Markets Live: Monday, 3rd August, 2015

Live markets commentary from 

Of China’s capital outflows and foreign banks

Look! More attention!

Both the FT and Bloomberg have weighed in on one of the larger China Rorschach tests — capital outflows.

So, what exactly do you see when you look at this?

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Shocking Greek thirtysomethings

You can see what we were going for…

You can follow the ASE, off 22 per cent at pixel, here. There’s more from markit here: Read more

FT Opening Quote – HSBC backs out of Brazil

HSBC’s $5.2bn disposal of its Brazilian business is no “End of Empire” move, but represents a renewed focus on Asia. FT Opening Quote, with commentary by City editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.  Read more

Further reading

Elsewhere on Monday,

- Mark Dow on why EM won’t crash — it is different this time.

- Secular stagnation: a monetary-financial problem or a fundamental-technological problem?

- Tracking inflation in Russia: The value of a bribe has been cut in half.

- PetroChina and nutty volatility in Chinese markets.

- When can investors talk to companies?  Read more

FirstFT – Chinese manufacturing contracts, Biden time and space-aged whiskey

Manufacturing activity in China is at its weakest in three years Read more

Some optimistic charts out of the euro area

The euro area’s economic performance over the past few years has been an almost unmitigated disaster, largely caused by unforced policy errors. And things could get a lot worse if the focus remains on threats to force the rest of the currency bloc to look like Germany. Yet we would be remiss if we ignored some mildly encouraging data that’s emerged in the past 12 months.

Start with the composition of growth in output and household incomes across the single currency. Via CreditSights: Read more

A Cambrian robotic explosion

Space. The final frontier. We look out into it to seek out new life and new civilizations so that we can boldly go where no man has gone before. But also to overcome the unsettling feeling that we might be all alone in the cosmos.

So what do we do to overcome this angst? We develop high-grade instruments to peer ever deeper into the universe. We do this to try to make sense of the vast big black expanse. To see into the darkness. To extract meaning from the data.

In so doing, we discover new mysteries like dark matter and dark energy. We get up close and personal with PlutoRead more

Markets Live: Friday, 31st July, 2015

Live markets commentary from 

Alphachat: Nikkei buys the FT, Gillian Tett’s forthcoming new book, and an Alphavillain returns from Greece

This episode was recorded on Wednesday, 29 July. You can find Alphachat on iTunes and Stitcher. Thanks for listening! Read more

The “whatever China needs” trade is over

Pragmatic sentences about the Chinese slowdown are often in short supply, so…

In our view, the worst thing about China’s slowdown is not the risk of some kind of cataclysmic economic meltdown or financial crisis but that – in sector after sector – the investable ways to “play” China shrink to the local names on the right side.

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When financial inclusion stands for financial intrusion

A standard line you hear from fintech promoters is that innovative digital technologies can liberate the world by bringing financial services to the financially excluded.

Yet, as we’ve noted on numerous occasions, there’s something disingenuous about this claim.

You see, the only way financial technology can drive financial inclusion is by de-risking people who would otherwise be too risky to lend to, who can’t be trusted to use funds allocated to them productively and who certainly can’t afford the extortionate rates which would make it worth lending to them. Read more

Could America’s financial reform candidate be…Rick Perry?

If you had asked us last week which American presidential candidate would be the first to use terminology devised by the Basel Committee for Banking Supervision in an intelligent discussion of the importance of higher capital requirements for the big banks, we probably wouldn’t have guessed that it would be Rick Perry, the former governor of Texas.

After all, this was the man who, despite a 14-year record as the executive of America’s second-largest state, is best known in the rest of the country for a gaffe. Yet the discussion of GSIB surcharges was just part of a detailed speech he gave on Wednesday at the Yale Club of New York, which we attended. Afterwards, we also had a chance to talk with Avik Roy, one of Perry’s senior policy advisers. (Roy had invited us.)

While there were certain ideas that struck us as potentially contradictory, the general thrust was promising. In fact, it’s possible Perry has outlined the most coherent and sensible financial regulatory agenda of any of the candidates so far. Read more

FT Opening Quote – Lloyds banks 38% profits rise

On another big day of banks reporting, Lloyds has announced a substantial rise in profits, but also recorded yet another large PPI charge. FT Opening Quote, with commentary today by deputy head of Lex Oliver Ralph, is your early City briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Friday,

- Destination unknown: Increasing the minimum wage and the lure of machines.

- The Economist plays “what if?”

- Bill Gross: I’m not what you would call a “prayerful” type of guy.

- Quants and black box trading: Why they all “blow-up”.

- Are the wheels already coming off the Greek deal?  Read more

FirstFT – Tsipras prevails, sky-high tensions and an end to invasive insertions

Tsipras wins battle with Syriza’s far-left faction Read more

Disrupting FREEDOM!

Citi’s back with the upcoming third edition of its Disruptive Innovations report, with ten new big opportunities to stop and think about.

These include:

  • Autonomous driving
  • Drones
  • Machine learning/artificial intelligence
  • Biosimilars
  • Floating LNG
  • Public API
  • Sharing economy
  • Virtual reality
  • Marketplace banking
  • Robo-advisors

 Read more

Lessons in distorting your own market from China’s “national team”

There’s a wild new theory going around that China’s (new and old) stock market slide is less down to this kind of thing….

Speaking before the investigation [into Avic Heibao, a listed manufacturing subsidiary of Mr Lin's company Avic, by the securities regulator on suspicion of illegal and irregular share transactions] was revealed, Mr Lin cast his company’s actions as part of a heroic struggle against foreign aggression.

“This stock disaster was a premeditated plot, a well-prepared case of malicious short selling and part of a powerful, tumultuous economic war launched against China,” Mr Lin said in an interview with state media. “The war launched against [the Chinese stock market] is an attack on the five-starred red [Chinese national] flag.”

In an editorial he penned for a state-run nationalist newspaper, Mr Lin also blamed US plots for the problems in the Japanese economy in the early 1990s and for the 1997 Asian financial crisis.

… and more down to distortions in China’s own markets. Now, particularly, those distortions introduced by China’s powers-that-be while trying to put a floor under the slide and target a level of 4,500 for the index, using a raft of measures. Read more

AIs desperately seeking an imagination model

What is imagination? How does it work? And what role does it play in consciousness?

Cognitive scientists have long hypothesised that imagination equals a “mental workspace” within which information can be processed across specialised subdomains. In other words, it’s a place where the brain can simulate the physical world around it and manipulate that simulation according to new variables to anticipate future scenarios. What’s always been a mystery, however, is how the mind knows what rules to use when manipulating that simulation.

Don’t worry. FT Alphaville isn’t turning into a bad science blog (Pluto fraud excluded). We raise the query mainly because of the current hubbub surrounding artificial intelligence systems and existential risk. On which note, do see John Gapper’s latest on killer robots and our own post from Wednesday. Read more

Markets Live: Thursday, 30th July, 2015

Live markets commentary from 

Faith in Chinese stats, charted

Only 20 per cent or so of investors polled by BofAML thought that Chinese growth was even approaching the official 7 per cent, ignoring the National Stats bureau’s claims that the figures for Q2 growth “objectively reflect the real situation.” Read more

A sovereign legal scorecard

First let’s start with a scatter chart, courtesy of Charles Robertson at Renaissance Capital. Click to enlarge…

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FT Opening Quote – Banks challenged on Super Thursday of results

It’s a Super Thursday of company results both in the UK and on the continent, so probably a good day to release bad corporate news in this deluge. FT Opening Quote, with commentary this week by deputy head of Lex Oliver Ralph, is your early City briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Thursday,

- Balding: “the Chinese stock market absolutely does not exist in a vacuum.”

- Yanis on those treason charges.

- The web we have to save.

- “One high roller requests a refrigerator full of bananas that he squeezes and throws as he gambles.”

- Piketty on Atkinsons’s plan for a more equal society. Read more

FirstFT – Aircraft debris found, drug abusers wanted and covering up in public

Investigators examine what may be MH370 debris Read more

Twitter’s active user problem

This is Twitter’s stock performance on Wednesday:

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Killer robots, AI and the path to stranded IT assets

Climate campaigners have popularised the notion that fossil fuel assets might one day become “stranded” because, if global warming is to stay within the internationally agreed two degree Celsius limit, they can’t realistically be burned.

It’s a view that has gained a lot of traction with investment managers leading to growing debates about strategies to de-risk portfolios by way of active engagement at the shareholder level or outright divestment. Read more

Markets Live: Wednesday, 29th July, 2015

Live markets commentary from 

An encouraging historical parallel to China’s stock bubble?

Consider the following two charts:

The chart on the right shows the price changes of the Shanghai composite stock index since the beginning of 2014 and the one on the left shows the price changes of a different stock index, decades earlier, that appears to have behaved very similarly, albeit with a bigger boom over a slightly longer time frame. We removed the labels and time scales to heighten their similarities, and normalised both to start at 100.

In both cases there was a period when basically nothing happened to stocks, followed by an extreme appreciation, followed by a sharp drawdown of about one-third.

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FT Opening Quote – Barclays still in need of a boost

Barclays has beaten expectations, but it still needs to show more of the acceleration it promised after removing CEO Antony Jenkins. FT Opening Quote, with commentary this week by deputy head of Lex Oliver Ralph, is your early City briefing. You can sign up for the full newsletter here.  Read more