iftttwall

In is only fitting that a week that has been characterized by deteriorating macroeconomic data, and abysmal European data, would conclude with yet another macro disappointment in the form of Markit’s sentiment surveys, for non-manufacturing/service (and composite) PMIs in Europe which missed almost entirely across the board, with Spain down from 58.1 to 55.8 (exp. 57.0), Italy down from 49.8 to 48.8 (exp. 49.8), France down from 49.4 to 48.4 (exp. 49.4), and in fact only Russia (!) and Germany rising, with the latter growing from 55.4 to 55.7, above the 55.4 expected, which however hardly compensates for the contractionary manufacturing PMI reported earlier this week. As a result, the Composite Eurozone PMI down from 52.3 to 52.0, missing expectations, as only Germany saw a service PMI increase.

Goldman’s take: “Bottom line: The September Euro area Final Composite PMI came in at 52.0, 0.3pt weaker than the Flash (and Consensus) estimate. Relative to August, the Composite PMI declined by 0.5pt. The weaker Final Composite PMI was driven by a downward revision to the French Final service PMI. Today’s data also showed a decline in the Italian and Spanish service PMI.”

From Chris Williamson, Chief Economist at Markit said:

“The PMI suggests the eurozone economy remained stuck in a rut in the third quarter. After GDP stagnated in the second quarter, we can only expect modest growth of 0.2-0.3% in the third quarter based on these survey readings, with momentum being lost as we head into the final quarter of the year.

 

“There are certainly pockets of growth: Ireland’s economy is recovering strongly, Spain is seeing a still-robust upturn and the German service sector is providing an important prop to growth in the region as a whole. But the overall picture is one of a euro area economy that is struggling against multiple headwinds. These include a lack of domestic demand in many countries, subdued bank lending, sanctions with Russia and a reluctance of companies to expand in the face of an uncertain economic outlook.

 

“The survey showed growth of new orders sliding to the weakest for almost a year across the region as a whole, suggesting demand for goods and services is barely growing. Employment was held more or less unchanged again as a result, and a weakening in firms’ backlogs of orders suggests we could see headcounts start to fall again in coming months if this lack of demand persists.

 

“The waning of growth signalled by the PMI will apply further pressure on the ECB to broaden the scope of its planned asset purchases, to not only buy riskier asset-backed securities but to also start purchasing government debt.”

In other news, bad news apparently is back to being good news. So despite or rather thanks to this ongoing economic weakness, futures have ignored all the negatives and at last check were higher by 9 points, or just over 0.4%, as the algos appear to have reconsidered Draghi’s quite explicit words and BlackRock’s even more explicit warning that a public QE is just not coming, and seem to be convinced that his lack of willingness to commit is merely “pent up” commitment for a future ECB meeting. That or, more likely just another short squeeze especially with the “all important” non-farm payrolls number due out in just over 2 hours, which for the past 24 hours has been hyped up as sure to bounce strongly from the very disappointing, sub-200K August print.

Speaking of payrolls, the August jobs data better be revised much higher or all those pundits, with an emphasis on Mark Zandi, who said the BLS will have no choice but to revise the August print, will appear even more foolish than they already are.

But an even bigger question, is whether today good news will be bad news and vice versa, because lately it sure feels that the market volatility is surging as a result of concerns that the Fed may indeed hike rates once it is done with what is now just $9 billion more in POMO.

In other news, European equity futures trade in a holding pattern ahead of today’s Nonfarm Payrolls release, with mild short-covering helping assist peripheral European stocks to recover from yesterday’s sharp ECB-inspired losses. Germany’s equity markets remained closed for Unity Day today, helping limit volumes on the final trading day of the week. Airlines perform particularly strongly in Europe, with easyJet shares trading at the highest levels since late June after upgrading their profit forecasts as the budget airline benefited from increased customer traffic after Air France’s pilot strike action over the past few weeks. Ahead of the US open, the E-mini S&P has risen about the 100DMA at 1946.25, helping assist the NASDAQ future toward 4,000.

After entering correction territory overnight, the Hang Seng Index in Hong Kong managed to close in the green, as an element of normalcy returned to the business district after the two-day market holiday. The Chief Executive of Hong Kong refused protesters calls to resign, however talks between the Hong Kong authorities and the protester leadership are due to take place in the coming days, hinting that a resolution could be in the pipeline.

Looking ahead we have trade data and the ISM non manufacturing reports but Payrolls will clearly be the main focus. The market is expecting a +215k and +210k print for the headline and private payrolls, respectively. Unemployment is expected to be unchanged at around 6.1%. DB’s Joe Lavorgna notes that in both of the last two years, the gain in September nonfarm payrolls has been less than the trailing year-to-date monthly average. In 2012, monthly job gains averaged +179k through August but September employment was up +161k. In 2013, job gains averaged +197k but September employment was up just +164k. He thinks this may be due to issues surrounding teacher employment or survey length anomalies. However both years saw a strong rebound before year-end. So its worth baring this in mind ahead of today’s figures.

Bulletin gHeadline Summary from RanSquawk and Bloomberg

• European equity futures trade in a holding pattern ahead of today’s Nonfarm Payrolls release, with mild short-covering helping the E-mini S&P top the 100DMA
• Weak Eurozone PMIs highlight the continued headwinds to growth, knocking EUR/USD toward 1.2600, however Germany’s public holiday keeps volumes very light
• Nonfarm Payrolls expected to bounce back above the 200K level, with markets also looking for a positive revision to August’s particularly weak number

ASIA

After entering correction territory overnight, and dropping as low at 22,565 the Hang Seng Index in Hong Kong mysteriously soared, all the way up to 23,148, before it  managed to close 0.6% in the green, as an element of normalcy returned to the business district after the two-day market holiday. The Chief Executive of Hong Kong refused protesters calls to resign, however talks between the Hong Kong authorities and the protester leadership are due to take place in the coming days, hinting that a resolution could be in the pipeline.

FIXED INCOME

After being knocked lower after the ECB’s policy update yesterday fell short of expectations, the IT/GE and SP/GE spreads have bounced back, tightening by 3bps apiece. Nonetheless, strength in Greek bonds has spilled over from yesterday as the ECB’s inclusion of BBB- debt in their Asset Backed Securities purchase program, as the GR/GE spread tightens by over 6bps.

EQUITIES

European equity futures trade in a holding pattern ahead of today’s Nonfarm Payrolls release, with mild short-covering helping assist peripheral European stocks to recover from yesterday’s sharp ECB-inspired losses. Germany’s equity markets remained closed for Unity Day today, helping limit volumes on the final trading day of the week. Airlines perform particularly strongly in Europe, with easyJet shares trading at the highest levels since late June after upgrading their profit forecasts as the budget airline benefited from increased customer traffic after Air France’s pilot strike action over the past few weeks. Ahead of the US open, the E-mini S&P has risen about the 100DMA at 1946.25, helping assist the NASDAQ future toward 4,000.

FX

Eurozone PMIs have (with the exception of Germany) been revised lower, highlighting the continued weakness in the European growth picture and weakening EUR/USD to trip touted stops at 1.2620. GBP underperforms after services PMI fell below expectations, showing the tense geopolitical backdrop and weak Eurozone is still feeding into UK growth, however composite PMIs still indicate Q3 GDP growth of 0.8%

COMMODITIES

WTI and Brent crude futures trade flat in relatively directionless trade ahead of the US open. Nonetheless, platinum has extended the year’s sharp decline to hit the lowest level since late 2009 as expectations of Fed tightening continue to weigh on precious metals. HSBC say platinum group metals continue to be subject to investor liquidation, which is more than offsetting physical interest, adding that bargain-hunting may emerge if the platinum-gold spread contracts further.

* * *

DB’s Jim Reid concludes the overnight recap

We’ve had so many policy surprises from the ECB recently that the market was left a bit deflated by the lack of a furry rabbit being pulled out of Draghi’s hat yesterday. As our European economist Mark Wall remarked he did not repeat last week’s key phrase – that the Council is ready to adjust the ‚size and composition? of purchases. He also seemed to de-emphasise the notion of targets for balance sheet size and the level of the currency. So it seems the council has moved back to wanting to see the impact of their prior policy initiatives before undertaking any fresh intervention. Mark Wall also remarked that this doesn’t change their view of Government bond QE in 2015 as his team think the ECB’s growth forecasts are too high and in time they will be forced to react to the likely disappointments.

At the end of the European session equity markets were in some degree of turmoil with the FTSEMIB, IBEX, CAC and DAX down -3.9%, -3.1%, -2.8% and -2.0%, respectively. For the FTSEMIB it was the worst day since February 2013 and for IBEX it was the biggest decline since early January this year. The S&P 500 hit its low (-1.03% intra day) at the European close before rallying all the way back to flat by the close. In reality there wasn’t a specific driver per se as data flow was mixed but the broader risk sentiment saw some support following the rebound in US small caps. There has been some focus on the underperformance in small caps lately so the first positive day for the Russell 2000 (+1.0%) after 3 long sessions of corrections earlier this week was a perhaps a reassuring sign. Echoing the intraday moves in equities Treasuries also unwound some of safe-haven flows earlier to close about 4bp higher in the 10yr (at 2.425%).

What was also impressive yesterday was the resilience in credit markets. European credit held in very well considering the scale of the equity sell-off (IG +1bp, Xover +3bp). However there was some discussion as to whether this was because investors don’t want to short a contract that is about to roll (on Monday) and will quickly become less liquid. So we’ll know more as to whether credit is remaining calm as of early next week. The resilience was also notable in the US credit market with the IG22 index 1.5bp tighter at one point before ending the day half a basis point tighter at around 64bp. The CDX HY index was fairly stable throughout the day before finishing one-eights of a point higher while the FINRA US HY corp bond index was up half a point in cash price terms.

This stability has occurred against a backdrop of further outflows from the asset class over the past week. Indeed the latest flow numbers are out and cover the period of Bill Gross’s career shift. Per EPFR’s data, US HY mutual funds saw outflows of US$2.3bn (-0.8% of AUM) during the week ending 1 October 2014. This marks the fifth consecutive week of outflows and the fourth biggest negative week since the first meaningful outflows in late June. Since then, we’ve witnessed 12 negative weeks (out of 16) for US HY and over US$26bn in cumulative outflows (or nearly 9% of AUM). Incidentally the WSJ reported on Wednesday night that PIMCO’s Total Return Fund saw a net US$23.5bn in redemptions in September (with bulk of it taking place last Friday).

Back to markets and turning to Asia, Hong Kong’s equity markets (Hang Seng -1.0%) continue to underperform the rest of Asia (Nikkei -0.3%, ASX 200 +0.3%). Investors continue to digest the implications of the ongoing prodemocracy protests. The good news is the protests over the last 2 days (public holidays in HK) were relatively peaceful. HK’s Chief Executive has rejected requests to step down but has assigned his deputy to meet and discuss with student group leaders on their calls for democratic reform. In response, one of the two main student groups said that the ‘occupation’ of key parts of HK would continue and the outcome of talks would determine whether they adopt more aggressive tactics (NYT).

On this topic, DB’s Michael Spencer has published a note outlining his thoughts and assessing the impact of the event. The retail sector is clearly a key loser via reduced  spending and tourist flows. Interestingly he highlighted that HK’s stock market should be supported by the fact that 40% of market cap is in Chinese companies whose earnings should be little affected by this. Also he thinks that it may not be too much of a stretch to imagine that Beijing may feel less disposed to expand on its use of HK as a testing ground for capital account liberalisation as long as protests continue. The HK-Shanghai Stock Connect from further liberalisation of CNH markets could be delayed as a result of the deteriorating political climate.

Looking ahead we have trade data and the ISM non manufacturing reports but Payrolls will clearly be the main focus. The market is expecting a +215k and +210k print for the headline and private payrolls, respectively. Unemployment is expected to be unchanged at around 6.1%. However Joe Lavorgna notes that in both of the last two years, the gain in September nonfarm payrolls has been less than the trailing year-to-date monthly average. In 2012, monthly job gains averaged +179k through August but September employment was up +161k. In 2013, job gains averaged +197k but September employment was up just +164k. He thinks this may be due to issues surrounding teacher employment or survey length anomalies. However both years saw a strong rebound before year-end. So its worth baring this in mind ahead of today’s figures.

via Zero Hedge http://ift.tt/1visVgy Tyler Durden

By: Brad Thomas at http://ift.tt/146186R

Singapore is regarded as the “safe haven” or Switzerland of Asia. While on the surface Singapore is the economy to which most others can only aspire to one day become, beneath the scenes is a very fragile economy highly dependent on the cost of capital staying low or at least rising very slowly over the coming years. If rates in the US rise sooner than what everyone expects and by a greater magnitude, the Singapore economy and dollar are in big trouble!

Let’s get straight to the point – Singapore has a huge problem and it relates to its property market – property prices have advanced some 50% since the start of 2006.

High property prices in themselves aren’t a problem. The problem is essentially the way in which the property market is financed, but more on that later.

What has caused this insane rise in property prices? From the chart above notice that most of the price movement occurred from 2009 to 2013. This was a period in which the US Fed engaged in what seemed an infinite “quantitative easing” program which took short-term rates down to virtually zero percent.

The Fed’s quantitative easing program has had far-reaching consequences for which it has openly stated that it doesn’t care (everything is ok as long as it is in the interests of the US). One way the stimulus manifests itself is as bubbles in other economies, particularly of the emerging variety, where the ultra-low rate set by the Fed has been exponentially compounding what was already a serious problem caused by China’s seemingly insatiable appetite for growth.

Singapore’s benchmark interest rate, the SIBOR, is tied to the U.S. Fed Funds Rate to minimize large swings in the exchange rate. Low interest rates are a direct cause of credit bubbles, and this is what is happening in Singapore.

Since the SIBOR is used to price the majority of loans and mortgages in Singapore, a very low SIBOR means cheap credit in Singapore. The ratio of household debt to gross domestic product now stands at around 77%, up from 55% in 2010 and 45% in 2005.

Furthermore, almost all mortgages in Singapore now have floating interest rates, meaning that once the Fed tapers, mortgage repayments will increase too, exposing unsustainable debt levels in the system. Let’s take a closer look at this stupidity.

The average mortgage rate in Singapore is now approximately 1%. This is ok as long as rates don’t move. Looking at the history of the fed funds rate, which was at 5% as recently as 2007, it has trended between 3% and 6% for the last several decades. If – or should I say when – Fed rates return to their historical averages after this exceptionally long period of low rates, Singapore’s housing market will discover a double whammy of underwater homes and unaffordable interest payments.

At 2%, interest payments in Singapore will more than overwhelm the principal and double monthly payments. It isn’t hard to see how disposable income and consumer spending in Singapore is so vulnerable to rising interest rates.

Singapore is not alone in its fragility to rising interest rates. What is happening in Singapore is a symptom of a broader macro theme (consumers gorging themselves on cheap credit). There is a region-wide emerging markets bubble, encompassing not just Singapore, but also Malaysia, Thailand, the Philippines, Indonesia, Australia and New Zealand. Singapore just happens to be the financial hub of the region and thus benefits from the skyrocketing price indices and booming household debt, as long as it lasts.

This emerging markets bubble is likely to burst, once the Chinese bubble and thus commodity prices pop (which they now appear to be doing). Given the makeup of Singapore’s economy, mainly characterized by finance and real estate, the chain of events could unfold in a way that echoes the financial crisis in Iceland and Ireland. However, as is usual with bubbles, they tend to be flat-out denied until they burst for little or no apparent reason.

The Economist labels Singapore as the third most expensive residential property market in the world, on a price-to-rent basis, causing a 60% overvaluation relative to the long-term average. Only Canada and Hong Kong are pricier. If the property market goes, so does the banking sector, since the banks hold almost 50% of their credit portfolios in property-related loans, residential mortgages making up nearly a third. Given that the vast majority of loans have floating rates, these banks are in for a horrible wake-up call on the bad loan front as rates rise.

The evolution of Singapore’s bubble is closely tied to US monetary policy, and though the causality is far from clear, Singaporean home price indices did reflect the first decline in seven quarters in 2013 Q4 and have been declining ever since, as the Fed started and continues to “taper”. Since the process of returning to non-zero interest rates in the US is likely to be extremely slow, the bursting of Singapore’s bubble is hardly imminent. However, there is always the risk that rates in the US rise sooner than expected because, if history is anything to go by, rarely do expectations match reality.

As the Fed moves towards raising rates, the risk must certainly be that rates rise sooner than expected. Why do I get the feeling that we are sitting precariously close to a repeat of the 1997 Asian Tiger crisis? If one of Singapore, Malaysia, Indonesia, the Philippines, Thailand, Hong Kong, or Australia or that matter gets into trouble then the rest go. Of course, I didn’t even need to mention China!

Expressing bearish views on the Singapore dollar is a great way to position for rising rates in the US and any crisis that is likely to materialize from rising rates. The preference is to express the view via long term call options on the USD/SGD.

– Brad

“The rising tide lifts all the boats.” – John F. Kennedy

via Zero Hedge http://ift.tt/ZzNnjL Capitalist Exploits

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Some of the most memorable moments of my tabloid-filled youth consisted of watching Geraldo Rivera interviewing and confronting Neo-Nazis and racists both in his studio and on the streets. Often times, these heated encounters resulted in brawls such as the one in this video, which has over 600,000 views on YouTube.

Geraldo and many others gave “a voice” to countless hateful groups on a regular basis throughout my youth, and millions of my fellow Americans saw them and were exposed to their unenlightened and pathetic ideology. This didn’t result in hordes of youth turning to violent extremism or the beginning of a Fourth Reich. Rather, what these interviews successfully did was expose the idiocy of these groups and make them even more isolated than they were before. That is how things work in a functioning free society. You aren’t afraid of ideas, you exchange them.

On Friday, I woke up to headlines proclaiming that David Cameron had called for a criminalization of “non-violent extremism” during a speech at the UN. I thought this could be a good topic for a post, but after watching it, I decided to focus on something else. At the time, I figured it was just a politician spouting stupid nonsense as usual. It wasn’t until today that I realized his “war on free speech” was about to become a key platform of Conservative Party policy in the UK. We learn from the Guardian that:

Radical Islamist extremists and neo-Nazis could be banned from making public appearances including on television under a gagging order proposed by the Conservatives with echoes of the broadcast ban that once applied to the voice of Gerry Adams.

 

The home secretary’s new orders would be aimed at those who undertake activities “for the purpose of overthrowing democracy”, a wide-ranging definition that could also catch a far wider range of political activists.

May will also set out proposals to ban non-violent extremist groups that fall short of the current threshold for being banned as terrorist-related organizations.

 

The moves to ban extremist but non-violent groups and to introduce extremist asbos were blocked by the Liberal Democrats on freedom of speech grounds and so were not announced when Cameron proposed measures to tackle British jihadists travelling to Syria.

 

May will announce during the home affairs debate at the Tory conference that the new powers will be included in the party’s manifesto for next year’s election.

 

The restrictions are expected to include banning individuals from speaking at public events, protests and meetings, having to inform the police in advance of any public event, protest or meeting that they plan to attend, and banning individuals from particular public locations.

 

May also wants to include restrictions on banned individuals from broadcasting, from associating with named people, and restricting their use of social media or the internet by requiring them to submit in advance any proposed publication to the police.

 

Banning orders would be time-limited to ensure they were proportional, but breaching the civil orders would be regarded as a criminal offence punishable with a jail term.

 

The Home Office has always argued that banning such groups would do more harm than good, but May says that it is now needed. A home secretary’s decision to ban a group would be subject to an immediate review by the high court to ensure it was not “obviously flawed”. A ban would make it an offence to be a member of or to fundraise for the group.

In any event, if we really want to ban extremist, disturbing behavior, let’s start with David Cameron’s selfie at Nelson Mandela’s memorial:

Cameron thumbnail at top by William Banzai7.

*  *  *

We are sure – as Mike Krieger notes – that whoever posted this is guilty of extremism

via Zero Hedge http://ift.tt/1r5uXg7 Tyler Durden

Against a consensus expectation of 215,000, Goldman forecast a 230,000 increase in September nonfarm payroll employment and a one-tenth decline in the unemployment rate to 6.0% (vs. consensus 6.1%). Overall they think the available employment indicators for September point to a solid report, despite slightly weaker data this week. In addition, the reversal of a couple of special factors from August should be a positive. If history is any guide, however, regarding downside risks, there has been some seasonal tendency for September payrolls to disappoint consensus.

Recent Data is more negatively biased… (via Bloomberg)

Via Goldman Sachs,

We forecast a 230,000 increase in September nonfarm payroll employment (vs. consensus 215,000). This would represent a substantial pickup from August’s 142,000 gain, pushing us back towards our view of the underlying trend and placing the payroll numbers back in line with the broader dataflow.

Arguing for a stronger report:

Solid business surveys. The employment components of all business surveys we track remained in expansionary territory in September, with most at fairly strong levels. Relative to August, six of twelve moved up, while the other six moved down. With respect to national (rather than regional) surveys specifically, ISM manufacturing employment moved down in September, but Markit manufacturing employment and Markit services employment advanced.

 

Claims continued to move down. The four-week moving average of initial jobless claims moved down by 6k from the August reference week to 295k.

 

Bounce-back from grocery store work stoppage. Although not technically classified as a “strike” by the Labor Department, work stoppages at Market Basket grocery stores resulted in a drop in food and beverage retail employment in August, which underperformed the twelve-month trend by about 21k. We would expect all of this effect to reverse in September.

 

End of auto shutdown distortions. Last month, durable manufacturing employment fell short of its twelve-month trend by about 10k, as seasonal adjustment volatility associated with smaller-than-normal July auto plant shutdowns distorted the August gain. We expect a more normal contribution from manufacturing in September. Although the ADP report was broadly in line with expectations for September—and has generally been of marginal use in predicting payroll employment more broadly—it did show a strong gain in manufacturing employment.

Arguing for a weaker report:

Seasonal bias. Historically, there has been a tendency for September payrolls to fall short of consensus expectations. This occurred in twelve of the past seventeen years. This could potentially be due to systematic differences between early and late survey responses by industry, which would not be captured by the seasonal adjustment methodology. While the average historical miss has been about 40k to the downside, over the past three years the average miss has been about zero.

 

Labor differential worsens. The Conference Board’s labor differential—the net percent of survey respondents reporting jobs are plentiful vs. hard to get—worsened by 2.6pt in September to -15.0.

 

Casinos run out of luck. The recent closure of three large casinos in Atlantic City (two of which occurred before the September reference week) might be expected to reduce payroll employment by around 5,000 jobs.

On top of the September numbers themselves, we think a positive upward revision to the past two months of data is likely. The September report has had a strong seasonal tendency to include positive back-revisions, with the average revision +42,000 over the past ten years and +65,000 over the past three years. As a result, we would not be surprised to see last month’s 142,000 revised up to something closer to 200,000, which would provide reassurance that the trend in job growth has not deteriorated significantly.

We also update our payrolls forecast “distributions” for September. The median model forecast is slightly above consensus at around 225,000 (vs. about 240,000 in August). The width of the distribution widened somewhat from August, likely as models which place more emphasis on the recent slower payrolls trend increasingly disagreed with models placing more weight on the generally solid September dataflow. However, downside skew moderated slightly. Purely model-based forecasts are also unlikely to capture the full extent of bounce-back from the end of grocery store work stoppages that we would judgmentally expect.

Exhibit 1. Distribution of Payroll Forecasts

With respect to the unemployment rate, we anticipate a decline of one-tenth to 6.0% on a rounded basis (vs. consensus +6.1%). We do see a substantial risk of the unemployment rate remaining unchanged, in light of the “firm 6.1%” starting point for August (6.1497% on an unrounded basis). Nonetheless, the risk on the participation rate is probably still slightly to the downside, and employment growth according to the household survey was somewhat soft in July and August, affording the possibility of a strong gain in September.

On average hourly earnings, we expect a trend-like gain of 0.2%, in line with consensus. This would push the year-on-year rate up slightly, to a still-subdued 2.2%.

*  *  *

Finally we offer this ‘humor’ from CNBC… winning in the new nominal vs real normal…

#winning http://ift.tt/YWCzeu

— Rudolf E. Havenstein (@RudyHavenstein) October 2, 2014

via Zero Hedge http://ift.tt/1tlLVZh Tyler Durden

Via Nick Andrews via Evergreen Gavekal,

The wobble in world markets continues, with stock indices across all time zones down steeply in recent sessions. Investors are not only realigning their exposure in anticipation of tighter liquidity conditions as the US Federal Reserve finally brings its asset purchases to a close later this month. After today’s European Central Bank (ECB) meeting they are also looking nervously at the magnitude of the task facing eurozone policymakers. And they appear to be coming to the conclusion that generating a rebound in growth may be too tough a job for Europe’s leaders to accomplish in the near term.

With France and Italy – the eurozone’s second and third biggest economies – either stagnating or contracting, to achieve a convincing recovery will require policymakers to press home their attack on three fronts: structural reform to increase economic flexibility, fiscal easing to stimulate activity, and monetary expansion to support credit growth. On all three fronts they face determined opposition.

Structural reform: On Sunday President Francois Hollande’s ruling Socialist Party lost control of the Senate to France’s center-right Union for Popular Movement (UMP) party, a development which will only complicate the implementation of reform plans already facing staunch resistance from strikers in the transport, manufacturing and service sectors. Meanwhile Italy’s three most powerful trade unions agreed on Monday to form a united front in opposition to Prime Minster Matteo Renzi’s proposed Jobs Act. Worse, Renzi has failed to win over the left wing of his own party, which accuses him of slavish obedience to Berlin’s policy diktat. Although the party’s senior leadership pledged its support for the bill this week, a possible showdown in the Senate on October 7 could still see key reform proposals significantly watered down.

 

Fiscal policy: In recent days both France and Italy have revised their deficit reduction targets. Yesterday French Finance Minister Michel Sapin rejected austerity, saying Paris will not bring its deficit below 3% of GDP until 2017, two years later than it earlier targeted. The Italian government this week also pushed back the date when it expects to balance its books, postponing its target by a year. The two governments face an uphill struggle in selling their delayed targets in Brussels and Berlin, however. The recent appointment of France’s former finance minister, Pierre Moscovici, as Europe’s economics and financial affairs commissioner with the key role of approving national budgets had raised hopes that France and Italy would be given greater flexibility in meeting fiscal targets. But in a surprise move this week Commission President Jean-Claude Juncker curbed Moscovici’s powers, appointing hawkish Latvian commissioner Valdis Dombrovskis to oversee and sign off Moscovici’s budget approvals. The move was widely seen as aimed at placating opinion in Berlin, where Chancellor Angela Merkel is uneasily watching the rise in popularity of anti-European political part, anti-euro party (AfD). Although AfD is still small, the threat of losing voters to Germany’s Euro-skeptic right will only encourage the chancellor to take a tough line with France and Italy over fiscal policy, especially in the absence of significant progress on structural reform.

 

Monetary policy: Investors are looking to ECB president Mario Draghi to announce details of a major program of asset-backed securities purchases at the central bank’s meeting today. However, given the insistence of the Bundesbank that the ECB should only buy superior quality investment grade securities and the reluctance of the German and French finance ministries to back ECB purchases with government guarantees, there is a clear risk that markets will find Draghi’s program deeply underwhelming. To make things even more difficult, on October 14 the European Court of Justice is set to rule on the legality of the ECB’s proposed Outright Monetary Transactions program of secondary market sovereign bond purchases. A decision against the program would effectively rule out the possibility of full-blown quantitative easing in Europe.

With efforts to procure a European recovery belabored on all three fronts, and prospects for eurozone corporate earnings set to disappoint, it should be no surprise that investors are jittery. The only bright spot for Europe at the moment is the weakness of the euro, which has fallen nearly 10% against the US dollar since May; a decline that will both help to support eurozone exporters and to ease disinflationary pressure.

As the US moves closer to tightening monetary policy and with European policymakers facing an uphill struggle in their efforts to generate a recovery, the decline in the euro looks set to continue.

via Zero Hedge http://ift.tt/1rRkwlu Tyler Durden

Coast to coast, ordinary Americans are growing more fearful of what Ebola in America means. Despite reassurances from officials (President Obama on down) that it’s contained, it appears it is not. By anecdote, as Reuters reports, in the Dallas community of Vickery Meadow (where Richard Duncan was staying), a cultural polyglot where about three dozen languages are spoken, the one word on everyone’s lips is “Ebola.” There is little indication a visitor to the community had been infected with a disease that has killed more than 3,000 people in West Africa, in the worst Ebola outbreak on record. “There’s no notes on the doors. No one came to talk to us. I picked up my kids from school down the street and found out it was this close,” one mother exclaimed, adding “right now, I’m not sure to take my daughter to school tomorrow… I’m getting so nervous.”

As Reuters reports,

On Sunday, a group of blighted apartments in a section of the neighborhood favored by West African immigrants was shaken by screams as one family saw a recently arrived relative being carted away in an ambulance.

 

The man was the first person diagnosed with Ebola in the United States. He was last seen by neighbors in the parking lot vomiting on the street.

 

“I heard about Ebola on the news, but I didn’t know it was right here,” said Juan Pablo Escalante, 43, who is from Mexico.

 

There is little indication a visitor to the community had been infected with a disease that has killed more than 3,000 people in West Africa, in the worst Ebola outbreak on record.

 

“There’s no notes on the doors. No one came to talk to us. I picked up my kids from school down the street and found out it was this close,” Escalante said on Wednesday.

 

Dallas County said it would put “boots on the ground” to monitor those who may have been exposed. In Vickery Meadow, residents worried if that would be enough to prevent an outbreak at what has been dubbed “ground zero” for Ebola in the United States. Vickery Meadow is home to about 25,000 people and more than 30 languages spoken among immigrants who have come to Dallas because it has one of the better job markets in the United States and relatively inexpensive property prices.

 

…

 

The community’s schools have also been touched by Ebola, with five children coming into contact with the patient. The children went to the four different schools they attend after being exposed. They are now home and showing no symptoms, but parents are worried.

 

Dozens of comments from parents posted on the Dallas Independent School District’s Facebook page said more information was needed, including the names of the potentially exposed children.

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Stay calm everyone – the government will be here soon with ‘the solution’.

via Zero Hedge http://ift.tt/1xIbpqs Tyler Durden

Via Mark Hanson,

via Zero Hedge http://ift.tt/1oGjNi1 Tyler Durden

Bloomberg’s Consumer Comfort gauge dropped to 4-month lows this week with across the board collapses in personal finance confidence, buying climate, and the state of the economy (78% not-so-good). However, it is under-the-surface data that exposes the sad reality of this so-called ‘recovery’.

For those earning over $100k, “comfort” nears record highs, for those earning below $40k, “comfort” plunged in the last few weeks to near 2-year lows. This has surged the rich-to-middle-class discomfort gap to near 4-year highs… thank you Ben.

Chart: Bloomberg

via Zero Hedge http://ift.tt/1tlx8xM Tyler Durden

Ebola carrier Thomas Eric Duncan – the guy who brought Ebola to Dallas – vomited outside his apartment building.

A WFAA tv news chopper took the following photograph showing how workers are cleaning up the vomit:

That’s a pretty good way to spread Ebola … especially if experts are right that Ebola spreads through aerosols.

Similarly, the Ebola patient’s sweat-stained sheets were left on his bed for days without being removed … even though his family was quarantined in the same room.

As we noted yesterday, arrogance may lead to unnecessary deaths.

via Zero Hedge http://ift.tt/YWi7KQ George Washington