FT markets round-up: “Stocks on Wall Street fell for a second day, while US Treasuries jumped the most in three weeks as investors worried about prospects for the global economy and the eurozone’s lingering debt travails. But setting the stage for Wednesday’s session, reaction to quarterly results from aluminium producer Alcoa, was positive. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. Earlier, stocks sold off as the International Monetary Fund said the world economy will grow at its slowest pace since the 2009 recession and as European finance ministers declined to request for more budget cuts in Spain at a meeting on Monday. The FTSE All-World index fell 0.9 per cent, after the FTSE Eurofirst 300 lost 0.5 per cent. The S&P 500 extended losses at the end of the session to close 1 per cent lower as the Nasdaq Composite slipped 1.5 per cent on the back of another poor day for Apple.” Read more
Volatility guru Christopher Cole, who heads up the volatility fund Artemis Capital Management, is known for making interesting arguments when it comes to volatility and risk. Previous philosophical thoughts have questioned the concept of volatility, proposed that risk itself is changing, and that QE and other forms of government intervention are warping volatility beyond recognition.
His latest note, though, takes us to an entirely new dimension of market abstraction. Read more
A read for the train home from Buchheit (who helped mastermind the Greek restructuring at Cleary Gottlieb) and Gulati on the options now facing the eurozone’s sovereign debtors and those holding the purse strings.
Not too surprisingly:
[Their paper] concludes that there are no painless or riskless options. In the end, the question may come down to this — to what extent will the official sector sponsors of peripheral Europe be prepared to take on their own shoulders (and off of the shoulders of private sector lenders) a significant portion of the debt stocks of these countries during this period of fiscal adjustment?
Politics isn’t our bailiwick and as usual we could be wrong about this, but given the logistical hurdles it seems like Congress and the president(-elect) would be acting more sensibly by using this limited time to focus narrowly on the immediate fiscal cliff issues, which will be challenging enough, than trying in vain to arrive at a Grand Bargain. But to state the obvious, political reality and economic urgency don’t always align. Read more
Aortech is a little AIM-listed specialist in polymer technology, whose main operations are in Minneapolis. Back in the summer, faced with an acute cash shortage, chairman Jon Pither stepped down – to be replace by a non-executive, Bill Brown.
The company was put up for sale. Brown couldn’t find a buyer for the whole firm, so he went looking for a cash injection, along with a possible deal to sell the core polymers business. Read more
According to George Magnus of UBS, most of the western world has now been struck down by “most unusual monetary policies” or ‘Mumps’ for short. And — contrary to popular belief — the disease is being underpinned not by western profligacy but possibly the very phenomenon. Too much thrift. The want and need for too many savings in an economy that demands spending on available capacity and goods today — a theme also actively being explored by Paul Krugman as part of his anti-austerity reasoning. Read more
The common retort to a reduction in the US unemployment rate, such as last week’s, goes something like, “Yes, but that doesn’t really capture the underemployment. What about all the part-timers?!” But, as ever, it comes down to how ‘part-time’ is defined. Comparing Bureau of Labor Statistics data with OECD data indicates that US underemployment is not as severe as the headline figures suggest. Read more
Live markets commentary from FT.com
Here’s the running order for Angela Merkel’s
last? visit to Athens. Graphic courtesy of Bild.
IEA predicts boom for Iraq’s oil industry: Iraq’s oil output is to more than double by the end of the decade and by the 2030s it will be the world’s second-largest oil exporter after Saudi Arabia, according to an in-depth study by the International Energy Agency. Fatih Birol, the IEA’s chief economist, said Iraq’s oil production would be “crucial for the health of the global economy”. He added thatIraq would account for 45 per cent of the anticipated growth in global oil supply over the current decade. (Financial Times) Read more
Hyperinflation or not. Immediate collapse of the regime or not. This situation is scary if what is coming out of Iran is accurate.
This is from the FT’s Najmeh Bozorgmehr in Iran:
“Chi mikhad beshe?” – what is going to happen? – is the most common question Iranians ask each other. It is asked in taxis, grocery stores, hairdressers and in the queues to buy bread. No one, however, seems to know the answer.
The IMF (among others) seriously misjudged the effect of austerity measures on growth. The fund says that the “fiscal multiplier” used by many countries has been a mere 0.5, when in reality the effect over the past few years has been 0.9 to 1.7. So, why did everyone get it so wrong? Read more
The IMF’s latest global growth forecasts are, unsurprisingly, lower than their last set of forecasts. Which were in turn lower than their previous set of forecasts. And that’s as far as we want to go back, thankyouverymuch. And even with the reduced forecasts, there are caveats. Big, ugly caveats… Read more
Elsewhere on Tuesday,
– Fiscal policy could be a lot better, in a lot of countries, concludes the IMF.
– The IMF’s entire public funding should be withdrawn, concludes Bill Mitchell.
– Is the Chinese property market *really* recovering? Read more
The IMF cut its forecasts for global growth. The fund sees an “alarmingly high” risk of steeper global slowdown and expects growth of 3.3% this year and 3.6% in 2013, down from its July estimates of 3.5% and 3.9% respectively. It also slashed its forecast for the UK economy this year from growth of 0.2% to a contraction of 0.4%. For 2013, the fund now expects growth of 1.1% in the UK, down from an estimate of 1.4%. Eurozone forecasts for 2013 were cut even more, from 0.7% to 0.2%. Forecasts for China were also reduced, by 0.2% for both 2012 and 2013, but the fund said “activity is expected to receive a boost from accelerated approval of public infrastructure projects”. (Financial Times)(Wall Street Journal)(Bloomberg)(Statement)
Stocks in Asia rose anyway as another round of speculation about Chinese stimulus was sparked by a report in Shanghai Securities News saying the government would encourage industry mergers and an expansion of cross-border trade. The MSCI Asia Pacific index was 0.2% higher late morning Tokyo time, although Japanese markets were lower after a long weekend. (Bloomberg) Read more