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from Global Investing:

Weekly Radar: Cyprus hogs the headlines but contagion fears limited

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CYPRUS BRINKMANSHIP/BERNANKE IN LONDON/BRICS SUMMIT/MARCH CONSUMER SENTIMENT IN EUROPE/JAPAN INFLATION-JOBS-PRODUCTION/US-UK Q4 GDP REVISIONS

Cyprus has hogged the headlines since Friday, with bank closures now extended to a full week as they try to sort out a very messy bailout - made worse by domestic policy missteps over taxing bank deposits. As with Italy’s elections, the saga certainly challenges any market assumption that the euro crisis had abated for good and it's also loaded with a series of potential precedents – not least the biggest taboo of them all, a euro exit. This is where the politics, brinkmanship and smoke-filled-rooms come in.  Yet as Cyprus is so small and its banks in such a peculiar setup - given the scale of Russian and other foreign depositors - the euro group, ECB and IMF appear determined not to be pressured into a bailout above the already gigantic 60 percent of GDP.

And, as with Greece last year, they will likely stand firm and leave any decision to exit up to the Cypriots themselves. You can't rule out that they may choose to go and regional risks rise somewhat as a result. But if the islanders are genuinely worried about a 6-10% tax on deposits, they may also think long and hard about the chance those deposits would be redenominated into a heavily devalued Cypriot pound. Just ask the Argentinians what that feels like. A deposit haircut may seem a like a half-decent deal by comparison if some other mix of Russian loans, pension raids or securitised future gas revenues doesn't stack up.

So, the small scale of Cyprus, a lack of direct systemic banking or sovereign debt linkages and the likelihood of some sort of political deal eventually emerging have all served to limit the fallout from the drama on world markets – rightly or wrongly.   World equities have been knocked back a bit, but remain up 5.75% year-to-date. The VIX popped higher, but remains super-low under 13%. Italian stocks are back to where they were on Friday afternoon, while the more telling Italian and Spanish 10-yr bond yields have even nudged lower. A successful Spanish government bond auction on Thursday, where yields across all maturities fell from the previous auctions in February, showed just how limited any Cyprus contagion has been so far at least.

from Global Investing:

Weekly Radar: Managing expectations

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With a week to go in January, global stock markets are up 3.8 percent – gently nudging higher after the new year burst and with a continued evaporation of volatility gauges toward new 5-year lows. That’s all warranted by a reappraisal of the global economy as well as murmurs about longer-term strategic shifts back to under-owned and cheaper equities. But, as ever, you can never draw a straight line. If we were to get this sort of move every month this year, then total returns for the year on the MCSI global index would be 50 percent – not impossible I guess, but highly unlikely. So, at some stage the market will pause, hestitate or even take a step back. Is now the time just three weeks into the year?

Well lots of the much-feared headwinds have not materialized. The looming US budget ceiling showdown keeps getting put back – it’s now May by the way, even if another mini-cliff of sorts is due in March -- but you get can-kicking picture here already. The US earnings season looks fairly benign so far, even given the outsize reaction to Apple after hours on Wednesday. European sovereign funding worries have proven wide of the mark to date too as money floods to Spain and even Portugal again. And Chinese data confirms a decent cyclical rebound there at least from Q3's trough. All seems like pretty smooth sailing – aside perhaps from the UK’s slightly perplexing decision to add rather than ease uncertainty about its economic future. So what can go wrong? Well there’s still an event calendar to keep an eye on – next month’s Italian elections for example. But even that’s stretching it as a major bogeyman the likely outcome.

from Global Investing:

Weekly Radar: Bounceback as year winds down

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Yet another Greek impasse, a French downgrade, ongoing DC cliff dodging and a downturn in Citi's G10 economic surprise index (though not yet in the US one) could have been plausible reasons this week to extend the post-election global markets swoon. But at 8 consecutive days in the red up to last Friday, that was the longest losing streak since last November, and a lot of froth had been shaken off these year-end markets already.

We've seen a decent bounceback in nearly all risks assets instead. That may be partly due to volume-sapping Thanksgiving week and partly due to the fact that more and more funds think the year is effectively over now anyhow. The only big wildcard left is the timing of an fiscal agreement stateside and few managers now honestly believe there won’t be some sort of a deal. (Deutsche, for the record, said this week that the divide between the sides over tax is much less than many assume).  Greece is a slower burner but again, few people believe it will be hung out to dry any time soon and a deal on the next tranche – whatever about deep and meaningful OSI, payment moratoriums and loan rate cuts – will most likely be reached next week at the latest. Talk of a EFSF-funded Greek debt buyback meantime has helped pushed its debt yields to the lowest since the restructuring.  And the French downgrade was probably the least surprising move of the past five years.

from Global Investing:

Weekly Radar: Earnings wobble as payrolls, BOJ, G20 eyed

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Easy come, easy go. A choppy October prepares to exit on a downer – just like it arrived. World equities lost about 3 percent over the past seven, mostly on Tuesday, and reversed the previous week’s surge to slither back to early September levels. Just for the record, Tuesday was a poor imitation of the lunge this week 25 years ago – it only the worst single-day percentage loss since July and only the 10th biggest drop of the past year alone. But it was a reminder how fragile sentiment remains despite an unusually bullish, if policy-driven year.

Why the wobble? t’s hard to square the still fairly rum, or at best equivocal, incoming macro data and earnings numbers alongside year-to-date western stock market gains of 10-25%. There’s more than enough room to pare back some more of that and still leave a fairly decent year given the macro activity backdrop and we now only have about 6 full trading weeks left of 2012. So it will likely remain bumpy – not least with U.S. and Chinese leadership changes into the mix as mood music. The sheer weight of a gloomy Q3 earnings season seems to have hit home this week, with revenue declines or downgraded outlooks  – particularly in "real economy" firms such as Caterpillar, Dupont,  Intel and IBM etc – worrying many despite more decent bottom line earnings. As some investors pointed out, earnings can’t continue to beat expectations if revenues continue to wither and there are still precious few signs of an convincing economic turnaround worldwide to draw a line under the latter.

from Global Investing:

Next week: Call and response?

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The Greek vote next Sunday now stands front and centre of pretty much all investment thinking, but the problem is that it may still be days and weeks before we get a true picture of what’s happened, whether a government can be formed and what their stance will be. If the new parliament cannot clearly back the existing bailout, even after a bout of  horse-trading, then a game of chicken with Europe ensues.  Eurogroup meets again on Thursday and there’s a German/French/Italy/Spain summit on Friday.  But G20 leaders gather in Mexico as all this is unfolding, so they will certainly be quorate if some sort of global response is required to any initial market shock. What’s more, the FOMC is meeting Tuesday and Wednesday should Bernanke feel the US needs urgent insulation from the fallout regardless of broader action. But it's certainly not beyond the bounds of reason that coordinated central bank action materializes next week if markets do indeed go skewways after the Greek poll. They have all clearly been consulting on the issue lately via telephone and bilaterals. And the assumption of more QE is there among investors. Three quarters of the 260+ funds polled by BoAMerrill Lynch this month expect another ECB LTRO by the end of Q3 and almost a half expecting more Fed QE over the same time.

And maybe it is this assumption of massive policy response that’s preventing markets capitulating outright. Money is gradually going to ground, but it’s not yet thrown in the towel completely as you can see from major equity indices, volatility gauges and interbank spreads etc. And there are a lot of headwinds everywhere over the next six months, the US election, fiscal cliff, end of operation twist stateside – and that’s in one of the few major western economies that was generating any significant growth this year. In other words, there are no shortage of arguments for another monetary boost. A heavy econ data slate during the week will also reveal just how much the world economy has run into sand this quarter. The standouts are the flash PMIs for June, the US Philly Fed index for June and UK jobs and inflation numbers.

from India Masala:

IIFA Diary: Notes from Colombo on Day 1

SRILANKA/The first day of the 11th edition of the International Indian Film Academy (IIFA) Weekend has been as chaotic as it has been revealing. From early morning chaos over accreditation and access to venues, by evening it had turned into excitement as the stars starting pouring in for the three-day event.

The centre of the chaos -- the Cinnamon Grand hotel has become the ideal ringside location if you want to catch a glimpse of your favourite star and Bollywood crazy Sri Lankans weren't letting go of any chance. By afternoon, the sprawling lobby of the five-star hotel was packed with eager fans, cameras ready to click and craning their necks to see if any star had arrived yet.

from Financial Regulatory Forum:

DIARY-Financial Regulation Events

    Upcoming key financial regulation events, conferences and policy announcements. 
       April 20-21
   GENEVA, Switzerland - International Federation of Accountants and United Nations Conference on Trade and Development (UNCTAD) hold conference on corporate governance reforms.
   
   April 22-23
   WASHINGTON - G20 financial ministers and central banks governors' meeting to discuss regulatory reforms. Financial Stability Board set to discuss its proposals for surcharges on systemically important banks, limiting activities banks can undertake and regulating over-the-counter derivatives markets. International Monetary Fund set to put forward a proposal for a bank levy to pay for bailouts.
   
   April 26
   BRUSSELS - Annual European Financial Services conference. speakers include EU Internal Market Commissioner, Michel Barnier, Mark Sobel, Deputy Assistant Secretary for International Finance and Liao Min, director general, executive department, China Banking Regulatory Commission and Eddy Wymeersch, chair of Committee of European Securities Regulators.
   
   April 27
   BRUSSELS - European Parliament's economic and monetary affairs committee set to hold first reading vote on alternative investments fund managers directive (AIFM).
   
   April 29
   LONDON - Association for Financial Markets in Europe conference on clearing and settlement, includes discussion on planned EU derivatives regulation.
   
   Late April
   BRUSSELS - European Parliament's economic and monetary affairs committee due to vote on draft law to regulate hedge funds and private equity groups.
   
   June 6-10
   MONTREAL, Canada - International Organization of Securities Commissions (IOSCO) holds annual conference.
   
   June 26-27
   TORONTO, Canada - The G20 group of leading countries meets. Will discuss financial regulation, including a possible tax or levy on banks.
   
   June
   BASEL, Switzerland - The Financial Stability Board to present policy options to G20 summit on how to tackle "too big to fail" banks.
   
   June
   BRUSSELS - The European Commission due to publish draft law on regulating over-the-counter derivatives markets.
   
   July
   BASEL, Switzerland - The Basel Committee on Banking Supervision meets to continue work on reforming Basel II bank capital framework.
   
   First half
   BASEL, Switzerland - Basel Committee on Banking Supervision carries out impact assessment on package of measures to toughen up bank capital and liquidity rules.
   
   First half
   LONDON - International Accounting Standards Board (IASB) to publish draft changes to hedge accounting, the final part of its IAS 39 fair value rule revamp that takes effect in 2013.
   
   October
   BASEL, Switzerland - The Financial Stability Board to present package of measures to address "too big to fail" problems with big banks.
   
   October
   BRUSSELS - European Commission may propose measures to regulate naked selling of sovereign credit default swaps.
   
   November
   SEOUL - G20 summit to discuss financial regulation, including how to tackle systemically important banks.
   
   End 2010
   G20 deadline for finalisation of new, higher levels of capital requirements for banks under new Basel framework.
   
   End Dec. 2010
   Higher capital requirements introduced for bank trading books as required by the Basel Committee.
   
   June 2011
   G20 deadline for agreement on convergence of accounting rules set by IASB and U.S. Financial Accounting Standards Board (FASB).
   
   End 2012
   G20 deadline for implementing new Basel bank capital requirements.
   ((Reuters messaging: huw.jones.reuters.com@reuters.net; + 44 207 542 3326))
 Keywords: REGULATION/DIARY
  
Monday, 19 April 2010 10:14:04RTRS [nLDE63I0MC] {C}ENDS

from Photographers' Blog:

A Volcanic diary

......finally confident about returning home after two difficult weeks of coverage around the volcano......

First attempt: Santiago-Puerto Montt-Castro-Chaitén-Puerto Montt.

May 2: Puerto Montt (1016 km south of Santiago). It's 10 p.m. at the local airport and I must reach Chaitén, a village which is in a state of alert. The Chaitén volcano, of which there are no historic records, has awoken after a 9,000- year slumber.

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