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Hot Brendan Keenan's "Bleak Omens" for Europe!

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Are you glad that this Economics Thread is the Biggest Thread of all on P.irish?


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Tadhg Gaelach

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Berlusconi hardens immigration stance after weekend shooting


Silvio Berlusconi, the former Italian prime minister and media mogul, hardened his stance on immigration ahead of next month’s general election after a neo-Nazi attack on African migrants in Macerata convulsed the heated campaign. Mr Berlusconi, the 81-year-old leader of the centre-right alliance topping opinion polls, said of the 600,000 migrants who had arrived on Italian soil in recent years that only a small fraction were refugees and the rest were a “social bomb that is ready to explode”. “All these migrants live off trickery and crime,” Mr Berlusconi told Canale 5, one of his own television stations.

“When we are in government an absolute priority will be to take back control of the situation. We will invest many resources to guarantee the security of Italians,” Mr Berlusconi added, pointing to his plans to increase police and army patrols of Italian cities.

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WEDNESDAY, FEBRUARY 7, 2018
TOP NEWS

German economy to grow by 2.7 pct this year – DIHK
The DIHK Chambers of Industry and Commerce raised its 2018 growth forecast for the German economy to 2.7 percent from 2.2 percent. "Companies have never been more upbeat," DIHK said in its latest business survey which showed business morale improved further at the beginning of 2018 despite a stronger euro. Separately, the Statistics Office said industrial production edged down by 0.6 percent in December after rising by an upwardly revised 3.1 percent in November. From October to December, industrial output rose by 0.7 percent.

U.S. trade deficit rises to nine-year high on robust imports
The U.S. trade deficit widened more than expected in December to its highest level since 2008. The import-driven surge in the trade gap reported by the Commerce Department on Tuesday also suggests 3 percent annual economic growth may be hard to achieve. The trade deficit increased 5.3 percent to $53.1 billion in December. The deficit surged 12.1 percent to $566.0 billion in 2017. That represented 2.9 percent of GDP, up from 2.7 percent in 2016.

Japan wages fall in blow to consumer spending, BOJ's inflation quest
Wages of Japanese workers fell in December at their fastest pace in five months, in a possible sign that further complicate the central bank's quest to reach its 2 percent inflation target. Real wages fell 0.5 percent in December from the same period a year ago, labor ministry data showed. That followed a 0.1 percent annual increase in November and marked the biggest decline since a 1.1 percent annual decrease in July 2017. For all of 2017, real wages fell 0.2 percent, following a 0.7 percent increase in the previous year.

UK growth outlook improves on back of world recovery - NIESR
Britain's Brexit-bound economy will grow faster than previously thought over the next two years, thanks mostly to strength in the global economy, the National Institute of Economic and Social Research, said. British GDP will grow by 1.9 percent in 2018 and in 2019, the think tank said, up from its November forecasts of 1.7 percent for both years. NIESR kept its forecast for the Bank of England to raise rates by 25 basis points every six months, quicker than most investors expect, until they hit 2 percent.

ECB to push back new regime on loans that sour
The ECB's new rules forcing lenders to set aside more cash for loans that go unpaid may come into force on April 1 the ECB's chief supervisor Daniele Nouy said. Sources close to the discussion had told Reuters that if the package comes into force from April 1, provisions would likely have to be built from the next accounting period, or mid-year for most. The ECB will apply the rules on a case-by-case basis and there will be no automatism to force provisioning.


ANALYSIS

U.S. Fed seen staying on rate-hike path after stock market plunge
Monday's rout on Wall Street frayed investors' nerves, but it is not enough to knock the Federal Reserve off course from its intended path to further raise interest rates in 2018 as the economy continues to hum along, analysts say. The worldwide market sell-off in equities wiped out $4 trillion in value from record peaks eight days ago, raising concerns such a swift loss of wealth would hurt corporate investments and consumer spending just when many economies in addition to the United States are on a synchronized growth path.



CHART OF THE DAY




MORNING MEETING


DATA
• 07:00 MBA Weekly Mortgage Application Indices
• 10:30 EIA Weekly Petroleum Status Report
• 15:00 Consumer Credit (Dec) (mkt +$20.00 bn, prev $27.95 bn)

EVENTS
• 06:00 FRB Dallas's Kaplan (non-voter, dovish) speaks at a business forum in Frankfurt, Germany
• 08:30 FRB New York's Dudley (voter, dove) participates in panel on improving the banking culture; New York, NY
• 11:15 FRB Chicago's Evans (non-voter, dove) discusses the economy and monetary policy; Des Moines, IA
• 14:30 FedTrade operation 15-year Fannie Mae / Freddie Mac (max $435 mn)
• 17:20 FRB San Francisco's Williams (voter, centrist) discusses the economy; Honolulu, HI

ISSUANCE
• 13:00 Treasury auctions $24 bn 10-year notes (a $1 bn increase)

MARKET BIAS
• The tactical bias is neutral to supportive favoring the buying of dips in fronts to 5s, while looking to sell notable “rips” out the curve while looking for ongoing volatility
• Look for a 2.80% to 2.70% range in 10s
• The strategic bias is flat
• The curve bias legged into a 5s/30s steepener at 56.7 bps (2.475% and 3.042%) looking to unwind in the 30-year auction, with a stop at 53.7 bps

OVERNIGHT NEWS RECAP
• Risk-on tone in markets but bonds try to trade higher then sag
• EZ Stocks rebound but more of a catch-up trade in Europe
• Germany agrees most aspects of coalition deal
• Pro Europe SPD to head finance ministry – peripheral spreads tighten
• German economy to grow 2.7% in 2018 - DIHK
• Brent down again but holding lows
• Shanghai Composite down 1.81% - fill gap to 29th Dec
• 10yr Chinese yields just holding 3.90%
• Bitcoin rebounds after sub 6k trade this week
• VIX calms down after volatile week
• Dec German ind out m/m -0.6% vs 0.5% exp and 3.4% prev
• French Dec trade -3.47bn vs -4.90bn exp -5.62bn prev
• UK Jan Halifax house prices -0.6% m/m vs 0.2% expected and -0.8% prev – soft

OVERNIGHT TREASURIES
• Bonds dip on Tokyo open, then recover through rest of overnight session
• Belly underperforms slightly, wings outperform
• Big volume, 416k 10-year futures trade by 06:34 EST
• March 10s mark 121-19.5/121-04.5 range overnight, last at 121-16
• 10s trade 2.758%/2.807% overnight, last at 2.772%
• 2s/10s 2bp steeper at 69.3bp last

OVERSEAS SOVEREIGNS
EGBs
Bunds open soft, recover amid news German government agreed
Peripherals firm on stronger European shares, rally on news of German government agreed
€3bn 2/28 Bund tap goes well, average yield 0.69%, comes marginally through offered side, good cover of 1.5, small BDF share 16.9%
10-year Bund futures slightly lower from Tuesday settle, marginally higher from open
10-year Bunds underperform within German curve, 2s/10s 0.6bp steeper, 10s/30s 1.5bp flatter
10-year Italy/Spain both 5.5-6bp tighter to Bunds
Portugal outperforms, 10-year spreads 7bp tighter to Bunds

GILTS
Gilts try to rebound after holding 121.60/61 region
122.24 resistance extending to 122.28
10-yr Gilts trades 1.510% to 1.535% range, last at 1.513%
Mar Gilts trade 121.68 to 121.97, last at 121.92
Gilt volumes at 42k, as of 05:52 EST
Gilts 2s/10s curve 0.2bp steeper at 90.6bp
10-yr Germany/UK 1bp tighter at 82bp

RATES SNAPSHOT
10-yr Current Yield Spread to Trsy (bps)
US 2.765%
JGB 0.070% -269
BUND 0.638% -212
GILTS 1.514% -125
Prices from Tradeweb

EQUITY RECAP
NIKKEI 21645, +35
• Nikkei attempts rebound but well off highs

DAX 12464, +70 FTSE 100 7187 +45
• Modest rebound – catch-up to US rally

Dow Futures -215, S&P Futures -24, NASDAQ Futures -55

FX SNAPSHOT USD/JPY 109.08 EUR/USD 1.2342

COMMODITY SNAPSHOT Gold $1327 +$3 Oil $63.1 -$0.2

SPREAD PRODUCT OUTLOOK

MORTGAGES
The FNMA 30-year current coupon closed at 3.394%, +75.7bp over the 5/10-year treasury blend and +60.3bp over the 10-year swap rate bid, 0.5bp and 0.4bp wider on the day.
January prepayments slowed more than expected on 30-year conventionals and GNIIs. Contributing factors were a lower daycount, weaker turnover seasonals, and reduced refinancings. Including all cohorts, the weighted average aggregate speed on FN30s in January according to eMBS was 9.4 CPR, down 12.1% from the prior month; GO30 prepaid at 9.0 (-11.8%); GNII was at 13.1 (-9.7%), with FN15 at 9.3 (-5.1%).


 
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The EU is the enemy of the working classes

Leftists who support the EU should look at Greece, and be ashamed.

This is the EU that uses the pooled-without-consent sovereignty of its member states to pursue its own institutional self-preservation, impoverishing struggling Eurozone members, from Spain to Italy, in the name of economic stability; imposing leaders-cum-administrators on recalcitrant electorates in the interests of austerity; and brazenly betraying workers’ rights at every self-interested turn. This EU – the actual EU, the one stubbornly committed to its own, not citizens’, interests – is not on the side of the worker. And it never was. Because this EU, when the economic imperative demands, is always against the worker.


But those attached to their fantasy left-wing ideal of the EU refuse to see the reality. To face up to this reality would simply be too much. It would mock their left-wing pretensions, humiliate and expose them for what they are: a craven defence of the status quo – a status quo in which they have long prospered.

The EU is the enemy of the working classes
 

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Five Star gains as Italy’s southern voters lose faith

Anti-establishment feeling is strong in region yet to benefit from eurozone’s recovery. Polls show Five Star on 26% as it gains Working Class support.


“Everything that is not Five Star is thievery. There is zero confidence in the political class,” says Mara Conga, 45, who works at a rental car office on the seafront. “The state doesn’t work, it doesn’t help the needy, it is completely absent. That’s why we need change.” Disgust with the political establishment will only have deepened this month after 169 people — including the president of Crotone province — were arrested for association with the ‘Ndrangheta, the region’s ruthless mafia. Another string of arrests last year was related to corruption at a large government-funded migrant centre close to Crotone.

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REVEALED: Germany is BIGGEST breaker of EU rules - despite lecturing smaller nations

GERMANY has been exposed as the top rule breaker in the European Union - even as it lectures other bloc members how to behave.

It faces 74 infringement proceedings from Brussels for failing to adequately convert EU rules into German law.

 
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END OF MERKEL: Socialists pulling chancellor 'into DOWNFALL' as party 'DETERIORATES'

A REBELLION is growing in the ranks of German leader Angela Merkel’s conservative CDU party.

Former allies believe she has ceded too much power to the left-leaning SPD in order to rule for a further four years as the head of a coalition government.

 
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Martin Schulz QUITS as SPD leader after he refuses Merkel's coalition job

MARTIN Schulz has stepped down as leader of the Social Democratic Party following his refusal to become foreign minister in the future government with Angela Merkel after his members turned on him for buckling to demands from the German Chancellor.