The Day Today 6 Jan 2015

— Stocks vomit, oil falls below $50, and the dollar index rises to a 9 year high – welcome to 2015! —-

* Germany speaks out over Grexit:
– Germany’s deputy FinMin: “Europe can’t afford a Greek exit”.
– MEP Elmar Brock from the CDU: “We want to keep the Greeks in the euro, but that will only work under the agreed conditions… We can’t let voters get the impression that impunity wins. This debate is about making it clear that Tsipras’s promises won’t work.”
– Deputy EU spokesman for CDU: “The agreements [between Greece and its creditors] must be kept. European nations have helped Greece on the condition that they will get their money back.”
….But the big risk of a policy mistake comes from the view that this time there would be no contagion: – Deputy Chancellor Fuchs: “I assume that what Greece had three or four years ago — namely the potential to blackmail us — is no longer present”

* France’s Hollande weighs in:  it is “up to Greece alone to decide” to keep the Euro… “Whatever the vote, Europe must no longer be synonymous with austerity”

* New San Fran Fed paper on why are wages so low? Because they didn’t fall enough during the crisis – “nominal wage rigidities” – so it takes longer to get back to higher wages and full employment. [Yellen has subscribed to this view previously]

* Fed’s Williams: “I see no reason whatsoever to rush to tightening. I don’t see any upside risks to inflation. I think these financial stability concerns that people do raise are real things we want to take into account, but that doesn’t argue for moving today or in the next few months relative to, say, later in the year.”

* With govt bond yields falling again (German 5yr yields just 0.01%!), corporate bonds could be next to turn negative

* Oil price fall creates growing argument in the US to raise petrol tax

* Conspiracy Theory #23 over why the oil price has fallen so much – is it China, trying to stimulate growth through the back door?

* It’s time for another storm in the US – but will this year’s be bad enough to confuse the growth figures, as it did last year? [It’s unlikely to affect the market even if it does, given the short base in US rates is now so much smaller!]

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