Posts from Monday Sep 10 2012

The Closer


FT markets round-up: “Wall Street’s S&P 500 retreated from its best close since January 2008 on Friday, and ended the session 0.6 per cent lower. The benchmark index is still up more than 9 per cent from the start of June. The FTSE All-World equity index fell 0.4 per cent as the FTSE Eurofirst 300 fell 0.2 per cent. In Asia, the region’s bourses fluctuated in fairly tight ranges. That rally has come as bullish sentiment got a boost by an easing of eurozone sovereign debt tensions on hopes the European Central Bank would pledge to suppress the short-term borrowing costs of member states. The ECB last week confirmed such a position and yields on Spanish two-year bonds, which were above 7 per cent in July, and fell earlier on Monday to 2.90 per cent. The euro, which broke below $1.21 when Madrid’s borrowing costs soared, bounced back above $1.28 on Friday, a near four-month high.” (Financial TimesRead more

Sterlisation (or not) in Brazil

As the ECB’s OMT threatens to maybe start, Jonathan Wheatley over at the FT’s beyondbrics has picked up on an interesting case of sterilisation going awry.

From Wheatley: Read more

An idea better kept in reserve

Yichuan Wang had a spectacular, wonky post trying to adjudicate a debate about interest on excess reserves that I’ve been having with David Beckworth and Dan Carrol.

I’ve been meaning to write about it for a while, but unfortunately a very lengthy recap is needed first, or it won’t make sense to the new reader. The three of you already familiar with the debate should skip ahead to the next section. Read more

Breaking a sovereign-bank loop

Chart du jour from the IMF staff’s Article IV report for Ireland — forecasting the path for Irish debt to GDP if a deal is reached with the ECB to reschedule those promissory notes, and if direct ESM equity replaced bank recaps under the bailout.

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Can Asia avoid the middle-income trap?

The thesis that the Asian boom is past its best is not new, but when we come across a particularly well-argued note on the topic, we like to share.

We’ve already given you a snippet from George Magnus’ latest on the topic — with regards to the role of technology in this shift — but we’d like to present the extended argument too. Read more

Portugal having a better time of it…

That’s Portugal’s 5-year CDS back below 500bps for the first time since March 2011 (we threw in Spain and Italy too as they have tightened a fair bit and we had load of chart space). Click to enlarge, data via Markit:

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How technology is killing the Asian growth miracle

George Magnus of UBS has a 29-pager out on Monday questioning if the Asian miracle may finally be over? FT Alphaville is still poring through the details, but couldn’t wait to bring you a substantial chunk of the note which is dedicated to the role of technology and its impact on Asian market dynamics.

We’ve noted on more than one occasion that economists may be missing a trick when it comes to how technology is changing the global economy. More so, that developments like 3D printing, could even pose a black-swan risk for Asia in their own right. Read more

The growing risk of shorting China stocks

The Globe and Mail has a spectacular report on the arrest in December of a Canadian citizen, Huang Kun, in Beijing. Huang had helped compile a report into a Vancouver-based company called Silvercorp, which is listed in New York and Toronto and mines in Canada and China.

Within days he was in Luoyang, in China’s central Henan province, being interrogated by officers from the local Public Security Bureau, or PSB. The Canadian citizen has been prevented from leaving China for more than eight months, and was made to pay $32,000 in a form of unofficial bail, before being re-arrested in July. Mr. Huang’s lawyer, Wang Yuehong, believes he will be charged any day now with “disseminating false facts to impair another person’s commercial reputation,” a criminal offence that carries a maximum punishment of two years in prison. If charged, Mr. Huang’s chances of winning his argument in court are exceedingly small: conviction rates in China are above 98 per cent. Read more

Is the 2012 China stimulus some kind of unicorn?

As in, does it exist?

Wang Tao at UBS takes aim at the “Rmb1tn stimulus“; she thinks it is not really real: Read more

German domino theory and book-cooking

There are two fairly important bits to this story in Der Spiegel.

One, that Merkel wants to avoid a Grexit for the time being and two, that the upcoming Troika report might be massaged to make that a reality. Read more

Markets Live transcript 10 Sep 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning, New York…


A Rorschach test, China Q3 data edition

Another month, another round of mostly disappointing China data. Not that everyone is overwhelmed by the gloom, as some are pointing to positive indicators in property as well as increased infrastructure investment, but more on that later.

August trade data released earlier today revealed that exports were up 2.7 per cent year-on-year. This is better than July’s dire 1.0 per cent year-on-year increase but still well short of the usual China trend, as the FT explains hereRead more

‘Your money will soon multiply’

That’s one of many, oft dubious, photographic attempts to document the euro’s plight brought together by Der Spiegel. (H/T  Paweł MorskiRead more

Glasenberg: ‘You can stay on as CEO for a bit’

Final terms from Glencore in its hostile bid for Xstrata include this weird proposal:

In order to provide clarity on the issue of CEO succession, Mick Davis will become the Chief Executive Officer and executive director of the Combined Group on the Merger becoming effective but to step down within 6 months with Ivan Glasenberg becoming Chief Executive Officer of the Combined Group at that time. Read more

Further reading

Elsewhere on Monday,

- A little push-back from China… Read more

The 6am Cut London

Glencore softened terms of its offer for Xstrata, saying it would keep Sir John Bond on as chairman of the mining company as part of the revised offer and retaining the same balanced board structure as proposed in February, with equal numbers of non-executive directors from each company’s board. Xstrata, which on Friday said it needed more information to consider Mr Glasenberg’s latest plans, declined to comment on Sunday and Qatar Holding, a key shareholder in Xstrata, is awaiting the board’s response. (Financial Times) Glencore could publish details of its revised offer as early as today. (Reuters)

Confidence is growing that a German court may approve the ESM in its ruling on Wednesday, and there are fresh signs that pro-EU parties in the Netherlands have surged ahead in national elections.  Meanwhile Olli Rehn, Brussels’ economics commissioner, said the “strict and effective” conditions described in the Outright Monetary Transactions programme would be much the same as the annual Brussels-led recommendations for national governments’ fiscal targets and economic reforms, but with greater detail and timetables for implementation. (Financial TimesRead more