Posts from Wednesday Oct 10 2012

S&P downgrades Spain

So Standard & Poor’s has cut Spain by two notches, to BBB- from BBB+, just one notch above junk level. As the FT said:

The rating agency’s move came after markets had closed in New York, but the euro still fell slightly on the news to trade 0.1 per cent lower at $1.2870.

S&P’s report is in here. Read more

The Closer

FT markets round-up: “The FTSE All-World index fell 0.6 per cent after the FTSE Eurofirst 300 closed with a loss of 0.5 per cent. On Wall Street, the S&P 500 closed 0.6 per cent lower, after sliding 1 per cent on Tuesday. The Asia-Pacific region dropped 0.8 per cent to a one-month low. Risk appetite across other asset classes was somewhat firmer. The dollar index ended the session only a fraction lower and its Australian namesake, which is sensitive to stock market volatility, rose 0.2 per cent to $1.0229. Gold surrendered early gains to trade nearly flat at $1,762 an ounce in New York. In highly-rated fixed income products, US 10-year Treasury yields fell after strong investor demand for $21bn in new notes. The yield on the 10-year note dropped 3 basis points to 1.68 per cent since the auction was held, down from an earlier high of 1.75 per cent. Equivalent Bunds added 1bp to 1.50 per cent.” Read more

Goldman employees doing their bit to bolster Jim Henson legacy, Jason Segal acting career

Fun scoop du jour from Tom Braithwaite and Tracy Alloway:

Goldman Sachs has told its board of directors that an internal investigation found little substance to allegations made by Greg Smith, the disaffected employee who claimed the bank has a “toxic environment” where bankers refer to clients as “muppets”. Read more

Post-crisis lens

Tyler Cowen writes:

In one very real sense, there is a significant demand shortfall. Yet repairing that demand shortfall requires many building blocks. Nominal reflation (which I favor) is only one of those building blocks. The others are rooted in trust and perceived real wealth, which are both slower to repair and require different policy instruments, plus the mere passage of time. Read more

The old are stealing our jobs!

From Steven Englander at Citi — a little observed factoid regarding employment trends among the older demographic:

We are taking one small slice at this subject, starting with the little noticed fact that employment to population ratios among older individuals have gone up in recent years, in contrast to the so-called prime-aged 25-54 cohort, where employment to population is much lower than earlier. Figure 1 shows the percentage point change in the employment to population for the three age groups since 2007. Read more

Money as a passion, not a standard

Are money and value, much like time, a function of relativity rather than a definable and quantifiable substance?

A while ago, we made the case that relativity was an under-appreciated factor in determining monetary value. We further argued that fixed exchange regimes, especially ones based on inflexible commodities such as gold, were particularly vulnerable to the warping effects of relativity. Read more

OMT is so 2013

That call might not come this side of New Year.

The market has been waiting for Spain to request its very own Enhanced Conditions Credit Line for quite a while now. It’s the road to OMT. And for a (very) little while just last week while it appeared we were only a weekend away.

But it’s now looking increasingly like we are not gonna get to see any OMT buying at all in 2012. Sad. Read more

US Markets Live cancelled

Our Markets Live platform is being temperamental even by its standards, and we’d like to sort out the remaining tech issues before returning. So with heartfelt apologies, US Markets Live will return to its regularly scheduled weekly appearance next Wednesday at 10am New York. Read more

Breaking: inevitable happens

The exact time of death can be recorded as 1:01pm BST. But, really, the pulse was lost long ago.

BAE Systems and EADS announced that they have decided to terminate their discussions. So should we blame another breakdown in eurozone relations? Or maybe, just maybe, BEADS wasn’t a merger worth saving. Read more

Awaiting the Iraqi oil rush

Over the current decade, Iraq accounts for around 45% of the anticipated growth in global output. Iraq becomes a key supplier to fast-growing Asian markets, mainly China, and by the 2030s Iraq is the second-largest global oil exporter, overtaking Russia.

That’s the main conclusion of the International Energy Agency’s special report on Iraq published on Tuesday. Read more

Markets Live: Wednesday, 10th October, 2012

Live markets commentary from FT.com 

The (early) Lunch Wrap

IMF warns eurozone on capital flight: Unless the eurozone resolves its capital crisis, European banks’ balance sheets will contract severely, further damaging growth and pushing unemployment beyond already record highs in the region, according to the IMF. In its global financial stability report, the IMF concluded that capital flight from the eurozone’s periphery to the bloc’s core, driven by fears of a break-up of the currency union, had sparked “extreme fragmentation” of the euro area’s funding markets, reports the FT. Read more

How vulnerable is Japan’s economy to the islands dispute?

Markets in Asia were apparently very skittish earlier today in partdue to fears that earnings could be affected by tensions between Japan and China over the Senkaku/Diaoyu islands. This in turn was no doubt exacerbated by the news that not only are the big four Chinese banks skipping this week’s IMF meeting in Tokyo, but the PBoC governor and the finance minister are also sitting it out, instead sending along their respective deputies.

From Bloomberg: Read more

King’s defence of low interest rates during ‘The Great Stability’

Mervyn King gave a “personal assessment” of the inflation targeting regime over the past twenty years on Tuesday night. And seemed to suggest that it may be best to allow UK inflation to over-shoot the 2 per cent target given the current economic environment in order to minimise volatility. Read more

Further reading

Elsewhere on Wednesday,

- Matt Levine explains what investment bankers do.

- The mathematisation of economics.

- Congress on Huawei is not your usual China-bashing. Read more

The 6am Cut London

The euro crisis is threat number 1, says the IMF * Asian markets are down * Capital and liquidity rules for the biggest UK banks have been quietly relaxed * Germany is going right off the BAE-EADS deal * The BoE is going off inflation targeting * Jack Welch defends his BLS attack, quits Fortune * Martin Wolf denounces previous UK austerity experiments.  Read more