the WSJ reports S&P Puts Downgrade Sights on EU And Its Banks.
The European Banks are frozen, they have no money for neither ongoing operations of lending. In the age of deleveraging and in the age of diktat, banks will be nationalized, and be known as the government banks or gov banks for short.
3) … Angela Merkel works for the United Europe Of Germany which establishes oversight over national budgets.
Out of sovereign armageddon, that is a credit bust and world investment breakdown, fate will bring forth a new global economic and political regime, Revelation 13:1-4.
Bible prophecy of Revelation 13 and Daniel 2 communicates that a credible sovereign stands in the wings. He and his banking partner will come to rule a united Europe through a new stability compact, that will be never be voted on.
At the appointed time, not any human action, but rather, God will open the curtains, and onto the Europe’s stage will step the Europe’s New Charlemagne and his Banking Partner.
God is overseeing a Eurozone coup d etat, to provide order out of the current chaos. These two sovereigns will develop the Eurzone into a type of authoritarian revived Roman Empire.
Greeks cannot be Germans. The former are of the olive state and are club med. The latter are of the industrious state and are hard working. Yet all will be one in a stability union led by a capable governor, The Sovereign, Revelation 13:5-10, and an adept banker, The Seignior, Revelation 13:11-18, which literally means top dog banker who takes a cut. These two will provide the seigniorage of diktat, as the seigniorage of fiat money, that existed under the Milton Friedman Free To Choose floating currency regime, is history. Their word, will and way of will provide a new moneyness, and the people will be amazed and follow after it, placing their confidence and trust in it, giving it their full allegiance, Revelation 13:3-4.
Austrian economists who follow the thinking of Hayek, Rothbard and Mises, suggests that Germany should go its separate way. But destiny is working to bring Germany forth as a powerful overlord in the Merkel, Sarkozy, and van Rompuy future, as Robert Wenzel writes, On Its Way: The United Europe of Germany, where Merkelism, the bold strategy of Angela Merkel to establish a New Europe as a stability union, that is a fiscal union, governs as Nordic leaders rule over their fiscally profligate Latin peers for the security and stability needs of Europe.
Sovereignty comes by appointment, Ephesians 3:1-11, and the only choice that matters is the one that God has already made.
God has given sovereign authority to the Clarion Call of the Club of Rome, and leaders, such as Angela Merkel, Nicholas Sarkozy and Herman van Rompuy, who are working through its authoritarian mandate to establish fiscal rules which bind the EU together as one.
The development of German dominance of the Eurozone, as well as the concept of a fiscal union, is abhorrent to UK Conservatives as they have been joint rulers of the world with the US for over 150 years. But God is working sovereignly to move power from the two iron kingdoms of the UK and the US, to a ten toed kingdom of regional global governance, Daniel 2:31-43.
David R Reagan writes that sovereignty will be sacrificed as a Federal Europe is formed. “German Foreign Minister Joschka Fischer repeated his call for a European government in July, 2000, and said the European single currency, the Euro, was “the first step to a federation.” He added that he wanted a “powerful president.”1 Fischer said his aim was “nothing less than a European parliament and a European government, which really do exercise legal and executive power,” to operate under his powerful president. More sinisterly, he welcomed the progress made in removing the “sovereign rights” of nations which he defined as control of currency and control of internal and external security. In summary, Fischer said, “Political union is the challenge for this generation.”2 … (1 and 2 Ibid, “German Foreign Minister floats idea of elected EU president,” The Financial Times, July 7, 2000. This article was a report on a speech by Joschka Fischer to the European Parliament’s constitutional affairs committee.)
A Latin America region of global governance is forming, as Timur Zolotoev writes in Global Research 33 Latin American Countries To Form A New Bloc. U.S. And Canada Not Invited. The Community of Latin American and Caribbean States, CELAC, pointedly excludes the US, Canada and Britain, as it forms a economic and political union and Eva Golinger reports A Union Of Latin American and Caribbean States, CELAC, Is Born.
The formation of the Latin American Bloc is an effective working of the 1974 Clarion Call of the 300 elite of Club of Rome for ten regions of global governance, as an economic means of dealing with deleveraging and derisking out of the carry trade investing of the former Milton Friedman Free To Choose floating currency regime. Regional global governance will be partly iron, that is authoritarian, and partly clay, that is democracy.
These elements are not compatible, and eventually they will give way to an even greater rise of the Sovereign and the Seignior, who will establish a one world government, a one world bank and global seigniorage, Revelation 13:18.
Yet for now, destiny is weaving the Ten Toed Kingdom, Daniel 2:33, together with the Beast Regime of Neoauthoritarianism, Revelation 13:1-4, that is replacing the Banker Regime of Neolieralism. The Beast Regime is a monster of banking led statism that is rising from the Mediterranean Sea nations of Italy and Greece. It has seven heads, symbolic of its occupation in mankind’s seven institutions and ten horns, symbolic of its occupation in the world’s ten regions.
4) … News of the day
Jeremy Warner of The Telegraph reports Mario Draghi’s Capability Is Limited By Treaty. As far as Mr Draghi is concerned, the treaty bans the ECB from providing “monetary finance” to nations, so that’s that. (Monetary financing … is buying up the debt to cancel it) . We can also forget all backdoor methods of achieving the same thing, such as lending to the International Monetary Fund so that the IMF can do the buying instead. There would be no such circumvention of the treaty, Mr Draghi said. All this rather confirms the suspicion that the ECB is not a fully fledged central bank out of the Federal Reserve and Bank of England mould at all, but just an anti-inflationary apparatchik of quite limited functionality. If Mr Draghi would like to do more, he’s plainly taken the view that he is not allowed to. For markets, it was all a big disappointment. Bond yields widened and stock markets fell anew. Most of us would think just such an extreme deflationary threat already upon us. Bizarrely, Mr Draghi and his governing council don’t agree.his insistence that the fiscal contract eurozone leaders are attempting to thrash out at their latest summit will be sufficient in itself to restore confidence is cloud cuckoo land. He cannot sincerely believe it. The problem in the eurozone is not fiscal indiscipline, though there has certainly been a lot of it, but current account imbalances entrenched by big differences in competitiveness. These cannot be made to go away with repeated rounds of growth stifling austerity, and as for Mr Draghi’s claim that it is possible to have both fiscal austerity and decent growth provided competitiveness is improved, it’s simply naive to believe that’s what is going to happen in practice.most of the evidence from the eurozone periphery is that it is continuing to lose competitiveness against the surplus north, with Germany progressively improving its share of an ever-shrinking market. As long as that goes on, the debt problem is going to get worse, not better. This weekend’s summit will do little to solve the fundamentals of this crisis. Only a fully functioning fiscal and political union, with tax and spending decisions centralised in one authority across all 17 nations can do that.
Reuters reports Germany Presses For EU Fiscal Union. France and Germany planned to use the Marseille meeting to lobby for their plan to amend the European Union treaty to toughen budget discipline, which they want to have ready by March. But several countries are skeptical. The EU remains divided over the need for treaty change. Summit chairman Herman Van Rompuy is urging leaders to avoid a laborious full overhaul that could take up to two years and face uncertain ratification. He wants them instead to slip stricter budget enforcement through in a protocol to existing treaties. This infuriated Merkel and was one reason behind a gloomy briefing by a senior German official on Wednesday, who dampened hopes for a breakthrough and said some leaders and institutions still didn’t understand the severity of the crisis. If all 27 EU states do not support more fiscal union by adapting the existing Lisbon treaty, which took eight years to negotiate, then Sarkozy and Merkel want the 17 euro zone countries to go ahead alone with more integration. Swedish Prime Minister Fredrik Reinfeldt, speaking for a non-euro state, said: “We respect that the euro zone wants their own meetings and take part of the responsibility on their own … But we want to stick with the 27 concept of course because all of us are members of the European Union and we want to have our influence. We want to keep the European project together.” Sarkozy and Merkel are both due to hold bilateral meetings later with incoming Spanish Prime Minister Mariano Rajoy before they head to Brussels. “We need more binding and more ambitious rules and commitments for the euro area member states,” Sarkozy and Merkel wrote in a letter to European Council President Van Rompuy, who has made his own proposals for tackling the crisis.
Geoffrey T Smith of the WSJ reports Mario Draghi Announces New ECB Crisis Moves. Mr. Draghi unveiled a raft of new financial measures, some of which went beyond even what it had done to ensure stability in the panic following the collapse of Lehman Brothers Inc. in 2008. The ECB will make two offers of unlimited 36-month credit to euro-zone banks; will cut its reserve requirement for commercial banks to 1% from 2%; and will widen the pool of assets it accepts as collateral for ECB loans to ensure easier access to funds for banks that have almost completely been shut out of private markets in recent months. Among other things, the ECB will also in future accept asset-backed securities with at least two ratings of A-. At present, the ECB only accepts AAA-rated ABS at its operations. In addition, it will allow bank loans, specifically residential mortgages and loans to small and medium-sized businesses, as collateral. Mr. Draghi said this would ease conditions for smaller banks that don’t normally have the necessary assets to borrow from the ECB. Banks are currently required to keep 2% of their customer deposits in reserve at the ECB, a figure that has equated to just over €200 billion in an average month this year. That suggests the reserve requirement cut could make around €100 billion in extra liquidity available to euro-zone banks. The new refinancing operations are the longest ever from the ECB. The new facility will first be offered Dec. 21 and will replace the 12-month operation that was to be offered the same date. Mr. Draghi announced the new measures after the bank decided to cut its benchmark rate as expected, by 25 basis points, returning it to an all-time low of 1.0%. The bank now expects inflation to average around 2% next year and 1.5% in 2013, and has lowered its growth forecasts.
Jack Ewing of The NYT reports Germany To Offer Banks Help On Reserves Germany plans to revive the government fund it used in 2008 to rescue banks, in order to help some German institutions increase their reserves, the Finance Ministry in Berlin said Wednesday. It is part of a Europe-wide effort to restore faith in the region’s banking system. On Thursday banks will make public their plans to raise capital and meet reserve requirements set by the European Banking Authority and euro area leaders. A German Finance Ministry spokesman, who was not authorized to be quoted by name, said he could not say which banks might receive funds. However, there was speculation that Commerzbank, a lender based in Frankfurt, would need aid as it did during the first phase of the financial crisis. Last month Commerzbank said it would sell assets and temporarily stop issuing new credit through its troubled EuroHypo unit to meet tougher capital reserve requirements. The bank, which reported a loss of 687 million euros, or $920 million, in the third quarter, said at the time it would also look at other options to increase its reserves. A Commerzbank spokesman declined to comment Wednesday. Several of Germany’s state-owned regional banks are also likely to be candidates for aid. The German newspaper Handelsblatt reported that the revived fund would be able to issue up to 400 billion euros in guarantees and 70 billion euros in credit to banks. According to a proposed law to be considered by Chancellor Angela Merkel’s cabinet next week, banks could be forced to accept the money to expand their reserves. Many banks in the euro region have had problems raising funds in recent months, as United States money market funds and other lenders doubted their ability to withstand the stresses of slower economic growth and the sovereign debt crisis. If the banks had larger reserves, the thinking goes, they might inspire more trust. But raising more capital is difficult for weak banks that are not very profitable.
Reuters reports Former Goldman Sachs President And US Senator Corzine Sorry, Stunned by Missing MF Global Money Former MF Global chief Jon Corzine apologized to customers, employees and investors who have suffered because of the brokerage firm’s collapse, but said he does not know where missing customer money is.