The FT’s markets round-up: “After falling sharply following Mr Bernanke’s testimony, US equities recovered to close higher on the day supported by a couple of well-received US corporate earnings. A survey that showed US homebuilder confidence surged in July by the most in nearly a decade has also helped lift the S&P 500 up 0.7 per cent. The FTSE All-World equity index gained 0.6 per cent after and advance in the Asia-Pacific region. The FTSE Eurofirst 300 meanwhile slid 0.2 per cent. The euro closed the session slightly higher at $1.2286 after briefly trading below $1.22.” (Financial Times) Read more
Last week we posted a note from Morgan Stanley analysts, who tried to guess at the final ultimate cost of the Libor scandal to banks – a combination of expected regulatory fines, litigation outcomes, and the business uncertainty caused by the mess.
A note from Nomura, which we’ve just posted in the usual place, arrives at a more open-ended conclusion while doing the kind of Libor vs Libor-proxy comparison that we’ve come across now and again (in this case the proxy was the Federal funds effective rate plus each bank’s one-year CDS). Read more
Spain’s banks really are providing Finland’s collateral for the EFSF/ESM bailout of Spain’s (weaker) banks.
The Finnish finance minister announced a deal on Tuesday. Here’s the presentation (in Finnish, hat-tip Aleksi Moisio) Read more
Caption if you wish. On the Libor front — asked if it’s reliable… Bernanke told senators that “I can’t give that assurance with full confidence”. (Testimony here)
Tack this onto the list of recent signs (see also here) that US housing has bottomed and started to recover…
Builder confidence in the market for newly built, single-family homes rose six points to 35 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July, released today. This is the largest one-month gain recorded by the index in nearly a decade, and brings the HMI to its highest point since March of 2007. Read more
UPDATE: Libor question right off the bat, and it’s clear that Bernanke was prepped for it. He said that the issue is “troubling” and that Libor is structurally flawed, but it was then complicated because there was no interbank lending going on at the time. He also said that members of the NY Fed informed all the relevant agencies in the US and UK of what was going on. The NY Fed also developed recommendations for suggested changes and communicated them with the Bank of England and the BBA. He also said that the Board of Governors was providing analytic support, and added that there was “rapid followup” by the other agencies such as the CFTC.
Click here for the live feed via C-Span, or try this link from the Senate. Robin Harding already has an article up on the prepared testimony — short version: not very revealing. Read more
Some suggestions on how to improve Libor…
The first is from the Economist, which compares Libor with the problems facing an art gallery or museum — price discovery in many markets is a tricky process. Read more
The slowing growth in China’s electricity output and consumption has been drawing a lot of attention the past few months. Production in June growth was flat, year-on-year, prompting many questions as to how Q2 GDP managed to grow at 7.6 per cent.
China’s electricity production and consumption data are watched because they are thought to give a more accurate picture of growth than GDP. Read more
Some emails between Paul Tucker and Bob Diamond courtesy of John Mann MP. Not as explosive as billed but there is a Libor-headed email to Bob that makes reference to HSBC, RBS “Stuart”, “Johnny” and Mark Dearlove from May 2008.
Click through the pics for the full docs (although there ain’t that much more): Read more
Live markets commentary from FT.com
We have Sir Mervyn King, Governor; Paul Tucker, Deputy Governor; Donald Kohn and Lord Turner, Members of the Interim Financial Policy Committee, Bank of England.
At pixel time this was going on… Read more
HSBC came in for a kicking in the Senate Subcommittee on Investigations into anti-money laundering and exposure of the US financial system to drug and terrorism financing.
Some of this is old news; as the FT notes, HSBC has not been formally accused of wrongdoing in connection with the most recent investigation, but it has twice been ordered by US regulators to take action on deficient anti-money laundering practices. However investigation by the US Department of Justice, the US Treasury and the Manhattan district attorney, is under way into many of the allegations raised in the Senate report, and some analysts expect fines of up to $1bn to result. Read more
Elsewhere on Tuesday,
- On the curious persistence of inflationary obsession. Read more
US Senate investigators came down hard on HSBC in a report into the bank’s involvement in illicit money flows. HSBC ignored internal warnings, flouted rules related to US sanction enforcement and waved anti-money laundering requirements for wealthy clients, the report says. A ”pervasively polluted” culture allowed the bank to faciliate clients involved in money laundering. (Financial Times)(Reuters)
Goldman Sachs is”building an in-house bank to lend money to wealthy people and companies”. (Wall Street Journal) Read more