Online Course Notes For Financial Markets – Anthony B. Sanders
While the US economy is humming along nicely, there is trouble brewing in River Cities (that is, the Yangtze River in China and The Rhine River in Europe).
Both the Eurozone GDP forecast and China Manufacturing PMI are falling like a paralyzed falcon.
Yes, we got trouble in River Cities … overseas.
Deutsche Bank, aka, The Teutonic Titanic, sank on the news that police raided their headquarters in Frankfurt Germany.
The Frankfurt headquarters of Deutsche Bank have been raided by prosecutors in a money laundering investigation.
Germany’s public prosecutor alleged that two staff members have helped clients launder money from criminal activities.
Police cars were seen outside the tower blocks that house the headquarters of Germany’s biggest bank.
Five other Deutsche offices in the city were searched in an operation involving about 170 police and officials.
Prosecutors are looking into whether Deutsche Bank staff helped clients set up offshore accounts to “transfer money from criminal activities”.
The investigation, which began in August, focuses on activities between 2013 and the start of 2018.
In 2016 alone, more than 900 customers were served by a Deutsche Bank subsidiary registered in the British Virgin Islands, generating a volume of €311m, the prosecutors allege.
The investigation was sparked by revelations in the 2016 “Panama Papers” – an enormous amount of information leaked from a Panamanian law firm called Mossack Fonseca.
Yes, Deutsche’s stock declined further below $10 per share.
At the same time, Deutsche’s default probability (5Y SR CDS) spiked.
Unlike the actual Titanic that struck a single iceberg, Deutsche Bank just keeps hitting icebergs on a consistent level.
I am sure the Chief executive of Deutsche Bank, Christian Sewing, is quoting Alan Rickman from Galaxy Quest, “Could you possibly try not to hit every single one?”
True, Brexit sounds like a Kellogg’s or Post cereral product, but it is the attempt by Great Britain to escape the clutches of the European Union insidious trade deals, among other things. But Britain’s “Great Escape” appears to be on the verge of collapse.
Hedge funds are turning ever more bearish on the euro as a combination of weakening economic data and ongoing political tensions with Italy damp sentiment. Net short speculative positions reached the largest since March 2017, according to the latest data from the Commodity Futures Trading Commission. Figures Friday showed the region’s composite PMI indicator fell to the lowest in four years, while Italy’s populist government continues to debatea deficit target which would be acceptable to the European Commission.
To be sure, some sort of Brexit deal will be hammered out, but probably similar to the 1626 purchase of Manhattan Island for the equivalent of $24 worth of beads and trinkets. That is, Great Britain will sell out for virtually nothing.
Below is a picture of UK Prime Minister Theresa May in a decorative hat on the left striking a “deal” with the armed EU delegation from Brussels.
The large Central Bank monsters are fighting. Instead of Godzilla versus Mothra, it is it The Fed versus European Central Bank (ECB).
As the US Federal Reserve continues to “nornalization” interest rates with increasing Fed Fund rate and balance sheet tightening (QT), Europe (or EMEA to be precise) is going in the opposite direction. There were 16 nations with negative 2 year soverign yields a short while ago, but now the number has grown to 18 (including France and Germany).
While on this side of the pond, tech-heavy NASDAQ has dumped 13% since its recent peak.
With a growing economy in the USA, and worries in Europe over Brexit and Italy’s budget fight with the EU (Greece’s GDP growth YoY is higher than France, Germany, UK and Italy).
the ECB is going in the opposite direction of the US Fed.
Here is a photo of Fed Chair Jerome Powell announcing a Fed rate hike in December.
