Posts from Wednesday May 16 2012

The Closer

ROUND-UP

The S&P 500 dropped for a fourth day, its longest pace of declines for a month, closing down 0.4 per cent at 1,324.80. Bank shares led the way down (Bloomberg). Read more

Discuss among yourselves, inflation trend path comparison edition

A chart from Market Monetarist:

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FOMC minutes for April 24-25 meeting

Yes, of course, there was a lot of stuff in the minutes about recent trends in the economy and the looming fiscal cliff and inflation forecasts and so on. The word “uncertainty” was used an awful lot with respect to the various forecasts in the SEP.

But we were mostly looking for something else. As our colleague Robin Harding has been pointing out, there was a disconnect in the last meeting in the Fed’s communications. Read more

Shifting ECB liquidity to ELA, Greek bank recap edition

NOT HALTING. SHIFTING. THEN IT GOES BACK LATER.

Today was really not the best day for the ECB to signal this: Read more

Odey’s angst

At present the lights are being turned down in the markets but the good fund manager, like the good pianist, will be the one who can play in the dark.

That’s Crispin Odey getting seriously gloomy and abstract in his latest note to clients. Read more

Fiscal credibility vs democracy

Last November John Hempton wrote an amusing post arguing that Ben Bernanke’s problem was that the Fed’s credibility was too high, thus creating a liquidity trap, and to solve this Bernanke should do something crazy like appear on television wearing a Hawaiian shirt and smoking a spliff.

John Kay’s latest FT column looks at the problem of credibility, although more in a fiscal than a monetary context. As he points out, we frequently hear now that credibility is the problem besetting heavily-indebted governments. Credibility is seen as a kind of panacea but Kay points out it’s only a very recent concept in economics: not in Keynes, not in Smith, not in Marshall. It dates back to a 1979 article by Finn Kydland and Edward Prescott, he says, who won a Nobel economics award for their work on the subject. Read more

Markets Live transcript 16 May 2012

Live markets commentary from FT.com 

What price a slowing population?

Making babies is fun and good for economic growth (sexing up a lede has never been so easy). Nomura has taken a shot at calculating just how significantly population changes can hit GDP. Their conclusion is that:

[A]lthough a population decline will dent GDP growth and inflation, the degree of correlation is not that high and the negative impact may not be as large as some observers fear. Read more

Recap and tranche primer

There were small [losses] in the first quarter, but real ones that we talked about the $2 billion were all in the second quarter. And it kind of grew as the quarter went on.

That’s JPMorgan’s chief executive Jamie Dimon, in the conference call arranged after the bank’s 10-Q revealed substantial losses in a synthetic credit portfolio held by its Chief Investment Office. Read more

What happens if the Chinese government cracks down on all copper ‘financing deals’?

Goldman Sachs’ latest commodity note considers the influence of China’s bonded warehouses, chock-full of copper, on the underlying market for the metal.

First, they admit that the popularity of copper financing deals led to about 640-650kt of copper being stored in Chinese warehouses at its peak at the end of April. This, however, is now on the decline. Their latest assessment of the market puts Chinese bonded warehouse stocks at about 550-570kt. Read more

Why China’s RMB exodus IS the story

There is a huge developing story in China’s currency, the renminbi.

After years of structural under-valuation, things are changing. Read more

Markets Live transcript 16 May 2012

Live markets commentary from FT.com 

The (early) Lunch Wrap

Good morning, New York…

FT ALPHAVILLE Read more

Caption this competition

This way to the Grexit, sir…

German Chancellor Angela Merkel welcomes French President Francois Hollande at the Chancellery hours after Hollande's inauguration in Paris on May 15, 2012 in Berlin. Source: Getty Images Read more

Tis an ugly morning in euroland

The Greek fall-out continues with Spanish 10-year yields hitting 6.5 per cent, their highest level in almost six months:

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Plug-pulling in Athens

From the FT:

Athens-based bankers said withdrawals exceeded €1.2bn on Monday and Tuesday – 0.75 per cent of deposits – as President Karolos Papoulias failed in two final meetings with conservative, socialist and leftwing leaders to form a national unity government. Read more

The (hot) pasty tax strikes!

From Greggs’ trading update comes a warning that the government’s plans to add VAT tax to takeaway foods “could have a material impact on our sales and profits”, depending on the outcome of industry consultations.

We believe there is an alternative to the Government’s proposal which will remove any anomalies and make the tax much simpler for both the Government and the consumer.  We believe the solution is to see VAT charged on all food kept hot for sale in a heated environment after cooking, all food re-heated to order and all food supplied in heat-retaining packaging.  This will very clearly differentiate between fresh bakery food and food that is being sold intentionally hot. Read more

Further reading

Elsewhere on Wednesday,

- The Whale’s harpoonerRead more

The 6am Cut London

Asian shares extended losses on Wednesday after Greece failed to form a coalition government, says the FT. The MSCI Asia Pacific index shed 0.7 per cent with Japan’s Nikkei 225 Stock Exchange off 0.5 per cent, Australia’s S&P/ASX 200 down 1.3 per cent and South Korea’s Kospi Composite index 1 per cent lower. Fears over a potential Greek exit from the eurozone continued pushing German, UK and US bond yields to or near fresh record lows.

In Greece, depositors withdrew €700m from local banks on Monday alone, according to the national bank of Greece, the WSJ reports. Although this is an escalation in the pace of capital flight, it falls short of “bank run” territory. Read more

Overnight markets: Down

Raw-material producers and technology companies led declines on Wednesday as all 10 industries in MSCI Asia Pacific index slid, reports Bloomberg. The benchmark has lost 10 10% since February 29, paring its 2012 advance to 1.5%. Hong Kong’s Hang Seng Index slumped 2% and South Korea’s Kospi index sank 1.2%.

Asian markets
Nikkei 225 down -114.61 (-1.29%) at 8,786
Topix down -7.83 (-1.05%) at 739.57
Hang Seng down -528.74 (-2.66%) at 19,366 Read more