Posts from Wednesday Aug 22 2012

The Closer


Fed minutes cattle-prodded the S&P 500 out of its losses, late in the day. It closed up 0.02 per cent at 1,413.49, one day after meeting but failing to hold a four-year high (Reuters). Hewlett-Packard shares traded up 2.1 per cent after hours, on its results. Read more

The CBO and the fiscal cliff — revised

Today’s report by the CBO takes an updated look at the outlooks for the US fiscal position and economic growth through 2022. And surprise, surprise: the fiscal “cliff” Americans are heading towards at the end of 2012 would be bad news if unaverted — certainly in the near term.

In particular, GDP and unemployment figures would be hit substantially under current law (the “baseline projection,” i.e. the fiscal cliff is not averted): Read more

FOMC minutes to the July 31 / August 1 meeting

— We’ve heard a lot lately on the idea of an “open-ended” asset purchase program. Well, it seems the committee also discussed the possibility of a kind of open-ended language guidance. That’s in addition to discussing the idea of extending the date from late-2014 into 2015 or scrapping the guidance altogether and tying the start of eventual tightening to economic factors:

Participants discussed a number of policy tools that the Committee might employ if it decided to provide addi-tional monetary accommodation to support a stronger economic recovery in a context of price stability. One of the policy options discussed was an extension of the period over which the Committee expected to maintain its target range for the federal funds rate at 0 to ¼ percent. It was noted that such an extension might be particularly effective if done in conjunction with a statement indicating that a highly accommodative stance of monetary policy was likely to be maintained even as the recovery progressed. Given the uncertainty attending the economic outlook, a few participants questioned whether the conditionality of the forward guidance was sufficiently clear, and they suggested that the Committee should consider replacing the calendar date with guidance that was linked more directly to the economic factors that the Committee would consider in deciding to raise its target for the federal funds rate, or omit the forward guidance language entirely.

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In praise of debt mutualisation

Steven Major, fixed income strategist at HSBC, has a remarkably sunny note out on the prospect of unlimited bond market intervention by the ECB, driving short term sovereign yields significantly lower.

Here are his seven steps to a definitive crisis solution… Read more

US Markets Live transcript 22 Aug 2012

Live markets commentary from 

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

On today’s agenda will be the ongoing potential-takeover sagas of Best Buy and Glencore, Dell earnings, a preview of today’s FOMC minutes, the latest out of Europe, and anything else that hits the tape.

Same time, same place as usual!

Finally, the FSA goes after the bucket shops

This is long over due. (Click the image)

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Spanish and Italian bond issuance, once the holiday is over [updated]

Waiting for the eurozone crisis to properly kick off again would fill us with anxiety if we weren’t so damn used to it by now. And while partaking in the time-honoured tradition of thumb twiddling, we’ve been looking at projected debt issuance by Italy and Spain for the remainder of what promises to be a fun second half once everyone is done sunning themselves.

Chart courtesy of UBS: Read more

Markets Live transcript 22 Aug 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning New York…


BHP’s Olympic Dam plans on hold

BHP Billiton is taking a step back from its planned $20bn expansion of its Olympic Dam copper and uranium mine — as many had suspected it might.

The company wrote down $346m on its investment so far in the South Australian project. That, combined with writedowns on its North American shale gas assets, led to a 21 per cent decline in its full-year profit after tax. Read more

Fattening tails in euroland structured finance

A request for comment by Moody’s — on how to rate asset-backed securities experiencing “rapid country credit deterioration”:

(Click to enlarge) Read more

Chart du jour – Australian bank edition

Via UBS. (Click to enlarge)

 Read more

Further reading

Elsewhere on Wednesday,

– Globalisation and the income slowdownRead more

The 6am Cut London

Japan’s exports in July hit a six-month low on falling demand from Europe and China. Exports fell 8.1% year-on-year, while economists had on average been expecting only a 2.9% drop. EU exports were 25.1 % lower and exports to China — Japan’s biggest trading partner were 11.9% lower, primarily on semiconductors, electronics and car parts (Reuters).

The US Federal Reserve and the Department of Justice are investigating RBS for possible breaches of Iran sanctions in a probe that has already led to the departure of a senior risk manager. The bank volunteered information about the alleged failings 18 months ago, after discoveries made during an internal review initiated by Stephen Hester after he became CEO three years ago. RBS is not being investigated by the New York Department of Financial Services, which last week agreed a $340m settlement with Standard Chartered over Iranian transfers (Financial Times). Read more

Australia’s capex cliff

Here’s a bold call: the developed world’s fastest growing (that’s Australia for those of you at the back of the class) will fall in to recession next year as the China-driven mining investment boom ends.

Given the recent declines in Chinese steel prices and spot iron ore price, Deutsche Bank economist Adam Boyton reckons Australia’s terms of trade (the price of exportable goods divided by price of importable goods) could be 15 per cent lower year-on-year by the fourth quarter. Read more

Iron ore floor becomes iron ore trapdoor

Where will the new floor be? Iron ore is still falling below the $120/tonne mark…

Iron ore spot price - Reuters - August 22, 2012 Read more