Posts from Tuesday Sep 4 2012

The Closer


FT markets round-up: “The S&P 500 on Wall Street returned from the Labor day holiday to register a decline of 0.1 per cent, weighing on European markets, where the FTSE Eurofirst 300 fell more than 1 per cent. When an earlier 0.4 per cent retreat for the Asia-Pacific region is added – led by a 0.8 per cent loss for Shanghai – this left the FTSE All-World index in the red 0.5 per cent. Commodities were muddled, with copper up 0.3 per cent to $3.47 a pound but Brent crude was off 1.3 per cent to $114.18 a barrel. Meanwhile fixed income “havens” were under pressure, pushing Treasury yields up 3 basis points to 1.57 per cent, suggesting pockets of risk appetite remain. Some stock market bulls may have expected a different reaction from news that the US ISM manufacturing survey had come in weaker than expected at 49.6.” (Financial TimesRead more

When lending standards don’t interfere, car sales edition

The August US light vehicle sales numbers from Autodata were released earlier this afternoon, beating expectations:

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Spain’s funding costs post a Draghi-ing

So, we are days from finding out what the ECB is planning to do… or at least, days away from knowing more than we do now.

But immediate largesse in the bond market isn’t the only bit of help that should be concentrated on. There is still Spain’s bank-bailout to consider and where its costs should ultimately lieRead more

Jim Reid’s journey into the unknown

One of the small mercies of the financial crisis is that Ben Bernanke’s years of studying of the Great Depression have not gone entirely to waste.

But, as Deutsche Bank’s Jim Reid, Nick Burns and Stephen Stakhiv note in the bank’s latest annual long term asset return study, we may be reaching the limits of what past lessons can tell us about the present: Read more

UK services pop (out early)

It was a PMI surprise, with UK service sector data appearing from Markit Group just before the close of trading in London on Tuesday.

It shouldn’t have happened. The original release was scheduled for Wednesday at 09.30am, but due to a Reuters Instant View error the number was outed on Tuesday at 1600. Read more

Greek tax evasion, mapped and crunched

Click to enlarge.

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The soybean, the bushel and the ethanol mandate

The performance of the Soybean future since the 1990s:

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Are we approaching the edge of a steel cliff?

Has the pain really started for those suppliers for whom China’s steel mills are the big growth prospect? Iron ore prices have plunged in the last few weeks, but they are still at historically strong levels and well above those of 2009.

The breaking of the iron ore cost curve suggests that the marginal iron ore producers (who are mostly Chinese) have either dropped out or are making some kind of centrally-commanded loss. But the signs of steel downturn-related suffering outside of China are so far mostly limited to Vale’s ill-timed super-giant Valemax ships, and Fortescue Metals Group, with its combination of large debt burden and high breakeven point relative to its Australian peers. Read more

Financial fragmentation in many parts

We are having a financial fragmentation heavy Tuesday so far — not surprising really considering it is one of the things that may allow Draghi-day to meet market hopes.

From the FT earlier: Read more

Markets Live transcript 4 Sep 2012

Live markets commentary from 

Towards a steady-state economy?

An ever larger number of voices (FT Alphaville included) are exploring alternative theories to explain our current crisis, many of which focus on the role of technology, productivity and sustainability.

One conclusion is that society (or at least one part of it) is finally experiencing what has long been theorised about as the steady-state economy. Read more

The (early) Lunch Wrap

Good morning New York…


Euroisation and de-euroisation in one handy chart

The unravelling of the eurozone’s financial integration is continuing apace. New data on divergent lending rates between core and peripherals countries showing how re-alignment of banking along national boundaries has contributed to the European Central Bank losing control of the interest rate mechanism.

Noting that convertibility premia is now a declared motivation for the ECB’s expected new bond-buying programme, JP Morgan’s Flows & Liquidity team have compiled a composite Eurozone disintegration measure: Read more

Further reading

Elsewhere on Tuesday,

- Why we can’t grow ourselves out of this crisis. Read more

Moody’s: EU outlook moved to negative

The rationale here is pretty rational.  From the rating agency’s statement on Tuesday…

The negative outlook on the EU’s long-term ratings reflects the negative outlook on the Aaa ratings of the member states with large contributions to the EU budget: Germany, France, the UK and the Netherlands, which together account for around 45% of the EU’s budget revenue. The creditworthiness of these member states is highly correlated, as they are all exposed, albeit to varying degrees, to the euro area debt crisis. Read more

The 6am Cut London

Eurozone lending rate divergence grows: Interest rates paid by companies in the eurozone’s weaker economies have surged, highlighting the bloc’s fragmentation as the ECB loses control of borrowing costs. ECB data on Monday showed Spanish small businesses face the highest bank borrowing costs in almost four years – while interest rates paid by German rivals are at record lows. (Financial Times) A last minute round of shuttle diplomacy is underway ahead of Mario Draghi’s announcement on Thursday, with EU president Herman Van Rompuy traveling to Berlin for talks with Angela Merkel today and Mario Monti welcoming Francois Hollande to Rome. (Bloomberg)

Montreal-based Valeant Pharmaceuticals has agreed to buy Medicis Pharmaceutical for $2.6bn. Valeant will pay $44 a share for Medicis, which is a 39% premium to the company’s shares as of Friday’s close, the company said Monday. (Wall Street JournalRead more

Fortescue and the Wile E. Coyote moment for the A$

And so Fortescue Metals Group, poster child for the Australian resources boom, has bowed to the inevitable and scaled back its heroic expansion plan.

Or as the heavily indebted company prefers to spin it; Takes decisive action on iron ore market volatility. Read more