Posts from Thursday Oct 18 2012

The Closer


Tech stocks were brought down by Google; the Nasdaq fell 1 per cent to 3,072 while the S&P 500 closed down 0.24 per cent at 1,457.34, breaking a three-day winning streak (Reuters). Read more

Goldman on housing and the consumer

A chart from Goldman economists showing their projections for the housing market’s contribution to GDP growth through the end of next year:

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Larry, no longer pending

The updated Google Q3 is out, and we go from…


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QE and the rental market

Most of the discussion about quantitative easing and the housing market in the last few years has naturally focused on how the appeal of lower rates is helpful, but does nothing about the more structural impairments in mortgage markets.

But monetary policy functions in numerous ways, one of which is the portfolio balance channel — whereby investors are incentivised to invest in riskier asset classes because the yields on safe assets have pushed down. BNP Paribas have an interesting note arguing that this too is having an impact on housing, specifically via the rental market: Read more


Accidental earnings release? In any case, highly unusual intraday results from Google had sent shares down 7.45 per cent at pixel time. (And the numbers were rubbish – $9.03 per share versus $10.65 expected) Read more

Counting ghosts

And so to HMRC to examine the UK’s “tax gap” — the difference between tax actually collected and the tax that could theoretically be collected. Click to read.

The ‘gap’ in Britain is put at £32bn. Read more

Gold up to $1,900 before year end, says HSBC

The price of gold has been all over the place in the past twelve months. No matter, say James Steel and Howard Wen at HSBC; they remain bullish on the yellow metal and expect prices to hit $1,900 before the end of the year. They also raise their average price forecasts for 2013 and 2014 to $1,850 and $1,775 respectively, but lower the 2012 average to $1,700 from $1,760.

As the graph below suggests, expectations of monetary policy in the US have been the key drivers, offsetting somewhat sluggish global demand. Read more

A tale of two VaRs

Buried in Morgan Stanley’s decent third-quarter results (excluding the absurdity that is DVA of course) is this intriguing footnote:

Morgan Stanley’s average trading Value-at-Risk (VaR) measured at the 95% confidence level was $63 million compared with $76 million in second quarter of 2012 and $99 million in the third quarter of the prior year. The Firm modified its VaR model this quarter to make it more responsive to recent market conditions.

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Of China, the yuan, inequality and the euro

There may be a new China to consider but its signs are not very easy to discern. The yuan is on a roll against the dollar, hitting multiple new highs since July but somewhat confusingly, estimates suggest that in the 12 months through September, some $225bn flowed out of China — that kind of outflow doesn’t square with the yuan’s recent strength. Read more

Van Rompuy, Barroso and Schulz to collect the EU’s Nobel together

We had only just digested the news that the EU had won this year’s Nobel Peace Prize, before the obvious question dawned on us: who’s actually going to go collect the thing?

Everyone from José Manuel Barroso, the president of the European Commission, to former German chancellor Helmut Kohl and “a choir of photogenic Croatian schoolchildren” had been suggested. Read more

Markets Live: Thursday, 18th October, 2012

Live markets commentary from 

The (early) Lunch Wrap

Chinese growth slows to 7.4% in Q3: China’s economy expanded 7.4 per cent in the third quarter from a year earlier, marking the seventh consecutive quarter of slowing annual growth, reports the FT. But in a positive sign for the world’s second-largest economy, data released on Thursday showed signs that China was close to the bottom of its downturn. Investment, retail sales and industrial production all accelerated at the end of the quarter, leading Premier Wen Jiabao to declare that the worst was probably over. Read more

Rating agencies have a funny way of agreeing about Spain

“Moody’s keeps gun pointed at Spain but does not pull trigger” was one of the more colourful headlines to come from the agency’s confirmation of the sovereign’s Baa3 rating with a negative outlook on Tuesday. A little rally in bonds and equities duly followed:

After the two notch downgrade by S&P about a week ago, both agencies now have the sovereign on equivalent ratings. It’s pretty hilarious to compare and contrast the reasons for each agency’s (in)action. Read more

Further reading

Elsewhere on Thursday,

– The Chinese economy is bottoming out, taking the Aussie dollar higher.

– PBC injects RMB30bn via open market operations.

– Waiting for 10am Madrid time today. Read more

The 6am Cut London

Resources stocks boosted Asian markets on bets China has hit the bottom. Australian shares rose 1.1 per cent and the Australian dollar hit a two-week high against the dollar. A weakening yen boosted the Nikkei, which rose 1.7 per cent. (Reuters)

China’s economy grew 7.4 per cent in the third quarter. The data mark China’s seventh consecutive quarter of slowing expansion and a threat to the official target of 7.5 per cent growth. Economists and government officials had predicted growth to rebound by this point in the year, but are now hunting for signs the economy has bottomed out. (Financial Times) Chinese industrial production grew 9.2 per cent on a year-on-year basis in September, up from a three-year low of 8.9 per cent in August, while retail sales rose 14.2 per cent, above the median forecast of 13.2 per cent. (BloombergRead more