Financial Market Report for Tuesday July 17, 2012
1) … Agricultural Commodities, RJA, JJA, and FUD jumped higher Monday July 16; taking Risk On Assets, ONN, higher, Defensive shares, such as REITS, RWR, Staples, XLP, and Pharmaceuticals, IHE, traded higher on Tuesday July 17, 2012. The chart of Biotechnology, XBI, and Utilities, XLU both show a questioning harami on Tuesday July 17, 2012, after the US Fed Chairman Bernanke gave no hint of further easing. Mexico, EWW, rose to an all time high. Bonds, BND, such as BLV, and ZROZ are trading at or near record highs.
2) … In today’s news
Open Europe relates
The German Constitutional Court has announced that it will announce its verdict on the constitutionality of the ESM and the fiscal treaty on 12 September
Welt Süddeutsche FAZ Spiegel
Merkel to rely on opposition to pass Spanish bailout in Bundestag
German Chancellor Angela Merkel yesterday said she was confident of obtaining a majority in the Bundestag in Thursday’s vote on ratifying the Spanish bailout, although due to dissent in the ranks of her coalition, she will need to rely on support from the opposition.
Separately, Spanish daily ABC reports that the Spanish bank bailout loans will have an interest rate of 2.5%, but fails to mention any sources for the information. Open Europe’s blog post analysing a confidential EFSF briefing laying down a proposed timeline for the Spanish bank bailout was quoted by Saturday’s Telegraph.
ABC El País El País 2 Expansión FT CityAM Euractiv Saturday’s Telegraph Open Europe blog
WSJ: ECB performs U-turn on imposing losses on senior bank bondholders
The WSJ reports that the ECB has shifted its stance on imposing losses on senior bank bondholders, with it now supporting such action in the case of bank wind downs. The new position was reportedly presented by ECB President Mario Draghi to eurozone finance ministers at their meeting on the 9 July, but was roundly rejected because it would require a complex re-negotiation of the Irish bailout. Another article in the WSJ notes that ECB lending to Spanish banks reached a record high of €365bn in June. (I relate that this news report is as of yet unconfirmed by other news services).
WSJ WSJ 2 FT CityAM YLE FT: Munchau WSJ Review & Outlook WSJ: Nixon Telegraph: Bootle
Between the Hedges relates Bloomberg news
Germany’s Stark Opposes ECB as Bank Supervisor, Wiwo Says. Former European Central Bank Executive Board member Juergen Stark said the ECB would risk the independence of its monetary policy if it became Europe’s bank regulator, Wirtschaftswoche reported, citing an interview to be published tomorrow. The euro area’s central bank would face conflicts of interest, for instance if a liquidity crisis at a major bank influenced ECB interest-rate decisions, the magazine quoted Stark as saying, in a summary of his comments e-mailed by the magazine today. While Stark backs creating a European banking regulator, he doesn’t want the ECB to take on the task, according to the report
I comment that Spain is an insolvent nation Spain Risks Market Lockout as Lifeline Yields Climb: Euro Credit. Spanish notes have delivered the world’s worst returns on securities repayable in five years or less for the past three months, jeopardizing the nation’s last line of defense against being locked out of capital markets. With every Spanish bond maturing after 2017 yielding more than 6%, the nation has relied on shorter-dated sales for more than 80% of its borrowing since June 1, compared with 60% for Germany and 66% for Italy
Also Spain Publishes Breakdown of 65 Billion Euro Budget Cuts
Zero Hedge relates
Sicily Is San Bernardino: With First Italian Region On Verge Of Default, Montius Pilate Washes His Hands. And Peugeot, Its Record High Default Probability, And A Brief Primer On Corporate Viability Under Socialism.
Kumaran Ira writes in WSWS
France’s Socialist Party government backs job cuts at automaker PSA. France’s Socialist Party (PS) government is tacitly backing PSA Peugeot-Citroën’s plans to shut down the Aulnay auto plant and to cut 8,000 jobs across France.
3) … The legacy of LBJ’s Grandchildren is proving to be quite poneros
NBC Chicago reports Two more teens have been charged in the beating death of a 62-year-old disabled man that Chicago police said was recorded on a cell phone and posted to Facebook.
Police said a 16-year-old gang member punched Delfino Mora, father to 12 children and a grandfather to 23, last Tuesday in an alley in the 6300 block of North Artesian. Mora’s devastated family told NBC Chicago that Mora was on his regular route of collecting cans that he sells for cash when the teens confronted him.
Nicholas Ayala, 17, of the 6300 block of North Talman and Anthony Malcolm, 18, of the 5500 block of North Broadway were both charged with first-degree murder and robbery.
Malik Jones, 16, the Latin Kings member accused of striking Mora, was charged with first-degree murder and ordered held without bail Sunday by Judge Adam Bourgeois.
Police said Jones handed his friends his cell phone to start filming then demanded money from Mora and punched him in the jaw. Ayala and Malcolm are accused of taking turns filming the video which allegedly showed Mora’s head smashing into the concrete.
Mora was found unconscious and died one day later.
Police said the video was posted to Jones’ Facebook page. He was arrested after police found out about the video.
4) … Inasmuch as Financial Armageddon is imminent, I am continuing post articles only twice a week; usually for Tuesday and Friday; down from posting daily.