Posts from Thursday Jul 12 2012

The Closer


The FT’s markets round-up: “Investors favoured top-tier government bonds over equities, sending the FTSE All-World equity index down by 1 per cent, in tandem with a drop in most European and Asian bourses. On Wall Street, the S&P 500 index pared some of its initial losses but still closed the session 0.5 per cent lower. The broad measure of US stocks lose more than 2.5 per cent over six days. In contrast, money moved into top government bonds, with the yield on the 10-year US note contracting by 3 basis points to 1.48 per cent, just 4bp above its record low. German Bund yields were also down 4bp to 1.25 per cent.” (Financial TimesRead more

QE3, the market functioning fear factor

I guess I would add to that, though, that, you know, each of these nonstandard programs does have various costs and risks associated with it with respect to market functioning, with respect to financial stability, with respect to the exit process, and so I don’t think they should be launched lightly. I think there should be some conviction that they’re needed, but if we do come to that conviction, then we’ll take those additional steps.

— Ben Bernanke on further unconventional Fed measures, at June’s FOMC presser. (Page 8 here, in response to Binyamin Appelbaum’s question.) Read more

It’s hotter in Karlsruhe than you think

Admittedly the words Karlsruhe and German and constitutional court lack any sex factor, but the relative lack of attention the case is getting seems a bit odd to us given what’s at stake. We’d expect the markets to be just a bit more het up about it.

So would Martin Lueck, an economist at UBS, who argues in his latest note that too many investors don’t understand the situation and are just assuming that the court will yield to the markets’/politicians’ pressure and let ratification of the ESM and fiscal compact pass: Read more

Accruing an old lady

The UK’s Office for Budget Responsibility is in desperate need of a graphic designer…

 Read more

Some more big scary Libor risk numbers to digest

It’s been a little while since we had a nice Libor risk estimate so we were delighted when Morgan Stanley’s attempt dropped into our inbox. MS take the Libor risk in three chunks:

1) Regulatory fines (an estimated median 7 to 12 per cent hit to 2012 EPS). From MS (all with our emphasis): Read more

Another ECB muddle (updated)

*ECB Overnight Deposits Plunge At Zero Interest
*ECB Says Overnight Deposits Fall to Lowest in Seven Months (1)

Apparent hopes that the ECB’s decision to reduce the rate paid on funds in its deposit facility from 0.25 per cent to zero will magically move money from hoarding banks to the real economy feel premature. Read more

Markets Live transcript 12 Jul 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning New York…


Of baby steps and EBA bank recaps

Right, we don’t want to get too “milk and cookies” about this but we have just one or two points to make about the European Banking Authority’s update on its bank recap exercise released on Wednesday. Some detail from the FT (with our emphasis):

European regulators have hailed their exercise to force the continent’s banks to buttress themselves with fresh capital as a resounding success, revealing 27 banks deemed to have a capital shortfall of €76bn last autumn raised a combined €94.4bn by the end of June deadline… Read more

China as a post-capital economy

By now everyone should be familiar with the argument against China.

We’re talking gaping spare capacity, a real-estate bubble, an import slowdown, short-term dollar shortage, horrible manufacturing stats, commodities over-exposure and well, just see this interview with Jim Chanos for more on how nobody in China earns their cost of capital. Read more

Further reading

Elsewhere on Thursday,

– Will regulators get it right on the Volcker Rule? Read more

The 6am Cut London

Asian stocks fell for a sixth day on news of an unexpected interest-rate cut in South Korea, worse-than- estimated Australian jobs data, adding to negative sentiment about the Fed minutes which showed little sign of aggressive easing plans. The MSCI Asia-Pacific index fell 1 per cent and the won and the Australian dollar both weakened. Markets are also awaiting Chinese GDP data on Friday. (Bloomberg, Financial Times)

South Korea’s central bank lowered the benchmark seven-day repurchase rate by a quarter percentage point to 3%, the first cut since February 2009. (BloombergRead more