Posts from Thursday Aug 16 2012

The Closer


Markets round up: Euro stocks rallied today as fears about the Eurozone and US economies quelled. The FTSE 100 closed up 0.03 per cent. The S&P 500 closed up 0.71 per cent. In further news, US Treasuries rose to their highest levels since May, with 10-year notes closing at 1.84 per cent. Read more

Spreads and that damn seniority

Here’s an interesting exercise in eurozone sovereign credit, courtesy of Francesco Garzarelli of Goldman — click charts to enlarge:

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10-year yield back to levels not seen since… May

That’s the US 10-year yielding a tad above 1.85 per cent at pixel time, moving in line with swings in global equity markets today. Perhaps reflecting a decreasing possibility of QE3 as the frontrunners pull out, or more simply just a reaction to better economic news of late. Who the devil knows — it’s August. Read more

Uncertain uncertainty effects and the fiscal cliff

Recently we’ve come across a few stories making the case that the looming fiscal cliff is already having an impact on the US economy, as companies are reluctant to invest given the possibility of severe fiscal contraction at the start of next year.

We began writing about the fiscal cliff last November (before it had the name, and we certainly weren’t the first). The outcome is still undetermined — and all indications are that it won’t be decided until after the election. It therefore seems reasonable to think that companies are pricing in some probability of a failure by the two parties to arrive at a deal before the end of 2012. Maybe they are. Read more

Distributing Spain’s bank bailout funds

Bloomberg reported on Thursday that the first €30bn of Spain’s bank bailout fund is “imminently” going to be making its way to Bankia.

Why? Read more

Statements of the obvious, and Facebook

Google spits out about 1,690,000 search results for “facebook lock up expiry”.

It’s not exactly been a state secret that early investors in Facebook could start selling their stakes from today, when 271m shares lurch down the slipway. You could say the share price had been trying to price in this supply in recent days. Another 1.6bn shares will exit lock-up periods from now to early next year. It’s all known about, surely. Read more

A muted Vix

Once again the financial world is a bit mystified about the performance of the Vix.

How can it be that the Vix index is trading at five-year lows when expectations are anything but bullish? Note, for example, the below chart via Also Sprach Analyst: Read more

How to export to look less peripheral, by Ireland

It feels increasingly weird to include Ireland in “the periphery”. It’s obviously not in “the core” or even “the soft core” because we’re pretty sure a country can’t belong to either of those clubs if it’s been on the receiving end of a bailout just two years ago and has had to take extreme evasive action to prevent almost its entire financial sector from imploding. And yet, Ireland looks impressive for a peripheral by some measures:

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Still waiting for an iron ore price floor

We looked at both steel production and iron ore prices a few times last month, because it became clear that they were not adhering to the “$120/tonne price floor” theory that has been widely accepted for the past couple of years. And… they’re still not.

Nomura’s Matthew Cross and Ivan Lee have produced this chart to underline their argument that one should look to steel profits rather than the iron ore cost curve to predict near-term iron ore prices moves. Which we’d characterise as: it’s problematic to look only at the supply-side in forecasting commodities prices. Read more

The (early) Lunch Wrap

Good morning New York…


This economic twilight zone

This summer hasn’t been entirely quiet. There were the Olympic Games, for example. And, errr, also economists have been having a busy time — revising their growth forecasts downward as they fret about whether recoveries around the globe are in any way sustainable.

Here’s a table from Morgan Stanley’s economics team, showing what busy bees they’ve been: Read more

Further reading

Elsewhere on Thursday,

A history of European debt issuance. Read more

Awaiting an African Barrick endgame [update] (update II)

Update (8:20am BST): it seems the usually-reliable sources were mostly reliable in this case, though there remains some uncertainty over whether they can tell one Chinese gold company from another.

Barrick Gold statementRead more

The 6am Cut London

Seven of the world’s largest banks are facing fresh scrutiny over Libor from a powerful US state prosecutor. Eric Schneiderman, New York attorney-general, has sent subpoenas to Deutsche Bank, Citigroup, JPMorgan Chase, Royal Bank of Scotland, Barclays, HSBC and UBS in the latest probe into banks’ setting of the London Interbank Offered Rate, according to people familiar with the matter and regulatory filings. What may set this probe apart from others being carried out into Libor around the world is Mr Schneiderman’s ability to use the Martin Act, a 1921 New York law which allows him to investigate anyone doing business in New York and to bring cases without having to show that the accused intended to commit fraud (Financial Times).

Brazil is planning a R$133bn ($65.6bn) stimulus package to spur investment in the country’s infrastructure and shore up ailing investor confidence in the world’s second-largest emerging market economy. President Dilma Rousseff announced the government would sell concessions in nine highways and 12 railways before moving onto other areas of infrastructure. The economy expanded 7.5% in 2010, the fastest pace in more than two decades, but last year slowed to 2.7% and this year is expected to grow 2% or less. Inadequate infrastructure and a skills shortage have been blamed for the rapidly slowing growth (Financial Times). Read more