First Impressions

Welcome to the end of QE2, or so we hear. How temporary will the pause be? Since the stock market has become the proxy for the health of the economy, I imagine the resumption will commence if and when we take out the most recent lows in the S&P 500. That would be 1860 for those keeping score.

Quote of the Day

Thinking that lending somehow can lead GDP is an illusion, and I don’t know how that has somehow crept into the policy debate.

Erik Nielsen, chief global economist at Unicredit, in the Reuters story “Federal Reserve to take away the punch bowl”

Lead Stories

Bond Investors Love Ger-pan
Alen Mattich – MoneyBeat – WSJ
Germany is widely seen as the eurozone’s big winner, the flagship of growth while other economies sank into long term stagnation. Which makes it particularly worrying that the bond market loves Germany as much as it does Japan.

***DA: I’ll take Germany, but no thanks on Japan.

IMF introduces floor on interest rates
Financial Times
The International Monetary Fund has been forced to change the calculation of its most important interest rate after aggressive monetary easing around the world threatened to turn it negative.

Here Are the European Banks That Failed the Stress Tests
Viktoria Dendrinou – MoneyBeat – WSJ
Twenty-five European banks wouldn’t be able to survive a swath of economic and financial shocks, European regulators said Sunday as they announced the results of “stress tests” on 150 major lenders across the continent.

Europe must act now to avoid ‘lost decade’
Scott Minerd – Financial Times
In recent conversations – whether with the US Federal Reserve, the European Central Bank, the US Treasury or the International Monetary Fund – one theme is playing large and loud: things in Europe are bad and policy makers appear already to have fallen behind the curve.

***DA: That term used to be used regardign Japan. Now it is called “lost decades.”

U.S. court hearing over Citi processing of Argentine bond payment delayed
Nate Raymond – Reuters
A U.S. judge has delayed by a week a December hearing to consider whether Citigroup Inc should be allowed to process an interest payment by Argentina on bonds issued under its local laws following its 2002 default.

Central Banks

The Conflict Between Germany and the E.C.B. That Threatens Europe
Neil Irwin – NY Times
We’ve known for some time about the tension between the European Central Bank, charged with guiding the economies of the 18 countries that use the euro, and Germany, the largest and richest member of that zone. A news report sheds light on just how dysfunctional that relationship has become.

***DA: The conflict is simple: one nation thinks it is a silly notion that one can borrow itself out of debt, and then there is everyone else.

Federal Reserve to take away the punch bowl
Mike Peacock – Reuters
Unless it springs a major surprise, the U.S. Federal Reserve will call time this week on its program of government bond purchases, which at one point was pumping $85 billion a month into financial markets and the economy.

***DA: They are taking it away temporarily while the prepare to spike it again.


When will the SNB end FX intervention and start raising rates?
Matthew C Klein – Financial Times
According to Goldman, the answer is sooner than the market thinks. A new note argues that the Swiss franc is already overvalued against the euro, which should give the Swiss National Bank cover to raise rates in response to a vibrant domestic economy and an overheating housing market.

Offshore renminbi market set to be blown off course
Edward Russell-Waring – Financial News
The UK two weeks ago became the first western government to issue paper in the Chinese currency. But changes in the market mean offshore issues from foreign entities are scarcer this year.

Sydney expected to get yuan clearing bank soon
Jeanny Yu – South China Morning Post
Beijing is set to accelerate plans to boost the international use of yuan by concluding pacts with key regional trading partners Australia and Singapore.

China to start yuan trading on Tuesday
China will begin trading the Chinese yuan against the Singapore dollar on Tuesday to help boost their usage in trade and investment, the central bank said.

Bitcoin market starts to mature
Kimberley Long – Euromoney Magazine
Interest and use of cryptocurrency bitcoin has undergone a meteoric rise in the past year, but it is now moving away from speculative investments into the real world of cross-border business transactions.

Indexes & Index Products

New social media index includes fast-entry IPO rule
Index provider Solactive has created a social media index for Vontobel that includes a rule allowing for extraordinary adjustments in the event of new social media IPOs that meet the entry conditions

ROBO-STOX Opens London Stock Exchange Trading
London Stock Exchange today welcomes the first global robotics and automation ETF to its markets.


LME taps China investors’ metals interest
Henry Sanderson – Financial Times
It is a tradition at the London Metal Exchange’s annual black tie dinner in the ballroom of the Grovesnor House Hotel to bet on the length of the speech. At 28 minutes this year’s not only surprised to the upside, it also came with an ominous warning.

A Sensible Gold ETF for the Paranoid
Lewis Braham –
It’s hard to talk about gold nowadays without sounding like a conspiracy nut. “I don’t have a bomb shelter at home stocked with canned soup,” says Norman MacDonald, manager of the Invesco Gold & Precious Metals fund. “And I don’t believe in the demise of the world financial system. But definitely something odd is happening to the price of bullion.”



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