Forex Market Commentaries - Living in Gass Houses

People Who Live In Glass Houses (or the Whitehouse) Shouldn't Throw Stones

Nov 11 • Market Commentaries • 20833 Views • 16 Comments on People Who Live In Glass Houses (or the Whitehouse) Shouldn't Throw Stones

There’s a media ‘joke’ doing the rounds at the moment, it has all the wit of a German attempting stand up during an open mike session at the Comedy Club so please don’t shoot the messenger but here goes..there’s only one person who Obama can lose the 2012 election to, Angela Merkel..

Apparently the Washington political elite are becoming increasingly frustrated at Europe’s inability to find a solution to the sovereign debt crisis, that’s understandable when they have two solutions of their own, print more money and er..oh yes, print more money. The inability to take on board the legality that the ECB cannot be a bank of last resort is lost on the psyche of America’s political elite, the simplistic view is that they could lend us Ben Bernanke for a month or two, “he’d show those pesky Europeans how it’s done..”

There was a wall of criticism when the ECB bought countries’ bonds in the last crisis, given it was perceived as a form of quantitative easing via the back door. The ECB have found other imaginative ways of doing the same since, a practice they have recently re-adopted during this latest crisis, but at some stage this has to stop as in truth, and whisper it quietly, no one at the ECB ever envisages this money being paid back, it’s simply added to the pile of paper IOUs.

For America to sit atop the moral high ground, particularly were fiscal and monetary policy management is concerned, is breathtakingly arrogant and myopic. It was only last month Tim Geithner was laughed at when he arrived at meetings in Europe to show the ECB and the troika “how it’s done”. A basic lesson in math and recent history reminded him that the raising of the USA debt celling by $1.4 trillion (circa 600 billion already burnt through and only 19 weeks remaining) and the loss of their AAA credit rating didn’t exactly prove his credentials when suggesting that Europe should adopt the same principle and methods the USA used to get themselves out of their self imposed mess. The words “the USA is in no position to lecture Europe regarding these matters” were quickly buried by the compliant financial press as young Timmy skulked back to Washington.

What the USA does have and Obama will undoubtedly follow suit with Britain on, is a ‘slam-dunk’ opportunity to blame Europe for their inevitable return to recession. This rhetoric is already being tested in the UK by the prime minister, typically the verbals are; “if this problem in Europe is not solved then they run the risk of dragging the UK back into recession”. Sadly this technique will work on Joe Public. Given the mainstream media’s propensity to act as useful idiot xenophobes the current UK Tory wing of the coalition government will push this excuse for all its worth. Similarly Obama will catch on quickly by suggesting that the USA was nearly there but for Europe, he just needs one more chance with the ‘Hopey-Changey’ thing..

Apparently the UK government is already putting in contingency plans for the break up of Europe and the collapse of the Euro, as to what those contingency plans could be given Europe is the UK’s biggest trading partner (exports and imports) is curious. But faced with the current impasse, Vince Cable, the UK treasury minister, admitted Britain was preparing for “all eventualities” in the eurozone, including the breakup of the single currency.

There’s a lot of scenario planning in government, thinking about all possible outcomes, and the Treasury is doing that. It affects our trade and potentially, in this Armageddon narrative, it affects the banking system, but we’re not there yet.

He’s not as well planned as the Germans who, according to delicious rumours on conspiracy news sites, already have billions of Deutschmarks printed and presses oiled primed and ready to go buried deep in the bunkers of the Black Forest. What a two fingered salute that’d be to the system and one that would guarantee Ms. Merkel re-election. She could then call up her friend Barack and ask him, in her best Sarah Palin voice; “how’s that ‘hopey changey’ thing working out for you?” Ooh those Germans and their wacky sense of humour..


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Market Overview
In early trading stocks rose as Europe took steps to address its debt crisis. Copper advanced, snapping a five-day stretch of losses. The MSCI All Country World Index increased 0.2 percent as of 8:08 a.m. in London, after falling 3.1 percent in the past two days. The Stoxx Europe 600 Index rose 0.3 percent and Standard & Poor’s 500 Index futures advanced 0.3 percent. The euro rose 0.2 percent to $1.3641. Hong Kong’s Hang Seng Index advanced 0.9 percent after plunging 5.3 percent yesterday, Japan’s Nikkei 225 Stock Average rose 0.2 percent and Australia’s S&P/ASX 200 rose 1.2 percent. Jobless claims in the U.S. fell by 10,000 to 390,000 in the week ended Nov. 5, to the lowest level in seven months, government figures showed yesterday.

The yen rose to the strongest level against the dollar since Japan intervened on Oct. 31. The currency advanced 0.3 percent to 77.44 per dollar before Italy sells as much as 3 billion euros ($4.1 billion) of five-year bonds on Nov. 14, testing investor appetite for the nation’s debt.

Market snapshot as of 10:30 am GMT (UK) time

Asia/Pacific markets had mixed fortunes in overnight early morning trade. The Nikkei closed up marginally at 0.16%, the Hang Seng closed up 0.91% but the CSI closed down marginally at 0.17%. The ASX 200 closed up 1.23%. European bourses have been buoyed by positive news with regards to Italy Greece and the ECB getting ‘ahead of the curve’. The STOXX is up 0.9%, the UK FTSE is up 0.36%, the French CAC is up 0.6% and the German DAX is up 0.67%. the SPX equity index future is currently up circa 0.3%.

Economic calendar releases that may affect market sentiment in the afternoon session

The Michigan consumer sentiment index is a report that assesses consumers’ thoughts on the economy and their personal finances, determined via a survey of consumers from 500 households. The preliminary figure encompasses roughly 60% of the data used in the final figure, and is not officially meant to be released to a wide audience. Preliminary figures are regularly leaked to the press, however, and therefore accessible to the financial industry. Economists surveyed by Bloomberg yielded a median forecast of 61.5, compared with the previous release of 60.9.

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