Posts from Wednesday Jul 25 2012

The Closer


Investors remained wary as stocks vacillated between positive Euro bank news and missed earnings from Apple. The S&P 500 finished the day down 0.03%. However, the Euro made up some of its losses, finishing up 0.5 per cent to $1.2127 (Financial Times). Read more

An early FOMC preview: the menu of options

You can consider this a preview of both next week’s meeting and the one in September, as various reports have indicated that he Fed may wish to wait for more economic data before deciding what to do next.

As usual we won’t play the percentages; instead we’ll just run through the possibilities and list a few of the potential complicating factors involved with each of them. Read more

Risk premium or deflation charge?

FT contributing blogger Gavyn Davies recently wrote about the impact of what he called a disaster risk premia on bond yields — something the FT’s Gillian Tett has also followed up on here.

In both cases, the authors suggest that bond yields have disconnected from credit derivative valuations — not because the derivatives are incorrectly priced, but because bonds now feature an embedded risk premium. Goodbye risk-free. Read more

Sandy Weill regurgitates 13-year old cake

Said Wall Street legend’s barfage took place on CNBC:

“What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail,”

 Read more

US Markets Live transcript 25 Jul 2012

Live markets commentary from 

Reminder: US Markets Live at 10am New York, 3pm London

Just a reminder that after a few weeks of bouncing around from one time slot to another, we’re back to our normal starting time of 10am EST. On the menu for today is a roundup of earnings: Apple, Caterpillar, AT&T, and a few others. Plus we’ll have a preview of next week’s FOMC meeting and the latest out of Europe.

At the usual place, see you there!

France is a lot like Greece − or is it, really?

Is France facing a future Greece-style debt crisis? Er, maybe — so long as you ignore the difference in their government bond yields and just use debt-to-GDP projections made in a working paper from 2010. But we’ll get to that later. For now, it’s over to John Mauldin of Mauldin Economics in his weekly newsletter who’s going to tell us why France is a ticking time bomb run for your lives:

Don’t look now, but the lion that lies hidden in the grass is France. Yes, the France that is supposedly a big part of the solution to eurozone woes and Germany’s stalwart partner in guaranteeing all that debt. AAA France. Rated that way by the same people who turned the nuclear waste of subprime CDO squareds, composed 100% of the worst sort of BBB junk, into gold. Read more

The reverb from Shanghai rebar

Shanghai rebar, the most-traded steel futures contract, hit a 2012 low last week and is showing little sign of letting up. Are iron ore prices — already bumping around near the $120/tonne floor — about to follow rebar?

Nomura says, probably: Read more

UK GDP: uh oh, edition (with added Gilt weirdness)

Hysteresis indeed (click through the pic for the full report):

 Read more

Markets Live transcript 25 Jul 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning New York…


For a few dollars more in China

A while ago, we dared to suggest that a new trend was emerging in China’s foreign exchange operations. Instead of being a net buyer of foreign currencies from the market — and conducting monetary policy operations in line with that position — the Chinese state was becoming a net seller of foreign currencies onto the market, and adapting its monetary policy accordingly.

A natural outcome of there not being enough foreign currency inflow into the country. But also of yuan outflows, and fears that the yuan may depreciate more generally. Read more

Further reading

Elsewhere on Wednesday,

– Does Europe even have a panic buttonRead more

The 6am Cut London

Apple shares fell 6% in after-hours trading after its 3Q earnings missed consensus forecasts. Apple’s revenues of $35bn compared with analysts’ estimates of around $37.2bn, while earnings of $9.32 per share were also below forecasts of about $10.32. The company blamed global economic conditions particularly in Europe, and delayed purchases as customers awaited a new iPhone model. Sales in Asia-Pacific were 22% lower, quarter-on-quarter. Apple also warned its new product mix would result in lower margins, which is believed by some to refer to plans for a cheaper tablet (Reuters, Financial Times).

BoE was worried about JP Morgan’s CIO : “In late 2010, employees at the central bank worried that the London arm of JPMorgan’s Chief Investment Office had come to dominate some important corners of the city’s financial markets […] and they were concerned about the potential impact that could have on the stability of U.K. markets, these people said.” However the central bank didn’t formally notify other regulators. (Wall Street JournalRead more