BOE and ECB: What It Means and What is Next

The Bank of England, which has a penchant for surprising the market, chose not to wait for the quarterly inflation report to provide cover, and announce GBP75 bln additional bond purchases over the next four months. We forecast sterling to finish the year near $1.50. However, in the near-term there is scope for additional position adjusting. A move above the $1.5500-50 area could target $1.57 before sellers re-emerge.

The ECB focused on liquidity measures, including a 12- and 13-month long-term refi operations and 40 bln euro covered bond purchases. The ECB did not cut rates as many had expected. Short-term European rates back up smartly, with the euribor futures strip yields rising 9-13 bp. We expect the euro to finish the year near $

A Tale of Policy Shifts as the UK goes QE2

Sterling plummets as BoE surprises the market with QE announcement; global stocks, oil advance. All eyes turn to Berlin for Trichet’s last meeting in the hopes of a policy announcement. BoE announcement see QE larger and earlier than many expected; Swiss inflation increases

Felix Zulauf: expect more market turmoil than in 2008

In an interview from late September, Zulauf tells James Turk that he is very much a eurosceptic. The external imbalances in the euro zone make the euro an untenable currency union. Like David Blanchflower, Zulauf remarks how markets are leading European policymakers. Zulauf believes that this is what is behind the European bank run now in progress and that this run will eventually put the entire European banking system at risk

Chart of the Day: S&P support way down at 900-950

The negative headlines are here and the tape bomb shows a failure to confirm the recent W-bottom, which has Andy Lees thinking about where the next stop is

The Global Double Dip and the French Bank Run

At some point soon, maybe tomorrow, I will be writing an update to two posts: The Fake Recovery and The recession is over but the depression has just begun. The gist of those two posts is still operative and also very relevant, namely that the problems which created a global panic in 2008 are still with us waiting for economic weakness to reassert themselves. When that weakness comes, bad things will happen. I think that about sums it up. We are about at that point right now

Treason?

If you believed the Republican leaders, you would say this is reckless monetary policy aimed specifically at supporting President Obama, a Democrat. You saw the last post I wrote, with the court scene from “A Few Good Men” tacked on. Boehner, Cantor, McConnell and Kyl would have you believe that Ben Bernanke is the misguided and dangerous Jack Nicholson character and they are the Tom Cruise character, trying to get him to admit to his crimes.

Is Bernanke ‘almost treasonous’ then, as Rick Perry has said he is?

Here’s my take

ALERT: Bernanke orders an Operation Twist QE Code Red

The Fed is not just doing QE via Operation Twist, it is also throwing in some mortgage-backeds to up the ante a little bit

Chinese shunning trade with French banks

Reuters has reported that Bank of China, a dealer in China’s foreign exchange market, has stopped doing foreign exchange forwards and swaps with several European banks. Separately, sources say the European banks involved are Societe General, Credit Agricole, and BNP Paribas, the three banks being frozen out of the US money markets. Allegedly, the bank has also stopped trading with UBS because of worries about UBS’s rogue trading losses

The prospects for inflation have not been smaller since 1930

Just where are all those borrowers who are willing and able to borrow the $2 trillion or $20 trillion that hyperventilators believe banks want to lend? The US private sector (firms and households) have instead ramped up their net savings—they are not borrowing, they are not even spending their diminished income. They are scared. They are (rationally) tightening belts, paying down debt, and accumulating claims on government and banks. In short, the prospects for inflation have not been smaller since

Rosenberg also sees Operation Twist QE3

David Rosenberg was on Bloomberg and sees operation twist. But he also says he doesn’t see how the Fed could prevent a US recession. His view is that the recession is already baked in. He goes further and says that Ben Bernanke is ‘always aggressive but never early’ meaning Bernanke will get the fed to do something – but it will be small beer until the economy collapses

Goldman’s Hatzius sees Operation Twist QE3 due to weak jobs number

The jobs numbers in the US were weak. There was no change in non-farm payrolls. Unemployment was unchanged from July at 9.1%. Underemployment was 16.2%. Total revisions to previous months’ data were –58,000, meaning the number today was equivalent to -58K print. The numbers sparked a selloff in stocks and crude oil, but caused the Swiss Franc and Treasuries to rally

The Curious Case of Benjamin Bernanke and QE3

Market action is quiet ahead of today’s Jackson Hole speech; US Q2 GDP likely to confirm slowdown. We do not expect an announcement of next round of asset purchases; yet doubt Fed will limit tools. EM asset prices are likely to continue trading as high beta irrespective of Bernanke’s speech