The 6am London Cut

Markets: Asian equities drifted lower in light trading a day ahead of market-sensitive GDP figures for the US and inflation data from Japan. (FT’s Global Markets OverviewRead more

The Closer


- A look at income inequality, hour by hour. And real wage growth this year. Read more

“Pent-up wage deflation” works better in theory than in practice

Janet Yellen’s thoughtful speech on labor markets last week has already received a lot of attention. One passage, which highlighted some recent research from her former colleagues at the Federal Reserve Bank of San Francisco, was particularly noteworthy, in part for its implications about the path of future wage growth:

The sluggish pace of nominal and real wage growth in recent years may reflect the phenomenon of “pent-up wage deflation.” The evidence suggests that many firms faced significant constraints in lowering compensation during the recession and the earlier part of the recovery because of “downward nominal wage rigidity”– namely, an inability or unwillingness on the part of firms to cut nominal wages.

 Read more

When FX wars become negative interest wars

Beat Siegenthaler, FX strategist at UBS, has been wondering about what the Swiss National Bank may do if the ECB’s measures to weaken the euro begin to test its 1.20 EURCHF floor.

He notes, for example, that there has already been a marked divergence between the EURCHF and the USDCHF:

 Read more

Money hierarchy, the global perspective

No, this isn’t going to be another FT Alphaville post pontificating over what money is or isn’t. We’ve had plenty of that.

Instead, precisely because nobody can really agree on what money is or isn’t, we’re going to take the basic position that money is an amalgamation of many different things and totally subjective to the holder and acceptor.

Just that somehow, for the purposes of trade and, you know, peace and quiet, we in civil and ordered society carry on the pretence that money represents a common value set amongst us all, and therefore don’t mind when it’s treated in a fungible manner. Read more

Another USD regime shift?

From BofAML’s David Woo, with our emphasis:

A major consensus this year was that this was going to be a rates-centric year. Eight months into the year, many investors continue to believe that with QE3 winding down, all markets will be taking their cues from the US rates market sooner than later. Currency investors are no exceptions. USD bulls have built their investment thesis on the assumption of higher US rates and have been waiting for rates to climb to establish or add to long USD positions.

 Read more

Markets Live: Wednesday, 27th August, 2014

Live markets commentary from 

The (early) Lunch Wrap

RBS fined £14.5m for poor mortgage records and advice || IMF’s Lagarde placed under formal investigation || Ryanair launches ‘business class’ as it aims for corporate market || Kiev promises ceasefire plan for east Ukraine || Foxtons to pay special dividend as profits jump || Balfour Beatty public-private portfolio valued at more than £1bn || Shale oil and gas producers’ finances lift growth hopes || Markets Read more

Further reading

Elsewhere on Wednesday,

- Property rights and saving the rhino.

- Why the Putin era may be over sooner than we think.

- The philosophy of Bayesian probability or why you can’t chop decision theory up into two parts.

- US economy: the persistent myth of deleveragingRead more

The 6am London Cut

Markets: Asian stocks only gained modestly in spite of a lift in US consumer confidence that pushed the S&P 500 up to a close above 2,000 for the first time. (FT’s Global Markets OverviewRead more

The Closer


- Martin Wolf on what’s wrong with corporate governance Read more

Bob’s back

8am on Wednesday sees a resumption of trading in Atlas Mara Co-Nvest, the cash shell that Bob Diamond floated in London last December, with a view to building a chain of banks across the African continent.

Atlas Mara is no longer a shell, of course. The shares were suspended for five months while Bob & Co raised $300m (against an initial target of $400m) and then completed the acquisition BancABC and African Development Corporation. This gives Atlas Mara a base network across Botswana, Mozambique, Tanzania, Zambia and Zimbabwe. It’s also trying to buy the commercial arm of BRD, the development bank of Rwanda. Read more

India’s Coalgate, the winners and losers

Of course, everyone’s a winner when judgements start off with prose like this:

Coal is king and paramount Lord of industry is an old saying in the industrial world. Industrial greatness has been built up on coal by many countries. In India, coal is the most important indigenous energy resource and remains the dominant fuel for power generation and many industrial applications.

 Read more

This time is not that different, long-term unemployment edition

If we were asked to make the Great Recession look radically different from all other postwar US recessions, we would point to this chart:

 Read more

Of Xi’s material world

Have a China rebalancing update in the face of a property downturn, the corruption crackdown and a reversion to type by Chinese leaders as they seek to prop up the economy.

To restate the obvious, China needs to rebalance its economy towards consumption over the next while if it’s to shift the economy away from a reliance on debt-driven investment and all of the “this is nuts” type excess that it can bring about.

And as UBS’s Wang Tao says: Read more

Markets Live: Tuesday, 26th August, 2014

Live markets commentary from 

The (early) Lunch Wrap

Lockheed Martin seeks to clean up space junk || Pictet in profit as wealth manager reveals results for first time || WPP profits rise despite sales ‘ravaged’ by strong pound || Regus hit by strength of sterling || Amazon buys Twitch to woo gamers || Hackers target gaming companies ||  Read more

Markets Live limps back to life…

Summer’s over, right?  Read more

Barclays’ boys club

Barclays’ most senior rainmakers held important client meetings last Wednesday. But rather than inside a wood-paneled boardroom, those meetings took place on the tree-lined fairways of Ridgewood Country Club, 20 miles west of Manhattan in bucolic New Jersey.

Barclays was the title sponsor of last week’s US PGA Tour tournament, humbly known as “The Barclays”. The tournament is the first of four stops that constitute the season-ending playoffs on the PGA Tour. Barclays has sponsored the New York area PGA tour stop since 2005 (the PGA Tour playoffs started in 2007). Its current sponsorship runs through 2016Read more

Quindell and an industry deaf to its assumptions

A few more things to ponder following the results for Quindell last week, beyond the cash situation that we have already covered.

One is the difference between what the UK’s largest listed law firm has assumed it will get paid for industrial deafness claims it is pursuing, and what UK insures have set aside to pay such claims.

Consider these thoughts from someone insurance minded who attended the Quindell analyst meeting: Read more

Further reading

Elsewhere on Tuesday,

- Surviving the absence of trophy kids.

- Austerity, France and memories.

- In which the “Gandhi of grain” meets seeds of doubt. Read more

The 6am London Cut

Markets: Hopes for further easing from the European Central Bank boosted equities overnight but the rally has failed to extend into Asia. Overnight, the S&P 500 briefly traded above the 2,000 mark for the first time, before closing 0.5 per cent higher at 1,997.94. (FT’s Global Markets OverviewRead more

The Closer


- The economic case for wiping out EbolaRead more

Draghi’s speech at Jackson Hole

Read it here, and see also the slide deck. As with all things ECB-related, we recommend following Lorcan’s twitter feed.

An excerpt from the speech below: Read more

Janet Yellen’s Rorschach speech

If the policy implications of Janet Yellen’s every word could be ignored, then her speech at Jackson Hole this year would merely be a wonderful elucidation of why it’s so hard to measure labour market health in real time.

The meaning for policy obviously can’t be ignored, and yet markets didn’t respond strongly one way or the other, while the instant reactions from commentators and strategists differed widely. Read more

Janet Yellen’s speech at Jackson Hole

You can read it here.

And below is an excerpt: Read more

Germany vs France on the euro, part deux

A brief follow-up to this morning’s post in response to a question we received on Twitter…

Below is a chart showing the full history of French household indebtedness data. It only goes back to 1996 but provides some additional context about the changes that occurred after the introduction of the euro: Read more

When creative destruction becomes creative devastation

John Komlos of the Ludwig-Maximilians University in Munich proposes in a new paper that ‘creative destruction’ has become devastating, not just destructive:

the destructive power associated with Schumpeterian creative destruction has increased markedly relative to their creative component, in contrast to previous epochs. Creative destruction’s gentle winds have mutated into cyclones of destruction.

Thus, our sense of well-being will probably not keep pace with even the slow economic growth being predicted by Gordon, Summers, and Krugman. While the economy will be growing, albeit slowly, we predict that our sense of well-being will be mysteriously lagging well behind.

 Read more

Plus500 as a model, citizen

One way to think about companies that have listed in recent years is that they are in the “show me” phase of their existence. Raising cash on a promise and a neat idea is one thing, the important part once the stock trades is to show that the business model works and is sustainable.

So consider Plus500, the Haifa, Israel-based Contract-For-Difference trading group that listed in London a year ago. The shares have since quadrupled, giving it a market valuation of £550m, a quarter of that of its long established competitor IG. The group recently reported first half earnings of $54m, up from $15m in the same period a year ago.

Some aspects of the company’s business deserve consideration. Read more

This speaks for itself. When’s the crash?

Felix Salmon on the redundancy of banks, in Friday’s FT:

Today’s big Silicon Valley deals are not based on corporate synergies, or the amount that earnings per share will increase after the deal closes. They are not, therefore, based on the sort of thing that bankers can model. (Very few of the acquired companies have any earnings at all; some even lack revenues.)

 Read more