TROUBLES in the Italian and Portuguese economies could blow up this year to shatter the eurozone, as disastrous Greece almost did last year.
Investors have become increasingly concerned about the anti-austerity agenda of the Portuguese socialist government, fearing defaults could lie further ahead, which has seen the borrowing costs for the government soar. Continue reading
Albert Edwards joins RBS in warning of a new crash, saying oil price plunge and deflation from emerging markets will overwhelm central banks, tip the markets and collapse the eurozone
The City of London’s most vocal “bear” has warned that the world is heading for a financial crisis as severe as the crash of 2008-09 that could prompt the collapse of the eurozone.
Albert Edwards, strategist at the bank Société Générale, said the west was about to be hit by a wave of deflation from emerging market economies and that central banks were unaware of the disaster about to hit them. His comments came as analysts at Royal Bank of Scotland urged investors to “sell everything” ahead of an imminent stock market crash. Continue reading
The bull market is about to end, says UBS’ Julian Emanuel.
For months we’ve been warning of a stock market crash.
Money Morning Capital Wave Strategist Shah Gilani – a former CBOE trader, co-creator of the VIX (“fear index”), and hedge fund manager – has seen a bear market just over the horizon since March 2014. Continue reading
RBS has alerted customers that up to 600,000 overnight payments may be ‘missing’ from bank accounts at NatWest, Coutts and Ulster Bank due to a technical glitch, sparking a string of complaints over “yet another Natwest blunder”.
RBS said in a statement that the issue, which “resulted in a delay to payments and Direct Debits being applied to some customer accounts”, was now resolved, but it could take days to clear up.
It said: “We have fixed the underlying issue, we apologise for the inconvenience caused and we are working flat out to get these payments updated for our customers no later than Saturday. Continue reading
Markets ignored clear warnings in Europe and America that the money supply is catching fire, signalling a surge of inflation later this year
The global deflation trade is unwinding with a vengeance. Yields on 10-year Bunds blew through 1pc today, spearheading a violent repricing of credit across the world.
The scale is starting to match the ‘taper tantrum’ of mid-2013 when the US Federal Reserve issued its first gentle warning that quantitative easing would not last forever, and that the long-feared inflexion point was nearing in the international monetary cycle.
Paper losses over the last three months have reached $1.2 trillion. Yields have jumped by 175 basis points in Indonesia, 160 in South Africa, 150 in Turkey, 130 in Mexico, and 80 in Australia.
‘It is absolute pandemonium in the fixed income markets. Everybody has been trying to get out at the same time but the door is getting smaller,’ says RBS
A wave of turmoil is sweeping through sovereign bond markets, setting off the most dramatic gyrations seen in recent years and threatening to spill over into over-heated equity markets.
Yields on German 10-year Bunds spiked violently by almost 20 basis points to 0.78pc in early trading on Thursday as funds scrambled to unwind the so-called “QE trade” in Europe, with powerful ripple effects reaching Japan, Australia, Brazil and even US Treasuries.
“It is absolute pandemonium in the fixed income markets,” said Andrew Roberts, head of European credit at RBS. “Everybody has been trying to get out of long-duration positions at the same time but the door is getting smaller.”
The much-awaited expansion of the European Central Bank’s asset-buying, or quantitative easing (QE), program will be larger-scale than expected, according to Royal Bank of Scotland, which says the objective now is to head off mounting deflationary pressures in the euro zone.
RBS, in a research paper published this week, says the ECB will expand its balance sheet from €2.2 trillion ($3.2 trillion) now to €4.5 trillion, and not the €3.1 trillion previously envisaged. This suggests a further €2.3 trillion of bond purchases, which is more than twice the amount so far mentioned by ECB officials. Continue reading
‘The forces of monetary deflation are gathering. Global liquidity is declining and central banks are not doing enough, either in the West or the East to offset the decline,’ warns CrossBorderCapital
Eurozone fears have returned with a vengeance as deepening deflation across Southern Europe and fresh turmoil in Greece set off wild moves on the European bond markets.
Yields on 10-year German Bund plummeted to an all-time low on 0.72pc on flight to safety, touching levels never seen before in any major European country in recorded history. “This is not going to stop until the European Central Bank steps up to the plate. If it does not act in the next few days, this could snowball,” said Andrew Roberts, credit chief at RBS.
Calls for action came as James Bullard, the once hawkish head of St Louis Federal Reserve, said the Fed may have to back-track on bond tapering in the US, hinting at yet further QE to fight deflationary pressures and shore up defences against a eurozone relapse.
‘We are reaching the end game in Europe. If they don’t launch real QE soon, the consequences are too awful to contemplate,’ warns RBS
A key gauge of deflation risk in Europe is flashing red, dropping to record lows on fears of fresh recession and lack of decisive action by the European Central Bank.
The sudden lurch downwards came as Bank of America warned that France’s debt ratio could rocket to 120pc of GDP within five years, unless the EU authorities take radical steps to reflate the region’s economy. Italy’s debt could threaten 150pc even earlier.
The 5-year/5-year forward swap rate monitored closely by traders plummeted beneath 1.77pc on Friday morning as a global growth scare drove European stock markets to a 12-month low.
“This rate is the most important market signal on the planet right now. Everybody is watching the chart, and it has just gone off a cliff,” said Andrew Roberts, credit chief at RBS.
Data from Germany, Italy and Portugal put pressure on ECB to act
Portugal has crashed into deep deflation and Italy’s inflation rate has fallen to zero as the eurozone flirts with recession, automatically pushing these countries further towards a debt compound spiral.
The slide comes amid signs of a deepening slowdown in the eurozone core, with even Germany flirting with possible recession. Germany’s ZEW index of investor confidence plunged from 27.1 to 8.6 in July, the sharpest fall since June 2012, during the European sovereign debt crisis. “The European Central Bank has to act now,” said Andrew Roberts, credit chief at RBS. Continue reading
The bank, 81 per cent owned by the taxpayer, has already axed 40,000 posts since it was bailed out by the government in 2008
Royal Bank of Scotland is gearing up for further job cuts as it prepares to focus on the high street and withdraw from riskier investment banking activities.
It now aims to cut up to 30,000 more posts by offloading parts of its international business and slashing its investment banking division. Continue reading
Italy is likely to need an EU rescue within six months as the country slides into deeper economic crisis and a credit crunch spreads to large companies, a top Italian bank has warned privately.
Mediobanca, Italy’s second biggest bank, said its “index of solvency risk” for Italy was already flashing warning signs as the worldwide bond rout continued into a second week, pushing up borrowing costs.
“Time is running out fast,” said Mediobanca’s top analyst, Antonio Guglielmi, in a confidential client note. “The Italian macro situation has not improved over the last quarter, rather the contrary. Some 160 large corporates in Italy are now in special crisis administration.” Continue reading