Home > November 2017 > Nov 19, 2017 Euro is sliding over Merkle unable to form a coaliation

Nov 19, 2017 Euro is sliding over Merkle unable to form a coaliation

November 20th, 2017

Normally this short week leading into Thanksgiving is bullish. Yet, this was before China started pulling the plug on liquidity. Shanghai Metals were flat tonight. The Big News is that Merkle couldn’t form a coalition in talks over the weekend. Eur/USD down .40% leading into the Europe session. Our Futures are down about .28%. Merkle’s options are to call for new elections, rule with minority or convenience a minority party to join them (which no one is interested in). China continues to close factories over pollution concerns for winter and PBoC sent out announcement on limiting shadow banking.

November 2017

  • Trading_Nymph

    From Telegraph…Exploratory talks to form Germany’s next coalition government collapsed shortly before midnight on Sunday when the pro-business Free Democratic Party (FDP) walked out of marathon negotiations.

    “The four discussion partners have no common vision for modernisation of the country or common basis of trust,” the FDP leader, Christian Lindner, announced after the four parties involved missed several self-prescribed deadlines to resolve differences on migration and energy policy. “It is better not to govern than to govern badly.”

    The euro slid in Asian trade overnight thanks to the uncertainty in Europe’s powerhouse nation. Against the yen, the euro was down 0.6% on the day to a two-month low and slipped 0.5% against the US dollar. It was down 0.43% against the pound at €1.125.

    Chancellor Angela Merkel has been trying to forge a coalition between her Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU), the pro-business FDP and the Green party, following federal elections at the end of September.

    Announcing the collapse of talks as an “almost historic day”, Angela Merkel on Sunday night insisted that the parties would have been capable of reaching a compromise even in spite of their polarised views on migrations, and described the FDP’s walk-out as “regrettable”.

    A so-called “Jamaica” coalition – so nicknamed because the parties’ traditional colours mirror those of the Jamaican flag – represents new ground even for Germany’s experienced leader and has only previously been tested at regional level.

    In a month of talks, Merkel has often cut a passive figure as party representatives found themselves at loggerheads over issues such as the question of how many of the migrants who found their way to Germany in 2015 and 2016 would be allowed to be reunited with their families.

    Migration emerged as a contentious political issue in Germany following the refugee crisis, when 1.2 million migrants entered the country in 2015-16. The backlash against Merkel’s decision to keep open Germany’s borders has resulted in a far-right party, the anti-refugee Alternative für Deutschland, entering the German parliament for the first time in more than 50 years.

    In the coalition talks in Berlin, the CDU, the CSU and the FDP have, at times, worked to outdo each other on calling for a harder line on migration controls.

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    According to reports in German media, the Green party suggested a compromise over the weekend whereby they would agree to limit Germany’s annual intake of migrants to a benchmark figure of 200,000 – as long as other parties did not rule out allowing migrants with “subsidiary protection” status to be reunited with their families.

    The parties have struggled to find a common ground on climate change, with the Greens calling for a reduction in coal-generated power of 8-10 gigawatts while its potential coalition partners have expressed concerns about job losses in the energy and manufacturing sectors.

    At the start of the weekend, the FDP leader, Christian Lindner, announced a deadline for the exploratory talks. “If we don’t work it out by 6pm on Sunday, the whole thing is dead,” his deputy, Wolfgang Kubicki, said. Yet the talks went on past that deadline.

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    If the parties had come to an agreement, negotiations would have moved to the next stage, in which a document with fundamental agreements provides the basis for the carving up of ministerial roles.

    With talks now seemingly over, Merkel could seek to form a minority government, either with the FDP or the Greens, and gather support from other parties on individual policy votes.

    The Social Democrat leader, Martin Schulz, whose party has played junior partner to Merkel in the German government for the past four years, ruled out the possibility of another grand coalition under his leadership. “The voter has rejected the grand coalition,” Schulz said at a party conference in Nuremberg on Sunday.

    Once all other options are exhausted, Germany’s president, Frank-Walter Steinmeier, could dissolve the current parliament and call fresh elections. To get there, however, Steinmeier would need first to set into motion a complicated process that would involve a parliamentary vote on Merkel’s role as interim chancellor.

    While the debate in Germany over the past few weeks has mainly focused on policy differences between the parties, it is likely to soon shift to the chancellor, and the question of whether or not she still commands sufficient power to hold together a strong government.

  • Trading_Nymph

    PBoC released the controls they are planning…PBOC to tighten rules on asset management business
    Reuters
    00:44 UTC+8, 2017-11-20
    China’s central bank has issued sweeping guidelines to tighten rules on asset management business, the latest step by Beijing to fend off systemic risks in the country’s rampantly growing shadow banking sector.

    The guidelines unified rules covering asset management products issued by banks, trust firms, insurance asset management companies, securities firms, funds and futures companies, the People’s Bank of China said in a joint statement with the banking, insurance, securities and foreign exchange regulators on Friday.

    At the end of 2016, the collective outstanding volume of their asset management business was 102 trillion yuan (US$15.38 trillion), including 29 trillion yuan of bank wealth management products and 17.5 trillion yuan in trust products, according to the PBOC.

    The new rules aim to close loopholes that allow regulatory arbitrage, reduce leverage levels to curb asset price bubbles and rein in shadow banking activity.

    The new rules will set leverage limits for asset management products. They will cap the total assets to net assets ratio at 140 percent for open mutual funds and 200 percent for private funds. Investors will be prohibited from pledging their shares in asset management products as collateral to obtain financing, a practice that would increase leverage.

    The PBOC also said financial institutions must break the practice of providing investors with implicit guarantees against investment losses.

    Financial institutions will also be forbidden from creating a “capital pool” to manage funds raised through asset management products. The practice allows banks to roll over the products constantly. The investment losses will be implicitly covered by the new product issuance.

    The draft guidelines are the latest and most comprehensive set of rules proposed by financial regulators to fend off shadow banking risks that could spread across different asset classes.

    “Clearly this is a critical turning point of the financial regulations,” said Zhou Hao, a Singapore-based analyst at Commerzbank. “Over the past few years, while the financial risks were rising, the overall regulations were actually behind the curve.”

    PBOC Governor Zhou Xiaochuan has warned that China’s financial system is becoming increasingly vulnerable due to high leverage and accumulating “hidden, complex, sudden, contagious and hazardous” latent risks.

    Financial institutions will not be allowed to use asset management products to invest in commercial banks‚ credit assets or provide “channel service” for other institutions to bypass regulations, the statement said.

  • panther341

    Hi TN – OPEC meeting next week in Vienna. Probably going to extend cuts until September 2018 bcs that is latest estimate on when the glut gets soaked up. Notice how those estimates get farther and farther out as this has gone on. Article on the dilemma: higher prices encourage US shale production, but they like $60 oil. And there is the ever present Aramco IPO on the back of the recent purge. https://www.marketwatch.com/story/opec-oil-ministers-will-face-this-dilemma-when-they-meet-to-extend-production-cuts-2017-11-17

  • panther341

    so my sister is coming for Thanksgiving. This means extra work around the house this week. I will be here for therapy if nothing else.

  • Trading_Nymph

    I am doing the house thing too. Lot’s of wine may help with the Therapy over the holiday table, lol.

  • Trading_Nymph

    It will be so much fun to watch Iran there. They better not sit them next to the Saudes.