Posts from October 2012

The Closer


FT markets round-up:“US equity markets closed fractionally higher after trading in negative territory most of the day, following a two-day closure and recorded their first monthly decline since May. As volumes rose after the first few hours of trading, volatility returned to markets, sending the CBOE Vix index, dubbed Wall Street’s “fear gauge”, 4 per cent higher to 18.5.Modest opening gains on the benchmark S&P 500 index fizzled out after the first hour and stocks traded lower most of the day. However, late activity brought the index fractionally up to 1,412.16. Still, the index fell 2 per cent over the month. The Dow Jones Industrial Average closed 0.1 per cent lower at 13,096.54 and lost 2.5 per cent over the month.” (Financial TimesRead more

The missing GDP, updated

Credit Suisse economists have updated their “Missing GDP” chart (prior edition here), now showing the average contribution to real GDP growth of each subcomponent in the first thirteen quarters of the last six US recoveries, and then comparing them against the corresponding contributions in this one.

 Read more

Around the world in Argentine bond payments?

Beyond all the interesting (maybe precedent-setting) stuff about pari passu

Since last week’s US Appeals Court ruling went against Argentina, there’s been a lot of comment about how the country could try changing the trustee or payments structure of the bonds which came out of its 2005-2010 restructuring. Read more

Sandy round-up

Just passing along a selection the more informative and interesting items we’ve come across today related to Hurricane Sandy, its economic impact and what it means for New York City:

— Three points from Goldman economists: Read more

The Romney spread-betting arb

We’ve written before about odd goings on in the spread betting world where US elections are concerned, namely last week’s big spike in Mitt Romney’s chances offered by InTrade.

If you can figure out a way to make it work, then perhaps more interesting is this little (ok, microscopic) arb opportunity: a Romney election win is being offered at 34.7 per cent on InTrade and 31 per cent on IG Index… Read more

Euro area bank lending: Halloween edition

Click through the pic for the full document (it’s not the most fun read):

Now, we don’t want to get carried away here. The report – covering lending in the third quarter and expectations for the fourth – wasn’t pretty, but it’s worth pointing out that there are glints of cautious funding optimism to be found, both within the report and without, particularly where corporates are concerned. Read more

Who ate all the gilts? Was it you, SNB?

An interesting nugget from Nomura’s Geoffrey Kendrick on the Swiss National Bank data released earlier, as it pertains specifically to sterling:

On GBP specifically we estimate that SNB buying accounted for two-thirds of all non-resident buying of gilts in Q3.

 Read more

US Markets Live, 31 October 2012

Live markets commentary from 

The Swiss National Bank straddle

It’s Swiss National Bank reserve figures Wednesday! That glorious day when we get to see how exactly the ingredients of the SNB’s cake have changed. Or to put it more literally, how have they been dealing with the masses of euro assets they are collecting.

Here’s the table in question. What it shows is that the SNB has cut its euro share of FX reserves to 48 per cent from 60 per cent in the second quarter of 2012 while the proportion of sterling and dollars being held increased.

Gasp? Well… yes. Read more

Being a banker on Halloween

With all that has come to light over the last few years, “PPI or treat?” might be a appropriate refrain for a banker on Halloween. Not that Halloween is quite so culturally relevant in the UK, that is. As the Daily Mash put it:

Thousands of costumed children and their parents are under the mistaken impression that they live in America, it has emerged.

The wrong-headed youngsters will dress up as witches and suchlike to indulge in the American ritual of visiting houses for sweets, something that makes absolutely no sense in the UK.

 Read more

‘Greek limbo’ is two words. TWO!

So, the Greek government has left this latest, very long, round of eurozone marriage counselling to head into, well, predictable domestic acrimony with headlines like “Crucial Test for Greek Coalition” trailing in its wake. From the ekathimerini:

“We did everything we could. We achieved significant improvements,” noting that Greece would remain in the euro if the package was passed and otherwise risked “descending into chaos.” “It is now down to the sense of responsibility of all political parties and each individual MP,” Samaras said.

Democratic Left issued a rejection within minutes, saying it does not agree with the outcome of negotiations with troika and repeating its objection to labor reforms.

JP Morgan’s Alex White points out that the next few weeks are going to be critical and that this one is likely going to the wire… again. Read more

China’s strange quarterly GDP revisions could actually be good in YoY terms

We pointed out just before China’s third quarter GDP figures were released that there is much strangeness around its quarterly growth data generally*. While most countries release an annualised, seasonally-adjusted quarter-on-quarter figure, China publishes a year-on-year figure and, only since 2011, a seasonally-adjusted but unannualised quarter-on-quarter figure.

This causes three problems:

– the headline number is not directly comparable with most other countries’ quarterly GDP figures.

– when a comparable number is generated (ie, when QoQ is annualised), the Q1 & Q2 2012 are FAR below the headline YoY numbers… the most striking example being 6.6% for the first quarter of 2012.

 Read more

The (early) Lunch Wrap

New Barclays investigations || Damage estimates for Sandy || US exchanges to open || NY power supplies || Greek austerity cont. || Disney buys Lucasfilm || UBS layoffs || Google & Starbucks to answer questions on UK tax bills || Romney & the auto industry || India’s Modi can apply for US visa Read more

Barclays’ new investigations

What do you get when you reveal two new regulatory investigations as part of your slightly disappointing quarterly results? Answer: a 4.4 per cent drop in share price, as Barclays is finding out on Wednesday morning.

From the FT (our emphasis):

Barclays has warned investors that it is facing another fine in the US, this time over its conduct in power trading.

It has also disclosed that it is under investigation by the US Department of Justice and the US Securities and Exchange Commission over whether its relationships with certain third parties breached corruption rules.

 Read more

Chasing storm damage estimates

The estimates of $10bn to $20bn for damage caused by hurricane Sandy fall well short of the costs incurred by hurricane Katrina ($113.4bn) and 1992’s hurricane Andrew ($58.6bn), Goldman Sachs’ Jan Hatzius says. But it’s difficult to know how much to rely on the cost estimates so early on, as Hatzius highlights:

These numbers are likely to strike many readers as surprisingly small given the scale of the devastation in several mid-Atlantic states. It is certainly possible that they are too small, as initial cost estimates for natural disasters have sometimes proved too low in the past. For instance, the damage from Tropical Storm Irene was about twice as large as the initial estimates had suggested, and the damage from Hurricane Katrina was about four times as large. However, it is also likely that the concentration of the impact in the area between Washington and New York has magnified its media impact, even relative to the population density and the value of the real estate in this part of the country.

(Ouch – the media card? Really?) Read more

Further reading

Elsewhere on Wednesday,

– Some scary forecasts about damage to the New York subway system.

– Did climate change cause hurricane Sandy?

– Insider knowledge, not all it’s cracked up to be. Read more

The 6am Cut London

Asian stocks rose as investors digested the Bank of Japan’s decision to ease policy for a second month in a row. Japan’s Nikkei jumped 1 per cent, recovering from Tuesday’s sharp sell-off on initial disappointment over the BoJ’s asset purchasing plan. But risk appetite has been encouraged by the unusual joint statement from the central bank and the government stressing their commitment to reducing deflation.” (Financial Times)

US exchanges to open on Wednesday: The NYSE, Nasdaq, BATS and Direct Edge exchanges all said they would open as normal on Wednesday after hurricane Sandy, and Sifma recommended US bond markets reopen. (ReutersRead more

The Closer

US stock markets remained closed on Tuesday as the Sandy clean-up began on the East Coast. NYSE, Nasdaq and BATS announced that their stock, options and derivatives markets would reopen for business on Wednesday. Sifma has recommended that US bond markets also reopen on Wednesday (Financial Times, Wall Street Journal). Early equity volume is expected to be strong as investors make end-of-month portfolio adjustments.

The storm’s toll: at least 30 deaths across eight states, and six million people left without power. Some 750,000 are without power in New York City (Full updates: New York Times, Financial Times, Wall Street Journal). Read more

UK banks pile in for cheap cash

The verdict is still out as to how much the Bank of England’s latest attempt to boost the economy is actually working. There are indications that Funding for Lending is helping ease credit flows, but we won’t know how attractive the low-cost financing actually is to banks until the FLS usage data for Q3 is released on December 3. It’s hoped that it will get up to £80bn of extra credit into the economy.

The scheme was launched this summer, and on Tuesday the BoE published a full list of participating banks along with their total lending to UK households and ‘private non-financial corporations’ (as of end of June). A total of 17 new institutions have got onboard since the launch, mostly building societies, but the Co-Op, Clydesdale and Tesco were also new joiners. HSBC is not on the list. Read more

Haldane, Occupy, and the path to reform

On Monday night, FT Alphaville had the pleasure of chairing a discussion on “Socially Useful Banking“. The key speaker was none other than Bank of England’s executive director for financial stability, Andy Haldane. His speech was entitled “A leaf being turned“.

Since we were there for the evening, and moderating the lively Q&A, it’s been interesting to see what angles the papers have taken on it. Here-under a headline digest: Read more

Geoff Grant’s lost ‘edge’

Grant Capital Partners is being shut down. This hedge-fund manager wind-down is brought to you by Geoff Grant, one of the same gentlemen behind Peloton Partners’ enormous fall.

Fun fact from the FT’s Sam Jones:

Grant Capital eschewed the asset-backed securities and heavy leverage that led to the downfall of Peloton and focused on highly liquid instruments such as currencies, bonds and interest rate derivatives.

While funds that specialise in trading mortgages have enjoyed some of their best returns in the past two years, global macro funds have floundered.

Oops. Read more

The UBS cull begins

The Swiss bank has wasted no time in starting the cost cutting programme it announced just this morning. Some people learnt of this when they tried to enter their offices on Tuesday morning, only to discover their passes weren’t working.

Our hedge fund sources also tell us that many of their UBS contacts “have red dots on their B’berg” this morning, meaning they’re not logged in. It sounds like sales staff have generally been the first to go. Read more

A bento box of pressure at the BoJ

So the Bank of Japan basically did what what was expected of it as did the yen, which gained 0.5 per cent against the dollar as traders saw massive selling of dollar-yen going through as the Bank’s decision hit the wires.

So far, so predictable. We thought UBS’ Paul Donovan summed up the BoJ’s move fairly well:

Japan saw the Bank of Japan defy government pressure to increase the asset purchase program by JPY10tn. They increased it by JPY11tn. No doubt this will be as effective as all the previous actions which have already raised the level of the BoJ balance sheet to 32% of GDP.

But the increasing pressure that is being piled on the Bank by the government is worth drawing attention to. As well as the Bank’s attempts to shift it right back to the government. Read more

The (early) Lunch Wrap

BP raises dividend || Apple shakes up senior ranks || UBS slashes costs || BoJ eases policy for second month || Markets update Read more

Please no bonuses over 20 per cent of base pay, we’re Dutch

On Monday the centre-right Liberal and centre-left Labour parties in the Netherlands managed to pull together a coalition agreement after 47 days of talks. It contained a limit to the tax deduction on mortgage interest, which some economists say distorted the Dutch housing market. There are also changes to benefits and taxes, but the thing that caught one FT Alphaville reader’s eye was this line of the agreement:

De hoogte van de maximale variabele beloning binnen de financiële sector wordt wettelijk vastgelegd op 20 procent van de vaste beloning.

We’re translating this as: “the amount of variable pay for workers in the financial sector will by law be capped at 20 per cent of fixed pay.” Read more

Sandy could delay the BLS report, and has already sparked nuclear fears

An update on the Sandy-related damage, market closures, and the alert about the Oyster Creek nuclear plant.  Read more

Further reading

Elsewhere on Tuesday,

– Sandy photos: Sorting the fake from the real.

“Fresh infighting” within Chinese Communist Party ahead of big transition.

– Hugh Hendry on God, gold, China and Treasuries and how he has no idea where stocks are going. Read more

The 6am Cut London

Hurricane Sandy hits US east coast hard || Markets shut for second day || BoJ increases asset purchase programme, rates steady || PBoC makes record daily injection || Nissan chief warns about China expansion || Barclays civil Libor case to go ahead || Royal Mail to hire 1,000 || Martin Wolf replies to John Taylor on US recovery  Read more

Sandy update

The photo above was taken by Bloomberg’s Nick Summers, and it shows a large part of Lower Manhattan is now without power, having been shut off by Con Edison to “protect both company and customer equipment, and allow for quicker restoration after Hurricane Sandy passes”. Read more

The Closer


US equity markets were closed and debt markets closed early because of Hurricane Sandy, while trading in Europe and elsewhere was light. From the FT’s markets round-up: “By early afternoon in New York the FTSE All-World equity index was down 0.3 per cent, while the FTSE Eurofirst 300 index had slipped 0.35 per cent. The Asia-Pacific index had dipped 0.2 per cent. The mood across asset classes was mildly “risk off”, with the dollar index up 0.2 per cent, copper down 1.4 per cent to $3.50 a pound and Bunds attracting buyers, pushing 10-year yields down 6 basis points to 1.48 per cent. Gold see-sawed, shedding $3 to $1,707 an ounce after trading as high as $1,713 an ounce.” (Financial Times) Read more