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Thursday, July 17

17th Jul - Bad macro, worse geopolitics



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EUROPE
Espirito Santo: complexity, opacity and moral hazardPieria
It may be too draconian to ban conglomerates with non-financial interests from owning banks. But consideration needs to be given to ways of limiting moral hazard and preventing circular funding arrangements such as those between BES and its parents.

Balance-of-Payments Facility: Current profile and future challenges of non-euro area financial assistanceDB Research
The Balance-of-Payments Facility of the European Union is a medium-term financial assistance mechanism for non-euro area member states suffering from a balance-of-payments crisis. This Research Briefing reviews current challenges in the ongoing negotiations between the European Parliament, the Commission and the Council on a recent legislative proposal which aims to streamline the facility with the current institutional framework of the ESM. Still, there is a particular need for reconciliation regarding the facility's volume, economic conditionality and the future role of the IMF.

Summit: EU leaders fail to agree on the remaining top jobsOpen Europe

The future of Europe: ‘Where Belgium goes, Europe goes’voxeurop

  UKRAINE / RUSSIA
EU Said to Expand Russia Sanctions After Putin Holds Firm – BB
U.S., EU Escalate Russia Sanctions as Putin Holds Firm – BB
Russian Sanctions: The United States Takes the Lead – CFR
Russian Bonds, Stocks, Ruble Tumble On Latest US Sanctions – ZH
Stocks And Bond Yields Are Plunging On Shot-Down Passenger Jet – ZH
Obama And Putin Speak, Mention Plane Crash; Obama Threatens With More Sanctions – ZH

  EUROPEAN CENTRAL BANK
Calendar for Governing Council Meetings in 2015 – ECB
Start Circling Dates on Your 2015 ECB Calendar – WSJ

Euro area deflation monitor – Danske Bank

ECB publishes disclosure process for comprehensive assessment – ECB
Publication Note on the comprehensive assessment – ECB

ECB Found Too Timid by Many in Poll as Europe WorsensBB
International investors say the euro area’s economy is in its worst shape in more than a year and in danger of dropping into deflation, with a central bank that many believe is not doing enough to help, according to a Bloomberg Global Poll.

  MACRO NUMBERS
Production in construction down by 1.5% in euro area – Eurostat
Euro area annual inflation stable at 0.5% - Eurostat
Euro zone June inflation unchanged at low levels as expected – Reuters

UNITED STATES
  FEDERAL RESERVE
Largest Banks Rank Highest On Fed Risk Data – WSJ
12 Beige Book Gems – WSJ
Bullard: Fed May Need Rate Rises ‘Sooner Rather Than Later – WSJ
Fed's Bullard backs repo rate, cites bond bubble worry – Reuters
Fed's Bullard says U.S. inflation appears to be rising – Reuters
Bullard Says Fed May Need to Move Forward Start of Exit – BB
Fisher: Monetary Policy and the Maginot Line – FED

Are markets poised for Taper Tantrum 2.0?Reuters
Investors may be ignoring subtle warnings from the Federal Reserve that a rate rise may come sooner than they think, setting the stage for another painful market contraction much like last year's "taper tantrum."

  EMPLOYMENT
Labor force participation rate since 2007 – White House
White House on Labour Participation – FT
Why workers are disappearing from the job market – WaPo
  Most of the decline in labour force participation was demographic, due to an aging population; a modest proportion was due to the recession and its unusual severity… For the Fed, that means there is not a significant “participation gap” on top of elevated unemployment.

  MACRO NUMBERS
Housing Starts Plunge due to Horrific Data from the South – Marc to Market
Housing Starts Tumble, Permits Plunge – ZH
Housing Starts decline to 893 thousand Annual Rate in June – Calculated Risk
U.S. housing starts, permits decline in June – Reuters
Construction of New U.S. Homes Declines on Plunge in South – BB

Forecast Says U.S. Home Prices Are Overvalued, Will Peak In 2016 – WSJ
A few comments on June Housing Starts – Calculated Risk

ASIA
Shadow banking in China is not as risky as the alarmists think it is – FT
PBoC follows other central banks in suppressing volatility – Sober Look
China Finds Debt Addiction Hard to Break in Growth Quest – BB
What to Fear If China Crashes – BB
China is Beginning to Rebalance, But There’s a Long Way to Go – WSJ

OTHER
Daily MacroWSJ
Washington’s decision to widen sanctions against Russia and Federal Reserve Chairwoman Janet Yellen’s ever so slightly less dovish than usual Congressional testimony on Wednesday proved a drag on European and Asian equity markets early in the session. But relatively thin news flow and light summer conditions are likely to encourage sideways trade.

Daily Central BanksWSJ
Hilsenrath’s Take: Two Camps in the Fed’s Rate Debate * Yellen Confronts Lawmakers on House Fed Bill * Fed’s Fisher: Rates Could Rise in Early 2015 or Even Sooner * Japanese Bond Yields Offer a Hint Of Trouble * Economists Question Beijing’s Stimulus Habit

EMEA Weekly: Week 30Danske Bank

A quick lesson on market topsThe Reformed Broker

Because low vol just happens some timesFT

Booming Until It Hurts?Project Syndicate

Commodities - Relief in the front, pressure on the back endDanske Bank