Good afternoon. The political part of last week was filled with news of the Republican primaries in the United States: the fight for victory was suddenly interrupted by former Senator of Pennsylvania Rick Santorum, he won in the heartlands (Missouri, Colorado and Minnesota) and will now compete with Newt Gingrich for being the conservative opponent of the recent favorite Mitt Romney – the latter won only in Nevada, where fellow-believers appreciated his Mormonism. Meanwhile, Canada followed the “elder brother” and legalized testimonies extracted under torture when it comes to “national security” – the sacred cow of civil liberalism. Russia's permanent representative to the UN Churkin also stood out – in response to the Qatari counterpart’s criticisms about the positions on the Syrian issue, he rudely threatened to destroy his country “already today”; Russian Foreign Ministry denied all – but was not believed. Cold weather in Europe is in the center of attention all over the world: the Caspian Sea froze (it’s -10 degrees in Baku), the same fate befell the Black Sea (for the first time since 1977) and the Venetian canals (this didn’t happen for 80 years), as well as other rivers and channels in the usually warm part of the continent – another victory for the theory of “global warming” is obvious. However, climatic disasters give rise to unusual innovations: a lot of snow fell in Minsk – and the authorities sent local prostitutes to the cleaning. Presumably, the classic prostitutes will be followed by the political ones?
Illustration: Artem Popov
Monetary markets. ECB, Bank of Korea and the central bank of Iceland left their rates at the same levels – as expected. Bank of England, too, did not change the discount rate – but it has expanded the plan for market bonds redemption for another £50 billion: however, that was also widely predicted. The head of the BOJ Shirakawa thinks in the same vein – he made it clear that the expansion of asset purchases is likely in the near future. Reserve Bank of Australia unexpectedly declined the market’s hoped-for reduction of the base rate – though made it clear that this option is still relevant; Bank of Indonesia cut the rate by 0.25% down to 5.75% per annum. US Treasury placed a fair amount of bonds last week – demand was quiet disappointing, though nothing really terrible has happened: just a lot of market participants are worried. Scandal erupts around the world’s leading banks: they manipulated Libor and Tibor rates, thus ensuring cheaper refinancing for them – Swiss authorities now hold an official investigation promising loud denunciations and bold sanctions.
The Three (IMF/EuroCommission/ECB) inspected Greece again - and concluded that the situation is “catastrophic”: who would have thought! Under such a sauce, the Three gave birth to a plan for Athens: to fire 150 thousand civil servants, reduce minimum wage and spending on health care by 20%, cut pensions etc - the local unions immediately called for a general strike; the police union even demanded to arrest the Three’s delegates – they have barely managed to escape. Fitch cut the ratings of a number of Italian banks including Intesa Sanpaolo, Banco Popolare and Monte dei Paschi di Siena; UniCredit escaped this fate – but it now has negative forecast on it; at the same time the agency has expressed irritation about banks’ reluctance to recapitalize – despite the demands of the eurozone authorities. The burden of debt in the eurozone continues to grow heavy – at the end of September it amounted to 87.4% of GDP (€8.2 trillion) against 83.2% a year earlier. But China hurries to the rescue: local economist academic with eloquent surname Yuan hinted that his country would soon allocate €100 million in support of the European stabilization fund – and although he said that this is only his personal opinion, it obviously generally coincides with the opinion of the bosses.
Currency markets continue to behave very sluggishly – the main rates vary within narrow limits: we would only note the euro going to $1.33 mark and the fall of the yen. Of the others, we note a growing number of US states wishing to introduce their own quasi-currency – those are now 13: and though the Constitution prohibits the emission of full-blooded money (although individuals’ communities have such right), it allows the use of gold and silver coins for payments – Utah already practices it in their operations. Funny reaction of one economics – he said that the dollar works perfectly as it is, so the alternative money can only be printed by the enemies of the state: it seems sovereignty concerns in the United States differ from the one in Russia only in scale of paranoia and the degree of inadequacy to the realities of life – and essentially the tendency to explain current social ventures with a conventional “State Department” are very similar in both countries.
Stock markets. The leading indices continued to grow – NASDAQ broke through the peaks of 2007 and 2011 and his colleagues are not far behind. Among corporations’ reports only good was Cisco – all the results exceeded market expectations, albeit slightly. The “Two of the casket” producers of liquid poison are not too impressive: but if Coca-Cola is more optimistic in general, the PepsiCo has disappointing forecast for 2012 and in addition decided to lay off 8,700 of its employees. Walt Disney's revenue has not held up to predictions; and the best friend of all the freeloaders Groupon is again in loss – despite almost three-fold rise in sales. Hard times are even for the extracting firms: the largest of them (in the world), BHP Billiton and Rio Tinto, reported a profit decline – however, nothing particularly wrong is happening with them right now. Leading mobile operator Vodafone disappointed too: figures came out worse than analysts had hoped. Swiss bank UBS disappointed: profit for October-December is half below expectations – and the general fall of 2011 is almost double.
Commodity markets. Brent crude oil has accelerated its growth, reaching nearly $120 per barrel – to blame the winter cold and tensions over Iran; WTI lagged significantly – but grew up a little too, meanwhile; US natural gas continues to stand at the long-term low. Industrial and precious metals were pricing – but very carefully. The food market has stabilized – prices vary slightly, only the oats and vegetable oil have grown up a bit, while milk and fruits sat down a little; prices for timber have moved a bit away from the recent lows.
Asia and Oceania. Indonesia's GDP decreased in the fourth quarter by 1.3% - however, the annual increase (6.5%) is still decent. In China leading indicators went down slightly in December; in January producer prices slowed down expectedly – but consumer price inflation has unexpectedly accelerated (+1.5% m/m and +4.5% y/y, the food is 10.5% more expensive than last year). Exports fell in January versus the same month last year for the first time since the crisis of 2008 – and the collapse of imports (by 15.3% y/y) hints at the weakness of domestic demand. Car sales shrank in January by 15.2% m/m down to the levels 23.8% lower than in the previous year – the worst decline in seven years; new loans are 26% weaker than forecast; adds to the disturbing picture is sharp (by 7.5% y/y) collapse in the consumption of electricity. In Japan engineering orders fell by 7.1% m/m in December – but after the November’s +14.8% that is not particularly scary. The trade balance seems to have settled in the area of deficit for a long time – and in January it continued to deteriorate: exports were 11.9% lower than a year ago – while imports increased by 12.6%. In January the indices of economic observers and consumer sentiment have deteriorated while producer prices began to slow down – but bank lending has swollen by 0.7% y/y which has not occurred since the autumn of 2009. In the New Zealand wages stagnated in October-December – but unemployment has fallen; Australia saddened with retail sales slumping in December. Anxious!
Europe. Industrial production was good only in Hungary (blame the low base effect year ago) and Italy; in the UK it is +0.5% but only after -0.5% in November – annual dynamics is confidently negative (-3.3%). Production slowed down in Turkey and the Czech Republic; the decline has accelerated sharply in Greece, Spain and Norway (-2.2% m/m and -4.9% y/y); in France decline of 1.4% m/m, more than recouping the growth of November (+1.1%) – for the year -1.3%; Germany had fallen by 2.9% m/m, reducing the annual increase to 0.9% - and if you adjust for statistical distortions, then there will be a negative figure. Factory orders in Germany rose by 1.7% - but after a decline by 4.9% a month earlier it was not impressive; on the average for 2 months there was a decrease by 2.1% - and of the components the only one positive is foreign demand for capital goods. In France, business climate continues to deteriorate while capacity utilization reduces; but in the eurozone as a whole in the middle of the first quarter both climate and investor confidence have improved – which is logical, because it was impossible to collapse at the present rate any further. In December, France's trade deficit has increased, while the German surplus fell; the British situation improved – because of the sharp fall in imports, which says more about the weakness of demand than of the balance of payments’ recovery. Prices in January went down across Europe – but the annual dynamics in the red only in Switzerland. But the confidence of her consumers has improved slightly and the unemployment rate is low; which cannot be said of Greece – where the figure soared in November up to 20.9%, so currently it probably hits the Spanish records. Retail prices fall in Britain – but it does not help the sales; in general, domestic demand in Europe is very weak.
Source: Federal Statistical Office Germany, an independent evaluation
America. Building permits in Canada jumped in December by 11.1% m/m, more than recouping the fall of November (-2.6%); but the number of developments in January was a little disappointing, being lower than a year ago (seasonally adjusted). Business activity grows in the country of maple leaf; while in the neighboring States optimism of consumers is growing – according to the reviews of IBD/TIPP and Bloomberg; however, the University of Michigan has a different opinion – and the indicator of financial conditions from the FRB of Chicago has once again deteriorated. US trade balance expectedly deteriorated in December, and improved in Canada. Number of recipients of unemployment benefits in the United States jumped in late January; new unemployed are less, but it is early to rejoice: there are not many layoffs – however, there is almost no hiring. Fed Chairman Bernanke, speaking to Congress, made it clear that he is not carried away by the official employment figures – he said, they “underestimate” the true weakness of the labour market, since they don’t really take into account the mass of unemployed people: until now, that was pointed out only by some pitiful “marginal-alarmists” (like us) – but now Benny-helicopter himself joined in our ranks! Consumer credit in the United States grew last year at the highest pace in 10 years – which confirms the statistics of the spending being significantly higher than income; but that could not continue for a long time - and there were noticeable signs of cooling down in the beginning of this year. Sales in the stores were better in early February than in January – and yet the annual increase continues to shrink.
Russia. In January consumer prices rose by 0.5% - while their annual increase already shrunk to 4.2%, competitive with the developed countries: a little more effort and Rosstat would report of the complete absence of inflation in Russia (just like in the USSR). Yes, the delay in raising utility rates until July has partly reduced the pressure on prices, but +4.2% y/y is too much even for our statisticians. The January’s purchases of cars pleased with the overall growth of 21% y/y – and grieved with the fall of AvtoVAZ sales for the same 21%. The innovative potential was demonstrated by Russian Post, running the program for micro-lending – the audience marveled: a loan of 5,000 rubles for a week is given at... 2800% per annum – against this background, the new idea of the Federal Antimonopoly Service to limit interest on loans looks as a mockery. Optimization of the treasury is ongoing – there is no longer the Moscow rescue service: when you try to call there the answering machine kindly says that if you have a fire, you have to call 01, if you feel bad – 03 and so on; another outstanding success of the authorities in their heroic struggle with a dark legacy of the cursed 1990s is obvious. In politics, powers are also not original. Putin wrote an article on democracy; his trustees became doctors, filmmakers, musicians, football players and animal trainers (along with their tigers?); at a meeting with the agitators he marveled at the civil discontent about abolition of winter time – you said yourself that cows does not like it, so we changed it.
Other presidential candidates are also creative: Zhirinovsky perpetrated yet another scandal in the Duma, and was offended by criticism of his political video, where he lashes ass with a whip – it turns out, it is the propaganda of animal cruelty. A week ago another rallies took place - and the pro-Putin one looked very stupid (as always, by the way); the current cold weather forced the leader of the “Communists of St. Petersburg and Leningrad region” Malinkovich to accuse the authorities in the use of climate weapon in order to prevent the opposition’s actions. However, the authorities really do want that: head of Tomsk Duma Il'inykh said that those who say that the authorities are crooks and thieves should be... burned at the stake! And bossed know how to punish – Honoured Doctor of Karelia was sentenced to six years’ probation for conspiracy, theft and drug trafficking: the woman had left a bit (costing 4.72 rubles) of a patient's anesthesia to help a colleague to neuter a cat, but fell under the authorities anti-drug campaigning – even Stalin's “ears” seem the top of humanism. But that's not all: Interior Ministry delighted the relatives of lawyer Magnitsky, deceased in jail, saying that it conveys the materials to the court for... posthumous condemnation of this villain – and they openly say that this can be avoided if relatives would abandon attempts to defend the honor and dignity of Magnitsky. This entire phantasmagoria was organically summed up by the Russian Football Union President Fursenko: arguing about the football, he said that in England it is “athletic” and in Russia - ... “spiritual”. As can be seen from the above, not just football is filled with a great spirit here!
Illustration: Artem Popov
Have a nice week!
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