Posts from Tuesday Apr 10 2012

The Closer

ROUND-UP

The S&P 500 followed global equity markets down, falling 1.71 per cent on the day as Spanish and Italian sovereign bonds sold off while yields on US Treasuries and German bunds plummeted. (Financial Times) This is the S&P’s fifth consecutive down day, the longest such stretch since last November. (BloombergRead more

One cheer for slower earnings growth…

Official earnings season in the US will kick off with Alcoa after the close of trading on Tuesday, and here’s one item that economy-watchers will be minding as companies report in the coming weeks.

First from RBC: Read more

A modern defenestration

We can’t ignore the (extraordinary) latest on the fall of Bo Xilai. Probably nobody who follows China as a market can, we suppose.

The Xinhua story on the arrest of Bo’s wife speaks for itself… Read more

Kiwi inflows bearing fruit

Large currency moves are generally easy enough to apply a reifyingly simplistic narrative to figure out.

Japanese yen having a bad year? That’s the Bank of Japan’s fault. Read more

Eurotrashing, again

Serious equity grief in Milan, where the FTSE MIB fell 5 per cent late afternoon on Tuesday…

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JP Morgan’s giant unwitting catalyst trade

For those new to the story, Bloomberg and WSJ reported on Friday that a handful of hedge funds and dealers claimed that a trader in JP Morgan’s Chief Investment Office has been selling so much protection on the Markit CDX.NA.IG.9 credit index that it was “distorting” the market — making the index too cheap.

While FT Alphaville thinks that a lot of this is getting way overblown, the story is performing a few useful useful functions. Namely, it’s: Read more

These are the voyages of the JP Morgan CIO

Bruno Iksil — a.k.a Voldemort — coverage at Bloomberg is getting a tad, should we say, compulsive.

The latest follow up sees the news agency trawling through the LinkedIn profiles of JP Morgan’s Chief Investment Office employees in an attempt to figure out exactly what the office does. Is it prop trading? Is it hedging? Or is it possibly funding? You can almost hear the collective Bloomberg brain chiming: “Cannot compute. Cannot compute. How can one guy hold a $100bn position? Why have we never heard of the Chief Investment Office before?”  Read more

Behind the (yield) curve (updated)

From the FSA (who else?). Emphasis ours.

Independent research recommends projection rates are revised downwards Read more

Masochism

And yes — broken transmission mechanism on display here. Still. Read more

Collateral withdrawal symptoms

The Spanish bonds mini-crisis continues this week, so we thought we’d mention an excellent note penned by JPMorgan’s Flows & Liquidity team last week.

It touches on this theme of Spanish banks being less able to manoeuvre their balance sheets into more purchases of government debt. And on other oddities related to ECB liquidity ops… Read more

The SNB as victim of a decentralised market structure

Thomas J. Jordan, vice chairman of the governing board of the Swiss National Bank, has made some interesting comments about last week’s sub 1.20 Swiss franc trade against the euro:

What precisely occurred last Thursday? Within just a few seconds, the euro/Swiss franc exchange rate fell from 1.2020 to 1.2000. Despite SNB offers placed in the trading systems, a few isolated transactions occurred below CHF 1.20 per euro. However, at no time did the best available euro exchange rate in the market fall below the minimum exchange rate of CHF 1.20. Thus, for a short time, what is known as a segmented market could be observed, in which transactions below the best price were concluded. This situation was remedied within very few seconds, however, by means of arbitrage. Read more

Revenge of the loan officer

In the first post of his series for FT Alphaville, Deux Ex Macchiato writer David Murphy introduces us to credit valuation adjustments (CVA) by providing some historical perspective. More on David and his background beneath the post.

Whenever you are promised cash in the future by someone who might not pay you back, you have credit risk. In derivatives trading, situations often arise where someone might owe you money in the future, perhaps because you have purchased an option from them, or because a coupon on a swap goes your way rather than theirs. This means that derivatives trading often includes taking some credit risk, along with the more obvious market risks. Read more

Markets Live transcript 10 Apr 2012

Live markets commentary from FT.com 

The (early) Lunch Wrap

Good morning, New York

FT ALPHAVILLE Read more

Unseasonal seasonally-adjusted data: energy edition

When is seasonally-adjusted not seasonal?

The first three months of the year were the warmest on record for the contiguous US, says NOAA (via Menzie Chinn). Read more

An Apple a day crowds the market

Dean Curnutt at Macro Risk Advisors believes the following is anything but a healthy sign for the market:

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Bernanke and the MMFs

Ben Bernanke gave a speech on Monday night about fostering financial stability, which featured a lot about the risks of shadow banking.

From the prepared speech notes, Bernanke lists the reforms around shadow banking that are under way — but “still at very early stages”. One of those is of course money market funds, to which he gives strong support: Read more

China rebooted: back to net exports

China’s swing back to a narrow trade surplus for March apparently took everyone by surprise on Tuesday. And just a day after the inflation figures had left everyone gloomy about the prospect for further easing too.

So, China’s back to being a net exporter, and the world’s on the right track… right? Read more

Get Carnwath!

Carnwath who?, you might ask.  In the absence of a Wikipedia entry, we’ll have to use the Barclays guff:

Alison worked in investment banking and corporate finance for 20 years from 1980 to 2000, before pursuing a portfolio career. During her career, Alison became the first female Director of J. Henry Schroder Wagg & Co, where she worked for 10 years. Alison also held the positions of a Senior Partner of Phoenix Securities and Managing Director, New York at Donaldson, Lufkin & Jenrette. Read more

Further reading

Elsewhere on Tuesday,

- Is the ‘London Whale’ (aka Voldemort) hedging DVA on JP Morgan’s bonds? Read more

The 6am Cut London

- China’s March trade data came in much better than forecast, with the country recording a surprise surplus of $5.35bn. Exports grew 8.9% compared to consensus forecasts of 7.2%, while imports grew 5.3% compared to consensus forecasts of 9%. (Reuters)

- Sony will announce 10,000 job cuts in a strategic briefing on Thursday by new chief executive, Kazuo Hirai. About half are expected to come from the unprofitable TV division. (Financial TimesRead more

Overnight markets: Mixed

Asian stock markets swung between gains and losses as news of China’s unexpected trade surplus and the BoJ’s decision to keep monetary policy on hold were absorbed, says Bloomberg. Japanese carmakers advanced after Nomura said a weaker yen would help Toyota, while energy stocks fell on lower crude prices. Earlier, US stocks continued to perform poorly and Treasuries rose on Friday’s weak employment data, says the FT.

Asian markets
Nikkei 225 up +37.66 (+0.39%) at 9,584
Topix up +2.53 (+0.31%) at 816.22
Hang Seng down -227.89 (-1.11%) at 20,365 Read more