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Prepare for Lehman re-run, Bank official warns - (www.telegraph.co.uk) Banks and traders must prepare for a
devastating market seizure as governments grapple with the escalating economic
crisis in Europe, a Bank of England policymaker has warned. Cheap and ready
access to the liquid assets that oil the financial markets are under threat
from both state-imposed capital controls and flagging confidence in the euro,
Robert Jenkins, a member of the Bank’s Financial Policy Committee, told the
Global Alternative Investment Management conference in Monaco. Without easy
access to liquidity, markets could seize in a re-run of the credit crunch after
the collapse of Lehman Brothers, he warned. “Those of you who traded asset
backed securities in 2008 can testify to the speed with which liquidity can
disappear,” he said. “Yet despite these examples, many continue to assume that
... ‘liquidity’ is free and will be freely available.
Merkel Balks At Sovereign Debt Purchases To Overcome Crisis
- (www.bloomberg.com) German Chancellor Angela Merkel balked at
committing to direct sovereign debt purchases through the euro-area bailout
fund, pushing back on calls by the bloc’s leaders who support the measure as a
way to ease the crisis. Such a move, while legally possible, “is not up for
debate” at present, Merkel said yesterday in Berlin. French PresidentFrancois
Hollande championed the idea of using the European Stability Mechanism
to purchase indebted countries’ bonds as a way to counter rising yields. Just
returned from the Group of 20 summit in Los Cabos, Mexico, Merkel said: “I
haven’t heard about such things.” “There is no concrete planning that I know
about, but there is the possibility of purchasing sovereign bonds on the
secondary market,” Merkel told reporters in Berlin after meeting with Dutch
Prime Minister Mark Rutte. “But this is a purely
theoretical statement about the legal situation.”
Americans Hold Dimmest View On Economic Outlook In Five Months
- (www.bloomberg.com) The fewest Americans in five
months said the economy was improving in June, signaling the slowdown in
employment is seeping into consumer psychology. The share of households viewing the
economy as heading in the right direction fell to 22 percent this month, the
lowest since January, pushing the Bloomberg monthly expectations gauge to minus
11 from minus 1 in May. The weekly Bloomberg Consumer Comfort Index was minus
37.9 in the period ended June 17, down from a four-week high of minus 36.4. “The
steady drip of dreary economic data and deteriorating labor market is reshaping
public expectations,” said Bloomberg LP senior economist Joseph
Brusuelas in New
York. The decline “will likely result in slower spending, which in
turn will likely have an adverse impact on business confidence.”
BlueMountain Said To Help Unwind JPMorgan’s Whale Trades -
(www.bloomberg.com) A hedge fund run by a former JPMorgan Chase & Co. (JPM) executive
who helped create the credit- derivatives market is aiding the lender as it
unwinds trades in an index at the heart of a loss of more than $2 billion. BlueMountain
Capital Management LLC, co-founded by Andrew Feldstein, has been compiling
trades in recent weeks that would offset JPMorgan’s risk in Series 9 of the
Markit CDX North America Investment Grade Index, then selling the positions to
the bank, according to three people outside the firms who are familiar with the
strategy. That allowed the bank, which is said to have amassed as much as $100
billion in bets on the index, to unwind trades outside the traditional web of
dealers. “They used BlueMountain to disguise what they were doing,” Peter
Tchir, founder of New York-based macro advisory firm TF Market Advisors, said
in a telephone interview. “It all gets a little bizarre and shows how screwy
this whole market is.”
The
Recession Threat Is Growing Around The World, And Goldman Says The Fed Won't Do
Anything About It - (www.businessinsider.com)
Prior to yesterday's FOMC meeting,
Goldman's Jan Hatzius was one of the most confident that the Fed would do QE.
It didn't. Now Hatzius
doesn't see any QE on the imminent horizon. This is what he said in a note this
morning: ...the
hurdle for additional balance sheet action in the next few months appears to be
quite high. The
fact that the FOMC took a "substantive" easing step today probably
makes another easing move in the near term relatively unlikely. The reason is
that the FOMC has not employed its unconventional tools in the same continuous
fashion in which it used to move the funds rate. Chairman Bernanke today
justified this strategy by saying that unconventional tools "by their
nature…tend to be lumpy." Although we do not see an obvious economic
reason for why unconventional tools could not be used in a more continuous
fashion, the chairman's view implies that today's action raises the bar for an
additional easing move involving the balance sheet in the near term.
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