If there was one catalyst for the market to be "convinced" of an imminent coordinated liquidity injection, as Zero Hedge first hinted yesterday, or simply a 25-50 bps rate cut from the ECB as some other banks are suggesting and Spain's ever more desperate Rajoy is now demanding, it was the overnight battery of European Flash PMI, all of which came abysmal, throughout Europe, the consolidated Eurozone PMI posting the worst monthly downturn since mid-2009, the PMI Composite Output and Manufacturing Index printing at a 35 month low of 45.9 and 44.7 respectively. PMIs by core country were atrocious: France Mfg PMI at 44.4 on Exp of 47.0 and down from 46.9, a 36 month low; German Mfg PMI at 45.0 on Exp. of 47.0 and down from 46.2. The implication, as the charts below show, is that GDP in Europe is now negative virtually across the board. Adding insult to injury was the UK whose GDP fell 0.3%, more than the 0.2% drop initially expected. The cherry on top was German IFO business climate, which tumbled from 109.9 to 106.9 on Expectations of 109.4 print, as the European crisis is finally starting to drag the German economy down, or as Goldman classifies it, "a clear loss in momentum. " What does it all add up to? Why nothing but a massive surge in risk, as the market's entire future is now once again in the hands of the #POMOList, pardon, the central banks: unless the ECB steps up, Europe will implode due to not only political but economic tensions at this point. Sadly, as in the US, by frontrunning this event, the markets make it more improbable, thus setting itself up for an even bigger drop the next time there is no validation of an intervention rumor: after all recall what sent stocks up 1.5% yesterday - a completely false rumor of a deposit insurance proposal to come out of the European Summit. It didn't, but that didn't prevent markets to not only keep their massive end of day gains, but to add to them. it is officially: we have entered the summer doldrums, when bad is good, and horrible is miraculous.
Overnight Sentiment: European Economic Implosion Sends Risk Soaring
Submitted by Tyler Durden 
RANsquawk EU Morning Briefing - What's Happened So Far - 24/05/12
Submitted by RANSquawk Video on 05/24/2012 - 05:54 Morning Briefing RANSquawkRANsquawk EU Morning Call - UK GDP Preview - 24/05/12
Submitted by RANSquawk Video on 05/24/2012 - 03:05 Gross Domestic Product RANSquawk United KingdomBeware Of Proud Greeks And Ultimatums
Submitted by Tyler Durden on 05/24/2012 - 01:22 fixed Greece
The ballot box and economics textbook are on a collision course around the world, and we thought Nic Colas' (of ConvergEx) analysis of what behavioral economists call The Ultimatum Game was worth a refresher. That’s where two strangers divide a fixed sum of money, with one person proposing a split and the other accepting or rejecting it. It’s a one-shot deal, so the proposer tries to work out the minimum amount required to get the other person to go along. Classical economics says that a $1 proposal out of a $100 pot should work, but in real life (and this study has been done everywhere from the rainforests of South America to the bars of Pittsburgh) it takes 25-50% offers to win the day. Nic found three recent updates to the Ultimatum Game that each speak directly to the current political state of play in Europe and the United States. One shows that proud people (or those led by nationalist-minded politicians, perhaps) need higher offers in order to accept a split. The second shows that the Game works even for small amounts. The last – and the first such study we've ever seen from a mainland Chinese university – shows that worries over social status complicate the already difficult mental calculus of "How much is enough?"Classical economics would say – and you will hear a lot of policymakers echo – that the Greeks should take whatever deal they can. Something is better than nothing. However, all the lessons of the Ultimatum Game studies point to an entirely different conclusion.Spain 'Discovers' 28 Billion In Debt
Submitted by Tyler Durden on 05/23/2012 - 23:43 European Central Bank Reuters
Back in late March, we pointed out - much to the chagrin of the LTRO-funded Spanish-sovereign-debt-stuffing banks of the tapas-nation - that, in a similarly misleading manner to Greece's 'leverage' the debt-to-GDP data for Spain was significantly higher than official estimates. Once sovereign guarantees, contingent liabilities and their responsibilities to the EU and the ECB were included things got a whole lot uglier. Now, slowly but surely, as reported by Reuters this evening, some of these bilateral guarantees/loans are coming to light. Instead of the expected EUR8 billion of 'regional refinancing' expected for 2012, it turns out there is EUR36 billion and as Reuters notes "the difference is due to bilateral loans from Spanish banks to the regions worth 28 billion euros that were not made public previously" adding that "It could unnerve further investors concerned by the capacity of Spain to curb its public finances and reform its banking sector." Critically this stunning 'discovery' should be worrisome since the plan, given the regions are virtually blocked from public market financing - due to the high cost of funds, was/is for the sovereign to guarantee (there's that word again) their issuance explicitly. Ironically, as de Guindos and Hollande are chummy borrow-and-spendaholic growth-seekers versus Merkel's safe-and-austere determination, so now the Spanish authorities must lend exuberantly to their regions while at the same time demanding deficit targets are met (or else?) - or as one Reuters' source objects:
Thursday, 24 May 2012
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