NEW$ & VIEW$ (27 MARCH 2013)

Lost deposits. Eurozone employment remains weak. U.S. soft patch watch. House prices strong. Durable goods. Vietnam GDP soft. Triple A’s shrink.

THE TEMPLATE

EU to push for losses on big savers at failed banks: lawmaker

The European Parliament will demand that big savers take losses if their banks run into trouble, a senior lawmaker told Reuters, adding momentum to a policy unveiled as part of a Cypriot bailout. (…)

Now the likelihood is rising that tough treatment of big depositors will be written into a new EU law, making losses for large savers a permanent feature of future banking crises.

“You need to be able to do the bail-in as well with deposits,” said Gunnar Hokmark, an influential member of the European Parliament, who is leading negotiations with EU countries to finalize a law for winding up problem banks. (…)

“Deposits below 100,000 euros are protected … deposits above 100,000 euros are not protected and shall be treated as part of the capital that can be bailed in,” Hokmark told Reuters, adding that he was confident a majority of his peers in the parliament backed this line. (…)

Pretty clear!  Where do you want your money now? Ready to do a due dill on your bank? How lucky do you feel?

BTW: Call me  British Banks Have Capital Shortfall of $38 Billion, BOE Says

Depositing some calm, at least for the little guys

The first chart is from HSBC, showing how many depositors fall within the bracket of the €100k guarantee mandated by EU law. The second chart is from JP Morgan’s F&L team, and shows percentages of insured and uninsured deposits in the eurozone. Essentially, the share of large or uninsured deposits is likely to be close to half of total deposits.

Together they give something of a picture of the insured versus uninsured in the zone (health warning: the data are from 2007) and it’s worth noting that for other peripheral countries relative to Cyprus, large deposits are mostly domestic. As JPM said, “the share of non–domestic deposits in peripheral banks is rather modest at 7 per cent as of the end of 2012.”

Crying face  Cyprus Sets Bank Restructuring

Cyprus gave the first indications of the steep losses facing large deposit holders at the island’s two biggest banks.

Cyprus’s central bank chief said Tuesday that large depositors at the island’s biggest lender, Bank of Cyprus Pcl, could lose as much as 40% on their deposits. In a television interview later, the finance minister said large uninsured deposit holders at the second-biggest, Cyprus Popular Bank Pcl, might only see one-fifth of their money returned and could wait several years before being paid back.

Based on estimates from government officials, the losses would affect some 19,000 deposit-holders at the Bank of Cyprus who, combined, hold some €8.01 billion ($10.30 billion) in uninsured deposits. Uninsured savers at Cyprus Popular Bank, who hold a combined €3.2 billion, will lose most of that.

Euro’s Bears Go Back on Prowl

Wagers on a weaker euro have grown for four of the past five weeks in the futures market, according to the latest data from the U.S. Commodity Futures Trading Commission. As of March 19, investors were betting $7.2 billion that the euro would fall against the dollar, the biggest aggregate position since November.

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Red heart Broken heart Poland opens way to euro referendum
Strong public opposition to the common currency

Donald Tusk, Poland’s prime minister, took a big political gamble on Tuesday when he opened the door to a referendum on joining the euro, in the face of strong public opposition to the common currency.

Lightning  Temp Hiring Tumbling in Euro Zone  Temporary hiring through agencies is falling in the euro zone at a double-digit percentage rate in year-to-year terms.

Agency employment across Europe is falling 10% to 15% year-to-year, he estimates.

Temporary employment fell at an annual rate of 15.5% in France and 3% in the Netherlands in January, its figures show. In Belgium, the most recent figures show employment fell 6.0% in December. German agency work fell 14.8% in November.

SOFT PATCH WATCH

Yesterday’s economic releases were generally on the weak side. 

  • The Richmond Fed index lost 3 points.

In March, the seasonally adjusted composite index of manufacturing activity lost three points settling at 3 from February’s reading of 6. Among the index’s components, shipments slipped two points to 8, the gauge for new orders moved down four points to end at -4, and the jobs index added one point to end at 9.

Pointing up Note that new orders have been weak for 3 consecutive months.

Other indicators also suggested weaker activity in March. The index for capacity utilization turned negative, losing fourteen points to -3, and the index for backlogs of orders dropped two points to finish at -14.

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The neighboring Philly Fed survey also shows uninspiring new order patterns.

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  • New home sales dropped -4.6% in February and January’s gain was revised down. Bundling January and February data, new home sales are up nearly 19% Y/Y.
  • Consumer confidence dropped to 59.7 in March from 68.0 in February. 
  • Expectations for economic activity over the next six months dropped to 60.9 from a revised 72.4, originally reported as 73.8. The assessment of current economic conditions slipped to 57.9 from a revised 61.4, first put at 63.3.

Open-mouthed smile  Home Prices Post Big Rise

Prices rose by 8.1% in January from a year earlier, the largest such gain in 6½ years, according to figures from the S&P/Case-Shiller index of home prices in 20 major metropolitan cities released Tuesday. All 20 cities posted annual increases.

Prices also defied their usual winter slowdown and rose 0.1% in January from December, a period when prices often fall because sales activity is slow. After adjusting for seasonal factors, prices gained 1% from December.

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Smile  Firms Shift Spending to Higher Gear

America’s businesses stepped up investment in the first quarter, as the threat of the year-end fiscal cliff was averted and despite fresh economic risks emerging in Washington and around the world.

One closely watched gauge of business investment—new orders for nondefense capital goods, excluding aircraft—fell slightly in February after climbing in January, the government said Tuesday.(…) The gauge’s three-month moving average has risen every month since October.

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Vietnam GDP Growth Slows in First Quarter as Banks Struggle

Gross domestic product expanded 4.89 percent in the first three months of the year from the same period a year earlier, the General Statistics Office said in Hanoi today. That compares with a previously reported 5.44 percent pace in the last quarter of 2012 and the median estimate of 5.2 percent in a Bloomberg survey of 10 economists. Growth in the first quarter of 2012 was revised to 4.75 percent, the Statistics Office said.

Retail sales increased 11.7 percent in the first quarter from the same period a year earlier, slowing from a 21.8 percent pace in the same period a year earlier, the Statistics Office also said today.

Global pool of triple A status shrinks 60%
Dramatic re-drawing of world credit ratings map

(…) The expulsion of the US, the UK and France from the “nine-As” club has led to the contraction in the stock of ­government bonds deemed the safest by Fitch, Moody’s and Standard & Poor’s, from almost $11tn at the start of 2007 to just $4tn now, according to Financial Times analysis.

The shrinkage, largely a result of US’s downgrade by S&P in August 2011, is part of a dramatic redrawing of the world credit ratings map, which is encouraging investment flows into emerging markets and forcing investors and financial regulators to rethink definitions of “safe” assets.

 

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