The BoE and those companies materially contributing to the UK

Mark Carney is still giving more details of today’s policy actions (press conference here). But for now, if you’re a company considering leaving Britain because of Brexit, perhaps take a good hard look at this from the August 2016 inflation report: Read more

Markets Live: Thursday, 4th August, 2016

Live markets commentary from 

Inmarsat bid five times Avanti Comms’ market cap before withdrawing last month

Yes, really. On Wednesday last week Patrick McDougal, Inmarsat’s head of business development and strategy, got in touch with Dominic Lester, joint head of investment banking in Europe at Jefferies & Co, Avanti’s advisory. He wanted to table a second takeover offer for Avanti after a previous low-ball bid for the rival satellite operator had been rejected. Inmarsat was ready to pay at least 140p a share in cash for Avanti, subject to due diligence. At the time, shares in Avanti were trading just below 30p. Read more

FT Opening Quote: The BOE confronts the inevitable

The BOE confronts the inevitable, insurers are up and there’s luck at Ladbrokes. 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

Back to a low vol FX world?

This is from HSBC’s FX team, they of most fervent RORO use, who basically think that if Brexit, the Turkish coup attempt and the BoJ’s not pulling the trigger as expected didn’t rattle the markets properly then something must be up.

To demonstrate this, they take us back to 2014 when things were in proper (and the fear was indefinite) low vol mode: Read more

Further reading

Elsewhere on Thursday,

- “Sex is a three-letter word that has rarely appeared in an Investment Outlook until now” – Bill Gross, August 3

- Goldman regulatory advisers were too friendly with regulators.

- Zeitgeist-y IMF working paper du jour: “Thomas Piketty’s Capital in the Twenty-First Century puts forth a logically consistent explanation for changes in income and wealth inequality patterns. However, while rich in data, the book provides no formal empirical testing for its theoretical causal chain. In this paper, I build a set of Panel SVAR models to check if inequality and capital share in the national income move up as the r-g gap grows. Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. “ Read more

FirstFT – UK business activity contracts, knife attack in central London and how Europeans feel about Brexit

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The most wide-ranging survey of British business activity since the vote to leave the EU showed its sharpest drop in at least 20 years, adding to pressure on the Bank of England to take stronger action on Thursday to prevent a recession. Read more

Time to reevaluate blockchain hype

The Hong-Kong based Bitfinex exchange is short 119,756 bitcoins after being hacked on Tuesday, though nobody can be sure what’s really happened because ‘hacking’ is a loose term and can encapsulate almost anything, including an internal security breach. (Do see the case of Mt Gox.) The mark-to-market value of the stolen coins is roughly $70m, but again who can really tell their true worth. Bitcoin is an asset class where the liquidation of 119,756 (approximately 0.8 per cent of the total bitcoin circulation) can move the market more than 20 per cent, suggesting a certain fantastical element to the valuation. Read more

Markets Live: Wednesday, 3rd August, 2016

Live markets commentary from 

This is nuts, ‘US30Yr Bond Yield to Evaporate’ edition

You’ll have already seen Nomura’s Toshihiro Uomoto attempt to explain the state of the world through chart, here.

But we thought we’d also share his suggestion that “30yr Treasury yield should near 0% within two years” as the “scarcity of products with a positive yield should continue facilitating the inflow of funds into the credit market.” Read more

When modern art meets global financial markets and monetary malaise

We were going to write about JGB yields jumping after the BoJ disappointed the market and made some (Nomura) think that even if the BOJ hasn’t reached the point where it can no longer deepen its use of current policy tools, “continued use of those tools could hasten the point at which it becomes difficult for the BOJ to act, with the exception of foul play*”

We were then going to compare that jump in yields to a similar jump in May 2013, when 10-year yields spiking “above 1% for the first time in 14 months… fed into an astonishing 7.3% slide in the Nikkei 225″, according to BoNYMellon’s Simon Derrick, and note that all we can really learn from that move is that it led to market turmoil.

But then we saw this work of chart, from Nomura’s credit team, and all of that good work was undone: Read more

FT Opening Quote: Profit plunge at HSBC

Profits plunge at HSBC, a mixed outlook at Next, the honours row simmers on. 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 Wednesday,

- We, the people, as banks: “We like the elasticity of credit, that allows us to spend today and put off payment to the future. But we don’t like the discipline of money, which is to say ultimate payment.”

- The value of settlement finality.

- A very good Guardian longread on the 1MDB scandal.

- The relative performance of high yield and crude oil, charted.

- “QE does have some economic effects; it’s just (I’m not ashamed to say) still difficult to discern just what these are.” Read more

FirstFT – Clinton’s growing financial firepower, the hidden costs of crime and how tech is altering our minds

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Hillary Clinton raised $63m for her campaign and $26m for the Democratic party in July, bolstering her financial firepower against Donald Trump as the two candidates move into the general election. Read more

Why does Goldman Sachs think the Fed is flirting with currency targeting?

Because the Fed certainly isn’t.

Yet analysts at the bank nonetheless have some strong words about New York Fed President William Dudley’s focus on the dollar. Read more

Bitcoin’s panopticon problem

How much personal data is bitcoin really sucking out of the system courtesy of third party operators who have grown accustomed to datamining the blockchain and then cross-linking the information to their known customer lists? Read more

Some pre-IPO questions for Postal Savings Bank of China

This state-owned thing is massive. China massive.

Fifth largest bank in China by assets and largest by number of branches massive — 40,000 branches nationwide and “about 500 million clients or nearly half of China’s population” massive at that.

Its plan is to IPO in September in Hong Kong… Read more

Markets Live: Tuesday, 2nd August, 2016

Live markets commentary from 

Staying safe during the war on inequality

It’s not often you hear investment strategists write so cheerfully about redistribution, but then again it’s 2016, so anything goes:

Happily, the fiscal flip this summer has thus far been more biased toward redistribution & Keynesianism rather than protectionism. For example: Read more

Guest post: Further questions about Chinese GDP data

According to official Chinese data, output in the second quarter in the industrial sector grew 6 per cent in real terms and 2.9 per cent in nominal terms. Given the officially reported 2.6 per cent producer price deflation that appears to basically reconcile. However, if we do dig beneath the surface Christopher Balding, professor at Peking University, HSBC Business School, argues large discrepancies appear. Read more

FT Opening Quote: Brexit caution dominates results

Brexit caution in the UK, deadline for PPI and Mrs May’s plans for industry. 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 Tuesday,

- Secrets and agents.

- Ten fun facts about the European stress tests.

- Why again is the IMF pushing fiscal consolidation in the eurozone?

- “Finally, households with the most negative wealth are characterized by their relatively large shares of student debt, 47 percent, and mortgage debt, 22 percent”

- “The @theranos presentation feels like a bait-and-switch. New product minilab what? I thought it was results of the Edison machine?”  Read more

FirstFT – Crude dips below $40, cancer in the crosshairs and the Armageddon museum

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US crude dropped below $40 a barrel on Monday while the global benchmark Brent hovered at three-month lows, as higher output and exports from big producer countries weighed on market sentiment. Read more

Guest post: What a UK macro-financial framework should look like as Brexit is negotiated

Peter Doyle, a former IMF staffer, advises the UK government not to delay rewriting the fiscal and macro-financial rules for the Brexit era… Read more

The BoJ’s questionable success fulfilling the demand for dollars

For the real reasons for dollar-funding pressure, look West rather than East Read more

Markets Live: Monday, 1st August, 2016

Live markets commentary from 

Markets Live is back at 11am

After a short, refreshing break, both Bryce and Murphy have made it back to FTAV HQ. So Markets Live resumes on Monday at 11am, as per usual. Never heard of ML? Click here. Read more

Discussing the BoJ’s alleged impotence…

Fine, the Japanese stock market maybe isn’t paying attention to the Bank of Japan the way it used to.

But did things have to get this mean?

From CLSA’s Benthos:

Faced with the problem of when to fire its last bullet, the Bank of Japan decided to fire half a bullet at half-cock. Now, speculators will be free to take liberties, fortified by the knowledge that the BoJ has only enough powder left to miss the mark one more time. The yen surged derisively. Governor Haruhiko Kuroda warned he has ample room to extend bankkiller Nirp. Three years after saying he’d achieve 2% inflation in two years, he said he would achieve 2% inflation in two years. It seems the BoJ has entered the Age of Impotence.

 Read more

FT Opening Quote: GSK and Alphabet to develop bioelectronics

GSK and Alphabet team up, a week of post-Brexit results and BOE expected to cut rates. 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,

- Brexit, VoxEU eBook edition.

- From a cautiously optimistic Gavyn Davies: “The probability of a global recession within 12 months in all of the major regions has now plummeted to almost zero, while the probability of “strong expansion” has risen to above 50 per cent.”

- Really thorough Nordhaus review of Robort Gordon’s growth (slowdown) opus. And Bill Gates has a go.

- Elizabeth Holmes (Theranos) to face 1000 scientists… Read more