Overnight...
Asia didn't do well last night, first the market was happy with the PBoC Chinese rate cut, but news articles have circulated speculating that the cut was done in advance of a batch of Chinese economic data due out this weekend and the fear that it will be much worse than expected. Oil has traded down on Chinese economic data fears, a slew of reports are due Saturday.
Well this is more early this a.m., you may recall my brief overview of the very mercurial nature of the Spanish position on whether they want, did or did not or did and then recanted, ask for bailout assistance. Can we finally put this to bed?
From Reuters:
Reuters reports: "Spain is expected to request European aid for its ailing banks at the weekend to forestall worsening market turmoil, becoming the fourth and biggest country to seek assistance since the euro zone's debt crisis began, EU and German sources said. Four senior EU officials said finance ministers of the 17-nation single currency area would hold a conference call on Saturday to discuss a Spanish request for an aid package, although no figure had yet been set. The Eurogroup would issue a statement after the meeting, they said. "The announcement is expected for Saturday afternoon," one of the EU officials said."
Now the ONLY little problem is that the EFSF/ESM don't have the money to bailout Spain, which may not seem like huge news given we were slow boiled with this news, but if you recall only 6 months ago, a Spanish bailout was considered Armageddon for the EU, the one country that is too big to save and thus the final domino in the PIIGS chain of dominoes that leads to an EU collapse. With the ECB sitting on the sidelines, it will be up to Germany to more or less fund whatever it can, right about the time when German voters are ready to through Merkel's CDU party out of office for burdening Germany with huge contingent liabilities, this should be a barn burner and it's no wonder the rating agencies are so quick to downgrade Spain so they can retain some credibility, it should have happened six months ago.
Unfortunately it doesn't look like this schizophrenic episode is any way near being put to bed. Germany responded very quickly...
"The German government on Friday reaffirmed that the European bailout funds were ready to support Spain, if Madrid applies for aid and accepts the conditions tied to it. “The decision is up to Spain. If it makes it, then the European instruments for it are ready,” government spokesman Steffen Seibert said at a regular press conference here. “Then everything will run under the usual procedure: a state makes a request, it will be liable and it accepts the conditions tied to it.” Seibert declined to comment on rumours of a possible Eurogroup teleconference this weekend to consider an aid request from Spain that might be forthcoming."
In bold is the kicker, "the conditions" which seem to be why Spain asked, then denied, asked again and then said it didn't, apparently the "conditions", which typically mean kicking out the Prime Minister and Finance Minister and replacing them with Goldman Sachs alumni, demanding harsh austerity that sends an already ailing economy in to a worse depression and sends unemployment through the ceiling (at this point we're talking about the second story ceiling as Spain's unemployment is already off the charts). Then there's the EU financial overlord who has the right to veto a sovereign country's financial and budget decisions. As for all of those European perks like 6 weeks of paid vacation, comfy government jobs, healthcare and pensions, say bye bye. Oh and while they're at it, Germany will probably request a quit-claim deed for the island of Ibiza, which will shortly become a German speaking playground.
That sounds like a lot of hyperbole, but every one of those examples has happened or been proposed in previous bailouts.
Oh and the framework being in place also is another not so subtle hint that Germany won't be backing Euro-bonds and if Spain wants money, they better stop backing them as well.
After Germany's response, it wouldn't be surprising for the entire "we asked, we didn't ask" saga to continue, well true to form...
Officials in Spain deny any knowledge of a weekend meeting over the Spanish banking sector bailout!
So they did or didn't ask? Chances are they did ask, they didn't like the "Conditions" Germany talked about and now are denying knowledge of a meeting, but haven't addressed whether they did or did not ask. I'm sure they did. Why don't they do these things through telephone calls before humiliating themselves in the press?
Is it me or is Europe just completely whacky, incompetent, indecisive, etc., etc., etc.? Also don't be surprised to see a Moody's downgrade of Spain as they are the last of the rating agencies that as of yet have not cut Spain.
After the open GS cut their Q2 GDP estimate...
We revised down our Q2 GDP tracking estimate by two tenths to +1.8% (quarter-over-quarter, annualized) from +2.0% previously. The downward revision primarily reflects weaker-than-expected real export growth in April. This was partly offset by stronger than expected wholesale inventories, which increased by 0.6% (month-over-month) in April
Finally I'm a bit surprised at the market open ES lost about 10 points overnight yet the market opened near unchanged? In fact ES is now 6 points lower than yesterday's close, but the SPX is in the green, not sure what to make of that.
Updates coming-Go FB! +4.5%
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