News that Matters – Market Close


  • S&P Revises U.S. Credit Outlook To “Stable” From Negative
  • Fed’s Bullard Details How QE Can Be Cut
  • Fed Retreat From Bond Buying Expected By Fourth Quarter – Poll
  • U.S., Japan Leading Recovery In Major Economies – OECD
  • ECB’s Draghi: ECB Will Not Buy Bonds To Save States From Going Under
  • Germany’s Schaeuble: Global Monetary Policy Causing Big Problems
  • Canada Housing Starts Rise At Fastest Pace In 13 Months
  • Apple Unveils Revamped iOS, iTunes Radio
  • McDonald’s May Sales Rise 2.6 Percent; Shares Up


High Noon for the euro in Karlsruhe court Commentary: German court could unmask ECB’s magic trickExpect this week the most gladiatorial of tussles between Germany’s Bundesbank and the European Central Bank at the German Constitutional Court — a High Noonepisode in long-running European psychological warfare to prevent full-scale unrest breaking out across monetary union.The eagerly awaited public hearing centers on the legitimacy of the ECB’s (so far unused) outright monetary transactions (OMT) proposition to buy weaker countries’ government bonds to heal the risk of euro EURUSD -.00%  break-up.As Mario Draghi, the ECB president, put it last week, the OMT “has been probably the most successful monetary policy measure undertaken in [the] recent time.” The OMT’s problem has also been its triumph, namely that the threat (or hope) that the ECB could undertake ‘unlimited’ support purchases of Italian or Spanish bonds, has not been turned into practice. Probably it never will be.


To the Fed, taper is a four-letter word “Taper” is not a word used in polite Federal Reserve circles.That’s according to the latest piece from Wall Street Journal Fed watcher Jon Hilsenrath. He points out the term has never been uttered out loud by Fed Chairman Ben Bernanke, or by influential New York Fed President William Dudley.It’s not that the Fed can’t foresee a time when it would reduce the current $85 billion per month rate of bond purchases. But the central bank is holding out the possibility it could also increase the rate. See full story (subscription required).As Hilsenrath writes:


Because Fed officials are uncertain about the economic outlook and the pros and cons of their own program, they might reduce their bond purchases once and then do nothing for a while. Or they might cut their bond buying once and then later increase it if the economy falters. Or they might indeed reduce their purchases in a series of steps if warranted by economic developments — but they don’t want the markets to think that’s a set plan. It is, as Fed officials like to say, “data dependent.”

Euro bailout Troika nears end of road with patchy record If the Troika that handles bailouts of distressed euro zone countries were a soccer team, it would probably be looking for a new manager after achieving a track record of one win, one loss and one draw.The uneasy trio of European Commission, International Monetary Fund and European Central Bank was assembled in haste in March 2010 after Greece’s public debt and deficit exploded and it was about to lose access to market funding.Last week’s IMF “mea culpa” report about the failures of the Greek program blew the lid off the fiction that the three institutions saw eye-to-eye on the rescue packages they designed and are enforcing in GreeceIrelandPortugal and now Cyprus.


Greece awakens from coma but recovery likely to be anaemic Greek business is awakening from a coma; the long-forgotten sound of drills and hammers can be heard on Athens construction sites again while customers queue calmly at banks to deposit cash rather than to withdraw it in panic.Nevertheless, the government’s declaration that an economic recovery is underway seems premature, with the hard numbers signalling stagnation rather than the robust growth needed to meet ambitious debt targets and reduce towering unemployment.“True, the phones have started ringing again but nobody is placing orders yet,” said furniture maker Nikos Papadopoulos.







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