europe

Trade Deficit for November 2011 - $47.8 Billion

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The November 2011 U.S. trade deficit jumped $4.48 billion to $47.8 billion in a month. This is a 10.36% deficit increase from last month in the trade deficit. October's trade deficit was revised down slightly by $195 million. Exports decreased -$1.54 billion, or -0.86%, while imports increased $2.95 billion, or +1.32%.

Debbie Downer S&P Crashes European Denial Party

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debbie downerHere comes S&P, throwing their opinions around with threats of a credit downgrade. I guess nation-states now know how Americans feel, being FICO scored over whether they shop at Walmart, literally being denied a job.

By now you're heard S&P has whipped out their weapons of mass destruction on 15 European countries. It's like the entire Eurozone just had war declared on them by Standard and Poors.

It's quite the bloodbath with Germany, France, Austria, Belgium, Ireland, Italy, Spain, Portugal, The Netherlands, Slovenia, Estonia, Malta, Slovakia, and even the frugal, we actually paid our WWII debt Finland being place on negative credit watches. A negative credit watch is a flip of a coin chance of being downgraded in the next 90 days.

The two other Eurozone countries, Cyprus and Greece are already downgraded, hammered by S&P.

What makes this political, is S&P has some policy prescriptions, they want to see, a new fiscal compact, or a fiscal union, i.e. Euro bonds. S&P has further requirements to come out from under their sovereign credit ratings thumb:

New European Bail Out Announced - Greek Debt Gets a HairCut

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We have another Eurozone bail out. The Euro Summit has released a 15 page statement (pdf) overviewing the agreement. The plan was ratified by all 17 Member States of the euro area.

First, there is a haircut on Greek debt, which while pretending to be voluntary, the volunteer or else threat behind it would allow a complete Greek default, where bond holders would get nothing and banks would probably be ruined.

We invite Greece, private investors and all parties concerned to develop a voluntary bond exchange with a nominal discount of 50% on notional Greek debt held by private investors. The Euro zone Member States would contribute to the PSI package up to 30 bn euro.

The plan is to reduce Greek debt to 120% of GDP by 2020 and is about €100 billion reduction with yet another €100 billion in additional aid.

Short Sellers Banned in France, Italy, Ireland, Spain

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Who rules the markets? Not short sellers says France, Spain, Italy and Belgium. They just banned short sales wreaking havoc on their markets, for some banks. Echos of 2008 now abound. In particular, short sellers are focused in on Société Générale, which dropped 20%, betting it might implode.

France, Spain, Italy and Belgium will impose bans on short-selling from today to stabilize markets after European banks including Societe Generale SA hit their lowest level since the credit crisis.

While short-selling can be a valid trading strategy, when used in combination with spreading false market rumors this is clearly abusive. -- European Securities and Markets Authority

Perhaps the short selling ban impending move had much more to do with today's stock market pop up than erroneous claims that a little tick down in initial unemployment claims caused a 423 point Dow increase.

Zerohedge, cynically notes the ban on some banks can be easily circumvents through options puts and calls.

August 26 just went supernova, as this is the day the short selling ban expires, the BEA reports the second, sub 1% GDP revision, and Bernanke presents his 2011 Jackson Hole keynote speech.

Europe Probing Goldman Sachs on Sovereign Credit Default Swaps

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YES! Bloomberg is reporting 16 banks, including Goldman Sachs are being probed by the EU for anti-trust for manipulation of the the financial derivative, credit default swaps, market.

Goldman Sachs Group Inc., JPMorgan Chase & Co. and 14 other investment banks face European Union antitrust probes into credit-default swaps for companies and sovereign debt.

The EU is investigating whether 16 banks, including Citigroup Inc. and Deutsche Bank AG, colluded by giving market information to Markit Group Ltd., a data provider majority-owned by Wall Street’s largest banks. It will also examine if nine of the firms struck unfair deals with Intercontinental Exchange Inc.’s European derivatives clearinghouse, shutting out rivals.

“Lack of transparency in markets can lead to abusive behavior and facilitate violations of competition rules,” Joaquin Almunia, the EU’s competition commissioner, said in an e-mailed statement. “I hope our investigation will contribute to a better functioning of financial markets.”

Global regulators have sought to toughen regulation of the $583 trillion credit-default swaps market, saying the trades helped fuel the financial crisis. The EU’s probes add to separate investigations in the U.K. and U.S. into whether banks colluded to manipulate the London interbank offered rate.

Credit default swaps allow anyone, not directly involved in the underlying asset, to place bets on whether that underlying security, asset will default or not. Credit default swaps are used for speculation. In the case of sovereign debt, that causes the cost of financing that debt to increase, dramatically.

A Credit Rating Downgrade for France?

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Bloomberg is reporting Moody's will downgrade France:

France risks losing its top AAA grade as Europe’s debt crisis prompts a wave of downgrades that threatens to engulf the region’s highest-rated borrowers, with Belgium also facing a possible cut, analysts and investors said.

Ireland earlier was downgraded 5 credit rating levels to Baa1.

Bail-Out-O-Matic

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dimeomatic
Yes folks, it's Bail-Out-O-Matic The European Union has created a permanent bail out fund:

Despite deep differences over how to contain their continuing debt crisis, European Union leaders agreed Thursday to create a permanent support fund for the euro after 2013 — something they hope will be a first step to calming the markets.

Leaders did agree, however, on the creation of a bailout mechanism that would operate after 2013, when the mandate of the current fund expires.

Yet even here, vital questions on the size and scope of the fund were left until the spring.

The new body, known as the European Stability Mechanism, will take over in 2013 from the existing 440 billion euro, or $582 billion, bailout fund.

Bondholders could be asked to shoulder some losses in future debt crises on a case-by-case basis.

To set up this facility, the European Union will have to revise its governing treaty, but it plans to do so in such as way as to avoid requiring referendums in any of the 27 member countries, all of which will have to ratify the revision.

AFP has more details:

Changes to the Lisbon Treaty were demanded by Germany to enable a temporary, trillion-dollar rescue fund to be turned into a permanent umbrella that will allow governments who fall on hard times to seek and obtain help from currency partners.

European Bank Stress Tests - Banks Didn't Tell the Whole Truth

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What a surprise. It seems when Europe ran it's bank stress tests, they only didn't report a few billion here and there.

Market Watch:

Europe's highly touted stress tests of major banks earlier this summer understated holdings of potentially risky government debt, The Wall Street Journal reported Tuesday.

Wall Street Journal:

An examination of the banks’ disclosures indicates that some banks didn’t provide as comprehensive a picture of their government-debt holdings as regulators claimed. Some banks excluded certain bonds, and many reduced the sums to account for “short” positions they held — facts that neither regulators nor most banks disclosed when the test results were published in late July.

Because of the limited nature of most banks’ disclosures, it is impossible to gauge the number of banks that excluded portions of their sovereign portfolios from their disclosures, or the overall effect of that practice.

The original Wall Street Journal article here, requires a subscription.

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