Spanish funding fears depressed US stocks. Spain’s two-year bond yields rose by the most in one day since the beginning of the eurozone crisis (Financial Times). The Dow Jones Industrial Average recovered from a 239 point plunge at markets’ open, but still closed down 101 points at 12721.46 (Wall Street Journal). Read more
Finland is a rare stable Aaa-rated credit in the eurozone, according to the ratings agency, which placed Germany, the Netherlands and Luxembourg on a negative outlook.
Possible contingent liabilities from rescuing Spain and/or Italy loomed large. Read more
China buys two North Sea oil fields on the same day. Coincidence — or a sign of change coming to the oil market’s biggest benchmark?
In addition to Sinopec’s $1.5bn acquisition of a stake in Talisman… Cnooc’s $15bn play for Canada’s Nexen (at a 61 per cent premium to the share price!) might give the state offshore oil company a major bridgehead into the setting of the Brent crude price. Read more
It’s not just excessive investment, particularly the fixed-asset sort, that’s a problem in China. It’s the wrong kind of investment that is the issue — projects that are simply uneconomic.
Exhibit 1: a somewhat ambitious airport-building programme, which is vexxing Gordon Chang: Read more
With Spain holding €44bn in reserves as of April and its borrowing costs soaring we thought a quick look at what it has coming down the tracks might be fun:
(In the interest of chart clarity we ignored any relatively tiddly, below €1bn, interest only payments. The above chart, and the one below, are sourced from Bloomberg.) Read more
Credit default swaps also want in on the “Spain’s [insert financial instrument] reach record highs” headlines. And they got their way on Monday morning:
Live markets commentary from FT.com
The FT’s Greg Meyer had a great piece out last week about the negative impact micro yields are having on the broker sector.
For a long time, the broker-dealer model has depended on the ability to reinvest customer funds to earn additional revenue. But in a zero-yield world that source of revenue is becoming constricted. Read more
That’s Germany at the bottom, Italy in the middle and Spain going basically flat from 3-year out (click to enlarge):
That’s Spanish 10-year bond yields hitting a new euro-era high of 7.434 per cent at pixel time according to Bloomberg data. Even more worryingly, Spanish short term borrowing costs continued to kick-up, with the 2-year composite yield touching 6.2 per cent as just about every tenor climbed. Read more
Elsewhere on Monday,
– The ECB wields a LOT of power in Europe. Read more
Fed FOMC voting member John Williams says that unless “further action” is taken, there would be a lack of progress in boosting the jobs market, and talked of the benefits of buying MBS rather than Treasuries, and of an ‘open-ended” QE programme that would reduce speculation around the exit. But he declined to call directly for a Fed move. Williams, chairman of the Federal Reserve Bank of San Francisco, is regarded as close to the centre of gravity on the rate-setting FOMC (Financial Times).
UK stock market intermediation should be trimmed, a government-sponsored review into equities published today will say. The year-long review by economist and FT columnist John Kay says the complex chain – including fund managers, companies, pension trustees, investment consultants and independent financial advisers – increases costs and undermines efficiency. (Financial Times) Read more
Weekend headlines from the FT and other UK media:*
From The FT, Read more