Quiz Time: In 5 seconds or less, name a Spanish bank that is trading above €5 a share.

BEEP! (Sound of bug zapper)

Trick question, there isn’t one….SAN 4.40

BBVA 4.72
BKIA 1.43
POP 1.88
SAB 1.49
CABK 2.19
BKT 2.93

Triggers for Troika Action

The point of this little quiz farce is to highlight the Spanish banks’ delicate condition, and this is likely where the true battle for the Euro zone lies. While Greece appears ready to implode, the ECB, the IMF, and the EU (Troika) will be mapping out a contagion ring fence plan for Spain. The … ...READ MORE

Last night, former Bank of England governor Sir John Gieve said that the regulatory drive for banks to strengthen their safety buffers is dragging down lending and holding back the recovery. This is the conundrum for regulators in banking as they attempt to strengthen the financial system by making banks hold more reserves, which creates the unintended consequence of lower lending that undermines the economy and spirals back into undermining the financial system. … ...READ MORE

From the Netherlands to France, European citizens and politicians are shifting their views on austerity and growth. The straitjacket of Maastricht is forcing countries into downward debt spirals that exacerbate not alleviate the descent. Growth is paramount to sustainability not just reducing spending or raising taxes. If you don’t grow, you can’t grow your tax receipts and you can’t service your debt at any level. This is the lesson of Greece and why it will remain a ward of the European Union until it restructures the remaining debt to levels that can be supported by current tax receipts. Therefore, it … ...READ MORE

Over the weekend, the newsflow was decided negative as both economics and politics “broke bad” to drive Risk-Off trading. Stating the obvious, the key for any market is the consistency of the information that is received to enhance or detract from the current themes. Clearly, mixed data or newsflow produces mixed market reaction. If the information is decided in one direction, the moves can be substantial especially given the advent of technology that allows for instantaneous trading across all instruments. This drives the “Risk-On” or “Risk-Off” trades.

Given this, let’s take a look at what happened over the weekend. First, … ...READ MORE

Overnight, China announced a massive increase in new Yuan loans that helped generate a big up move in Risk and the Australian dollar (the huge 44k increase in Aussie jobs was also a factor for the AUD). New Yuan loans increased 1,101.0B versus expected 797.5B. While Chinese bank loans typically increase in Q1, this appears to be the result of a concerted effort amongst the major banks to increase liquidity to the system to aid economic growth. Loans for January and February had surprisingly fallen to the lowest level since 2008 for similar periods.

- Read More -… ...READ MORE

This weekend, China released their 70 city housing statistics and they were the weakest since they started the series in 2011. New home prices fell in 27 out of 70 cities in China from a year earlier with 6 cities unchanged. As most know, Chinese property prices have increase significantly over the last 10 years and the government in 2011 attempted to slow down the rise by regulation, interest rate increases and reserve requirement increases. China recently cut the reserve requirement and this sparked a belief that more easing would come to aid housing. However, Premier Wen Jiabao told lawmakers … ...READ MORE

On Thursday, the Greek government will announce the participation level for the private sector involvement in the swap of 206 billion euros of debt at 22:00 Athens (15:00 EST). The goal is to get 75% as a threshold for proceeding with the transaction. According to the FT, private holders of €206bn in Greek bonds have until Thursday evening to decide whether to take part in a swap where they would trade bonds for a package of bonds and cash that would knock about €100bn off Athens’ debts.

“Greece must get 75 per cent of holders to participate to avoid forcing … ...READ MORE

WB Zoellick warns on China: Today in Beijing, World Bank President Robert Zoellick stated that China will probably have a “soft landing” in the near term as its government needs to overhaul its economy to manage expansion over the next two decades. According to Bloomberg, the World Bank issued a report that said the nation needs to redefine the government’s role, alter the structure of state enterprises and gradually allow market-set interest rates, according to the executive summary. In November, the World Bank estimated that China would have a growth rate of 8% with the IMF estimating growth at 8.2% … ...READ MORE

Thursday February 16th, 2012

Apple Impact: For those that missed it, yesterday the WSJ had a nice graph of Apple’s impact on the market…..
Greece Drive-by: My view remains that the risk is for the negotiations between Greece and the EU to continue all the way up until March 20. Why? Because it’s only via this threat of default can the EU force Greece to enact their austerity measures. With an election coming up in April, the risk is that one of the candidates states they will renegotiate the terms to win over the electorate…..
US Econ Data: BMO’s Jennifer … ...READ MORE

In a somewhat stunning turn of events, the House Republican leadership has decided to add $100 billion to the US deficit by passing a 10-month extension of a Social Security payroll tax cut without finding offsets to pay for it. This comes within 24 hours of hyper-criticism (much deserved) of President Obama’s budget. (One of my favorite parts of the Obama budget is the use of a peace dividend stemming from ending the wars in Iraq and Afghanistan. Sounds great, until you realize that both wars were not paid for and therefore there is no honey pot of money to … ...READ MORE