EU agrees on banking supervision

More calls for the Australian RBA to cut interest rates, this time from the CEO of Westpac, Gail Kelly, who cites low consumer and business confidence. However, the A$ continues to strengthen, currently A$1.0555 against the US$;

A Chinese airplane flew over the disputed islands in the South China seas, with Japanese defence forces scrambling aircraft to intercept it. This game is getting dangerous. Apparently, it was the 1st violation of Japanese airspace since 1958. The action will help Mr Abe, who has proposed that Japan takes a firmer line with China (source FT);

The EZ has agreed to disburse E49.1bn of aid to Greece in 4 tranches, with E34.4bn to be dispersed in December. E16bn will go to recapping Greek banks. In addition, further assistance will be provided to Greece if it achieves a primary surplus next year.

Greek Q3 unemployment rose to 24.8%, up from 23.6% in Q2;

The head of the centre-left Italian party wants Mr Monti to continue to be involved in the government after the elections. In addition, Mr Bersani, the head of the PD stated that his party would be willing to cede more control over the Italian budget to the EU, if the EU enacted anti-recessionary policies;

The IFO institute forecasts that German GDP will decline by -0.4% in Q4, Q/Q;

Fitch reports that the 2013 outlook for French banks is negative. France is likely to be the real problem next year;

The EU has agreed on the ECB supervising EU banks which have assets of E30bn and over and, in any event, the largest 3 banks of each country in the EU. Mr Schaeuble believes that the banking supervisor will be established by March 2014. About 200 banks in the EU will be affected;
The FED, as expected, increased its QE programme, by adding US$45bn per month of treasury purchases to the US$40bn of MBS’s it is currently buying. Furthermore, they stated that they would continue buying until there was a substantial improvement in the labour market. Interest rates will be kept at close to zero until unemployment falls to 6.5%, a major change of the FED’s monetary policy. The FED will continue to forecast low rates unless inflation rises above +2.5%;

US initial jobless claims came in at 343k, lower than the 369k expected and the revised 372k the previous week. Continuing claims totalled 3.198mn, slightly lower than the 3.210mn expected and the 3.221mn previously;

US November retail sales rose by +0.3% M/M, lower than the +0.5% expected and the -0.3% in the previous month. Retail sales, ex auto and gas came in +0.7% higher M/M, above expectations of +0.4% and -0.3% in October;

US November PPI came in at -0.8% M/M (+1.5% Y/Y, lower than the +1.8% Y/Y expected), lower than the -0.5% expected and -0.2% in October. Core PPI (ex food and energy) came in at +0.1% M/M (+2.2% Y/Y), in line with expectations and -0.2% in October;

US October business inventories came in at +0.4% M/M, in line with expectations, though lower than the +0.7% in September;


Asian markets closed higher, though European (ex Italy and Spain) and US markets are marginally lower

The Euro is trading around US$1.3085, up on the day. The Yen is weaker, currently Yen 83.50 against the US$.

Gold is trading at US$1697, with January Brent at US$107.59.

Pretty lackluster day.

Kiron Sarkar

13th December 2012

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