Financial Market Report for May 5, 2010
1) World stocks, ACWI, and VT, turned lower again today as speculation started to wash out of commodities, DJP, as the exhaustion of quantitative easing commenced a rally in the dollar, $USD, and competitive currency devaluation in the major currencies, DBV, the emerging market currencies, CEW, and the commodity currencies. CCX.
The world has reached the End Point of Neoliberalism, as seigniorage of the US Federal Reserve and the World Central Banks has failed, as inflation is taking its toll on the BRICS, EEB, and China, YAO, responds with the start of feudal economic governance, state corporatism and price controls. A fall in gold, GLD, to $1,380 could easily occur as the commodity currencies, CCX, turn lower. Yanzouh Coal Mining, YZC, lost 2.9%
The death of Neoliberalism and the sinking of currencies means the rise of regional economic governance as called for by the Club of Rome in 1974 where leaders announce Peace and Security Framework Agreements waiving national sovereignty.
2) European Financials, EUFN, fell lower 3.8% as the Euro, FXE, fell lower, 2.0% lower.
3) … A Chancellor, that is a Sovereign, and a Banker, that is a Seignior, will arise out of Götterdämmerung, that is an investment flameout caused by collapsing world currencies, DBV, and CEW, and failed central bank Treasury Auctions, BWX.
A) … Open Europe asks A Terminator For EU President?
B) ... And I ask will a Goldman Sachs Banker rise as ECB President? Open Europe reports Nicolas Sarkozy backs Mario Draghi to become next ECB President. Following an official endorsement from French president Nicolas Sarkozy yesterday, Italian Mario Draghi has moved a step closer towards securing the position as head of the European Central Bank after Jean-Claude Trichet retires in October.
In the FT, former deputy director of the IMF’s policy development and review department Desmond Lachman argues that Mr. Draghi ought to focus on the ECB’s principal task of maintaining price stability in the eurozone, and “reverse Mr Trichet’s stealthy adoption of a second mandate: keeping the eurozone’s periphery afloat”. FT FT 2 FT Lex FT: Lachman WSJ Le Figaro EurActiv France IHT Telegraph Irish Times El Pais
Open Europe reports Irish banks continue to issue bonds to themselves in order to gain ECB loans. The Irish Independent reports that Irish banks’ controversial issuance of ‘own-use’ bonds is set to continue. ‘Own-use’ bonds are issued by the banks to themselves, but are guaranteed by the Irish state, and then posted as collateral to take cheap loans from the ECB. In the past few days Irish banks have issued €12bn of these bonds in order to roll over the original ‘own-use’ bonds until August, highlighting ongoing problems in the Irish banking sector … Meanwhile, the FT reports that the Spanish government has urged its regional governments to work harder to meet their deficit targets, amid fears that it could be dragged further into the peripheral eurozone crisis. Separately, German inflation reached a new high of 2.6% in April, further increasing pressure on the ECB to raise interest rates more quickly. Most economists now expect another two rate increases this year, and one early next year … Writing on Conservative Home, Andrew Bridgen MP argues that the bailout of Portugal would be throwing “good money after bad” and that the series of eurozone bailouts are ultimately wasted as they fail to “address the fundamental flaws in the Eurozone currency model”. For these reasons, Bridgen argues that the UK’s participation in the Portuguese bailout should be brought before Parliament for “an urgent debate”. Irish Independent FT WSJ Conservative Home CityAM FT: Milne Irish Times Irish Times 2 El País: Vidal-Folch
Open Europe reports DieWelt reports that the EU Commission is planning a directive on building efficiency which would require homeowners and landlords to replace existing shower heads, taps and toilets with ones which have a reduced flow to save water. Die Welt calculates that this would cost German homeowners €400 each, which would be a total of over €10billion for all homes in Germany. Focus Welt
Open Europe reports EU’s Court of Justice set to ban patents on discoveries that involve stem cells Leading scientists have warned that Europe’s bio-engineering industry will be “wiped out” if the EU’s Court of Justice follows the advice of its Advocate General, Yves Bot, and imposes a ban on research using human embryonic stem cells, on the grounds that it represents an immoral "industrial" use of human embryos. Independent Guardian Times Mirror Mail Express BBC NewScientist
Bild propagandizes the line that Draghi is the most Germanic central banker out there, picturing him with a Prussian police helmet.
4) … Competitive currency deflation commenced with the exhaustion of the US Federal Reserve Quantitative Easing.
The Australian Dollar, FXA, fell 1.5%
And the Euro, FXE, fell 2.1%
And the Swedish Krona, FXS, fell 2.2%
This Finviz database report of FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, CYB, BZF, XRU, FXY, BNZ, DBV, CEW, CCX, UUP, shows competitive currency devaluation is underway.
Countries turning lower included
Russia, RSX, -3.0%
South Africa, EZA, -2.8%
The United Kingdom, EWU, -2.4%
Sweden, EWD, -2.4%
Europe, VGK, -2.6%
Canada, EWC, -2.2%
Australia, EWA, -1.5
Switzerland, EWL, -1.7%
Thailand, THD, -1.2%
South Korea, EWY, -1.1
New Zealand, ENZL, -1.1%
Mexico, EWW, -1.0%
5) The failure of the seigniorage of Neoliberalism is seen in World Stocks relative to World Government Bonds, ACWI:BWX, continuing to fall lower and in the tremendous fall of The HUI Precious Metal Mining Stocks Relative To US Treasuries, GDX:EDV, as well as the fall in value of developed country banks such as Australian Bank: Westpac Banking, WBK, and The United Kingdom Bank, Barclays, BCS, and South Korea Bank, KB Financial, KB