Posts from Thursday May 3 2012

The Closer


US stocks closed down, with the Dow Jones Industrial Average knocked off its four-year high, after a recent bout of disappointing data. This has been reflected in the Citigroup Economic Surprise Index which is at its lowest since September, with a reading of -24.20. It was also reported that the service sector grew at a slower than expected pace in April (Bloomberg). Initial jobless claims provided a bright spot, however, falling more than expected and clocking up the largest week-on-week drop for nearly a year (Reuters). Read more

We refuse to waste a witty headline on Facebook’s S-1

1) It’s a punchy IPO pricing range.

2) Ooh look at the insider seller amounts. Read more

Killing VaR

Hopefully that headline gets your attention for the Basel Committee on Banking Supervision’s latest review of capital rules for banks’ trading books.

There is a lot in it — the Committee has been tinkering with trading books since the crisis exposed serious mismatches between the capital that banks’ models said they needed for trading structured credit, and the losses they ended up experiencing. In fact this review follows up on the 2009 rule-set dubbed ‘Basel 2.5’. Read more

The Sage (or not) of Abbottabad

Is it permitted to invest funds in the stock market, buying and selling shares, for the goal of supporting jihad, or investing some donation-derived funds in stock markets and shares?

The judgment upon this also depends upon the circumstances and regulations of these stock markets. I know nothing of the circumstance and regulations of these stock markets which would qualify me to speak about them. The methods of selling in (TN: the stock markets) have many complications, and are full of tricks, and I have no ability in this. May God strengthen us and you. Read more

Basel III bunfight: Is this the beginning of the end?

On Wednesday, as FT Alphaville has already illustrated, European finance ministers failed to agree legislation that would enshrine Basel III bank capital rules into law. This despite all those involved having already agreed in principle to Basel III back in 2010.

So why the failure to agree? Read more

Greek elections: Be afraid, be very afraid

Greece goes to the polls this weekend. And it looks like it’s going to be messy. The potential for the “wrong” result to wreak havoc in the markets on Monday morning is real.

The outcome is very difficult to predict due to the incredible fragmentation of political support within the country and the rise of marginal parties. Many of these are deeply opposed to the austerity measures, the euro and the EU/IMF programme. As a result, mainstream parties have been dragged away from the centre. Read more

Cooking (CDOs) with SocGen

ETFs, unregulated banks in disguise

If one article sums up how ETFs have come to change the market structure of the equity universe, it’s this one from Paul Amery at Index Universe on Thursday.

As he recounts, the thing that really worries regulators is the role ETFs play in the shadow banking world today. To what degree do their security deposits fund banks, and what sorts of maturity transformation is going on behind the scenes? Also, to what degree do ETF providers fulfil a credit intermediation role by transferring capital and liquidity from savers to borrowers, even when most ETF investors are unaware of the fact that their “deposits” may not be fully capitalised at all times? Read more

Five eurozone futures, from Fitch

From Fitch’s latest report on eurozone endgames, and their sovereign credit ratings implications (click to enlarge):

 Read more

Faith in the “Anglo-Saxon” model, charted

This is from Morgan Stanley’s Joachim Fels and Elga Bartsch:

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The (pictorial) European bank capital rules deathmatch

It went on so long even the translators gave up — there was sure some mud-slinging going on in Brussels on Wednesday as European finance ministers met to try to agree legislation to implement Basel III rules on bank capital.

One could be forgiven for wondering how this is even still a debate at all. Read more

You call that a credit bubble? This is a credit bubble!

The famous (implied) last words of Crocodile Edwards — a.k.a SocGen uber bear, Albert Edwards — this Thursday.

Following in the foot steps of colleague Dylan Grice’s episode of Australia bashing the other week, Edwards calls the situation plain: Read more

Look, quickly, some not disastrous eurozone auctions!

Both Spain and France managed to get decent debt sales away this morning and although yields did jump in Spain there was at least some solid demand to provide solace. Not bad considering it was Spain’s first auction since the country’s rating got cut by S&P last week. The steady demand will also provide reassurance as the ECB’s LTRO effects start to wane.

French borrowing costs actually fellInterest rates on the €1.6bn of nine-year paper sold fell from 3.29 per cent previously to 2.85 per cent while those on the €3.3bn of 10-year bonds dropped by 2 basis points to 2.96 per cent. Read more

The leading Korean export indicator

If you are fed up with trying to interpret China’s PMIs as a global indicators, try this:

Asia ex-Japan exports growth rate, by destination - Nomura Read more

Markets Live transcript 3 May 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning New York…


ECB meeting preview, door likely to be left ajar

The European Central Bank will meet on Thursday, and the broad consensus is for rates to remain on hold. After yesterday’s dismal Purchasing Manager Indices, the press conference will be watched even more closely.

A quick recap of those PMI numbers, courtesy of Jim Reid and Colin Tan at Deutsche Bank, and then onto the implications for the ECB’s rate setting. Read more

Further reading

Elsewhere on Thursday,

– What happened to the American dream? Rattner and Ferguson debate. Read more

The 6am Cut London

The BoE should have “shouted from the rooftops” about risks before the financial crisis, Bank governor Mervyn King said in a speech on Wednesday night. (Financial Times)(Bloomberg)

EU bank rules that would “make him look like an idiot” at a bad-tempered meeting of finance ministers in Brussels, the FT reports. The disagreement over British demands to toughen up the rules could scupper agreement on a 600-page law to implement the Basel III accord. Even after 15 hours of talks, European Union ministers were unable to agree in the early hours of Thursday, reports Reuters, although Denmark’s Margrethe Vestager said she hoped there would be a deal at the next meeting in Brussels on May 15. Read more

Overnight markets: Down

Asian stocks slipped with exporters retreating as disappointing data out of Europe and the US dimmed the outlook for the global economy, says the FT. The MSCI Asia Pacific excluding Japan index lost 0.4 per cent with Australia’s S&P/ASX 200 flat and South Korea’s Kospi Composite index down 0.1 per cent. Japanese markets were closed for a holiday. Hong Kong’s Hang Seng index slid 0.5 per cent while China’s Shanghai Composite index slipped 0.3 per cent.

Asian markets
Nikkei 225 up +29.30 (+0.31%) at 9,380
Topix up +3.38 (+0.43%) at 792.87
Hang Seng down -105.59 (-0.50%) at 21,203 Read more