Grexit not this year. Maybe in 2013, with a 10 per cent drop in GDP. Continued financing from the IMF and the EU (through the Balance of Payments Assistance facility, possibly) to cushion the blow.
All those prognostications and more… Read more
We’ve long been admirers of Lee Buchheit, who helped mastermind the Greek restructuring at Cleary Gottlieb. Read more
ROUND-UP
US stocks did not have a contingency plan for European tape-bombs. Shares were hit hard by news of preparation for Grexit, only to rally late on hope that the EU summit would produce results (and on low trading volume). The S&P 500 closed up 0.17 per cent at 1,318.86 (Reuters). The 10-year German Bund yield closed at 1.4 per cent, a record low. Read more
Brad DeLong’s note on the first decades of central banking practice and theory didn’t get as much attention as his paper on fiscal policy at the zero bound (co-authored with Larry Summers) — but we really think it’s worth a read for anyone with an interest in the topic.
We won’t summarise the whole thing here, but one point in particular is worth emphasising. Read more
There are two stories regarding capital flows and the eurozone: flows between member states, and flows to and from the eurozone as a whole.
We’ll ignore the flows into Germany and away from Italy for a moment. Although only for a moment, because the intra-euro capital flows actually appear in the capital flows to and from the eurozone, if only indirectly. Read more
Three Alphavillans are running around Canary Wharf in East London this evening in support of the British Heart Foundation.
Left to right: Lisa Pollack, David Keohane and Masa Serdarevic Read more
Catch up with Joseph, Cardiff and Izy on US Markets live now. Click here.
UPDATE: Session now over, but you can read the transcript here. Read more
“Bas! Bas!” is surely a familiar cry in the Reserve Bank of India right now as India’s rupee continues to plummet. So far, it has dropped 15 per cent against the US dollar since the start of February, hitting multiple new record lows on its way.
The central bank has attempted to get inventive in response but nothing seems to be stopping the slide (metaphorically speaking, in the chart, the higher it gets the weaker the rupee): Read more
FT Alphaville has been focusing on signs that China may be suffering a “capital outflow” problem.
We also think global markets may be under appreciating the problem. Read more
Live markets commentary from FT.com
The ‘Greece’ section of the Bundesbank’s latest report on the German economy must be read to be believed (emphasis ours):
Current developments in Greece are extremely worrying. Greece is threatening not to implement the reform and consolidation measures that were agreed in return for the large-scale aid programmes. Read more
Back in December, the FT’s Tracy Alloway and Robin Wigglesworth explained how that which was financed by collateralised loan obligations was no longer going to be so financed. This will lead to a credit crunch for sub-investment grade companies that looks set to kick off in earnest in a couple of years.
Older CLOs* are making up for some of the slack by extending loans, but it appears that ultimately, funding will have to be obtained elsewhere or these companies will default. Read more
If you thought the headlines were bearish… you haven’t seen the bank quant models (the ones which presumably can’t read headlines).
Looking at SocGen’s latest cross asset quant research, the picture painted on all signal fronts is increasingly coming across on the dire side: Read more
Live markets commentary from FT.com
Good morning, New York…
FT ALPHAVILLE
Read more
From the lyrics of this year’s Montenegran Eurovision entry “Euro neuro” (pronounced: ɛw-ro nɛ-ro):
EURO neuro
Euro neuro
Euro neuro
Monetary brake dance
Euro neuro
Euro neuro
Euro neuro
Give me chance to refinance Read more
Shell had set May 23 as the date for acceptance of its April offer of more than £1.1bn for Cove Energy. It could have been such a beautiful day… but Thailand’s PTT Exploration has decided to come storming back into the picture with an improved of of 240p per Cove share.
That values the company, and its 8.5 per cent stake in a licence to drill the Rovuma basin block off Mozambique, at near £1.2bn and has understandably turned the board’s heads while giving the share price a 10 per cent pop: Read more
Italy’s March balance of payments data showed a big net outflow for investment
This was something picked up by Deutsche Bank’s Alan Ruskin (and us, here) as suggesting an accelerating outflow of foreign capital from Italy, now that the LTRO glow had worn off. It appeared to be happening, worryingly, at a rate that was not being offset by Italian repatriation of capital. Read more
Coca-Cola Hellenic Bottling SA — a pretty unexciting play on the Eastern European soft drinks market. Volume growth a bit flat. Only eight per cent of profit is Hellenic.
Elsewhere on Wednesday,
- Henry Blodget wants to tell you what really went on with the Facebook IPO research. Read more
Risk assets continued their retreat in Asia on Wednesday as renewed fears of a Greek eurozone exit appeared, says Reuters, with the MSCI Asia Pacific falling 1.7%.
Germany restated its opposition to eurozone bonds, despite support from Paris, Rome, Brussels, the OECD and the IMF. The FT reports that German officials said the country’s position on the subject would not change in June. Read more
Asian shares retreated as hopes of fresh measures to tackle Europe’s debt crisis faded ahead of a meeting of European leaders while weak trade figures weighed on Japanese exporters, the FT says.
The MSCI Asia Pacific index slid 1.2 per cent with Japan’s Nikkei 225 Stock Average 1.2 per cent lower, Australia’s S&P/ASX 200 index down 1 per cent and South Korea’s Kospi Composite index off 1.3 per cent. Hong Kong’s Hang Seng index fell 1.5 per cent while China’s Shanghai Composite index slipped 0.2 per cent. Read more
The fiscal cliff and “Taxmageddon” are terms for what might happen at the end of this year, when various US tax cuts and benefits expire, and the automatic “sequestration” spending cuts agreed as part of last year’s debt ceiling/Super Committee deal are due to kick in. (Cardiff explained it in more detail back in November if you want a refresher on the scale and messiness of it all.)
There have been several estimates of how this might play out — Nomura for example forecast that the expiration of the Bush tax cuts alone would reduce GDP in 2012 by 1.5 percentage points. Now the Congressional Budget Office, a non-partisan agency, has published its own analysis, which paints a picture of all of the fiscal restraint measures and expiring tax cuts shaving a massive 4 percentage points off GDP growth in 2013, making for a recessionary first half: Read more
