First Greece, Now Italy
Stratfor on Italy:
The Italian government eked out a legislative victory today, but the victory was a hollow one. Only 308 of the parliament’s 630 MPs voted for the government’s budget, eight shy of a majority. The bill only passed because the opposition chose to abstain rather than defeat the budget. Italy has now taken the lead position in the contest of what can unravel the euro.
Greece, which has held that dubious honor for nearly two years, is actually now off the radar. Today the Greeks formed a national unity government that has the political authority to implement deep austerity while compartmentalizing political backlash against the system. It might not work, but it should last at least until the new year.
But today’s Italian budget vote — or more specifically the decision of several previously pro-Berlusconi deputies to abstain with the opposition — puts Italy squarely in the crosshairs.
Despite Bunga Bunga moving the market, we present some important chart levels
Another Berlusconi news session. Volume is rather poor, and the only risk takers around seem to be the HFT News Algos. It is almost a sad thing to see how illiquid markets have become from time to time. Indices move up and down one percent on news of Bunga Bunga resigning or not. As per usual, the “secret” buyer that still loads up on futures every morning is around, and supports the market. After the last days move up, we are slowly approaching that magic 200 day moving average. Let’s see if Mr Biggs becomes uber bullish again? Important chart levels below.
Market shows first signs of moves as Weidman and Berlusconi dominate the News
Markets are still rather boring. Silvio news out that he does not have majority (but has a lot of Euros) and that some opposition leaders are asking for his resignation. We doubt he really cares about that. Weidman has also suddenly realized that money printing leads to hyperinflation. So, no real news as futures start moving for the first time today.
Don’t be surprised if we get increased margins on Italian Bonds….
Mid Day Market Update
Every morning there is a “secret” buyer lifting the ES futures higher… We are experiencing another non event trading session going into lunch in Europe. Even the newswires are tired of reporting about Greece and Italy. Let’s see if this starts breaking out of the last days trading range? A couple of charts below.
Run for your money (as the Greeks and Italians take out cash)
Markets are trading in another no volume, no action fashion. We are getting the creepy feeling, like the calm before the storm. The news ticker is still full of news regarding Berlusconi, Greece, Italy, Debt, but nobody really seems to care today. What are ordinary people doing then? Pulling cash out of the system. We know the Greeks have been doing that for quite some time, but what about the Italians? With Italian bond markets in a chaotic status, where the 10 year is continuing it’s parabolic move towards the 7% level, there sure must be people wondering what to do with the money in the banks. Don’t forget, the Italian bond market is the world’s third largest, and a run on the banks would cause trouble well beyond Italy. As pointed out, it feels very calm….
Der Spiegel reports on the “run for the return of your money”.
“Run for your lives” is the new motto in Europe, and not just among banks and insurance companies, which are selling off southern European bonds as quickly as they can, but also among ordinary holders of savings accounts. Banks and regulatory agencies are noticing that anxious citizens throughout Europe are trying to bring their money to safety. The flight of capital from Italy, Spain and Greece is in full swing.
Since the beginning of the crisis, ordinary Greeks have withdrawn about €50 billion ($69 billion) from their accounts, or a fifth of total deposits. In May, when the first rumors about a possible withdrawal from the euro zone were making the rounds, the Greeks withdrew €1.5 billion from their accounts within 48 hours. And it is no longer just the rich who are moving their money to a safe place. A Greek nun recently closed her convent’s bank account, telling the bank employee that she needed the €700,000 in the account for renovations. But when pressed by the bank employee, she finally admitted that she was worried about her order’s assets.
….and the Italians are surely getting more nervous.
Fed Intervention and the Market
If you still wonder who is putting on the show. Guess what, Fed still rules the markets. Guest Post by DShort.
If a picture is worth a thousand words, this chart needs little additional explanation — except perhaps for those who are puzzled by the Jackson Hole callout. The reference is to Chairman Bernanke’s speech at the Fed’s 2010 annual symposium in Jackson Hole, Wyoming. Bernanke strongly hinted about the forthcoming Federal Reserve intervention that was subsequently initiated in November of 2010, namely, the second round of quantitative easing, aka QE2.
The lastest major strategy, Operation Twist, which was announced on September 21st, has just begun and will run through June 2012. The Fed will sell $400 billion of shorter-term Treasury securities and use the proceeds to buy longer-term Treasury securities in an effort to lower interest rates.
Enron is back as Olympus says it hid losses
It seems that Worldcom and Enron are back. Last week we got to learn about MF Global, risky unhedged bets, and how it brought the firm down. This morning’s news comes out of Olympus. According to Bloomberg three executives have been hiding losses for decades. The even sent the shares falling and dragging Nikkei with it. Wonder how the practices of Japanese auditing actually work? The scandal Black Swan is hitting suddenly on a frequent basis. Let’s see if it spreads to the Med shortly. From Bloomberg;
Olympus Corp. said three executives helped conceal decades of losses by paying inflated fees to takeover advisers, the first admission of wrongdoing since accusations from its former chief executive officer engulfed the Japanese camera maker in scandal four weeks ago.
Former Olympus Chairman Tsuyoshi Kikukawa was involved in hiding losses at the company, President Shuichi Takayama said in a press conference in Tokyo today. Executive Vice President Hisashi Mori, who was fired today, and auditor Hideo Yamada were also involved, Takayama said. The company may take legal action against all three, he said.
Full story here.
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