Posts from Wednesday Oct 24 2012

The Closer


FT markets round-up: “Markets recovered some ground on upbeat Chinese economic data after weaker-than-expected figures from the core of the eurozone had rattled investor confidence. In the US, the Federal Reserve left benchmark rates unchanged as expected, and forecast low interest rates until mid-2015. The central bank also said it will continue with its programme to buy $40bn in mortgage-backed securities a month until the labour markets improve substantially. The S&P 500 ended the session on a weak note, falling 0.3 per cent to 1,408.76. The FTSE All-World equity index closed slightly lower after earlier trading down 0.3 per cent, while the FTSE Eurofirst 300 has pulled out of losses to close 0.5 per cent higher.” (Financial TimesRead more

FOMC statement, 24 October 2012

Overheard in the FT newsroom: “The market is violently unchanged on the FOMC statement.”

In other words, a bit of a snoozer, as expected. That said, there will be a few things to watch for when the minutes come out, as we noted last week. Read more

Paying back the LTRO early… or not

Consider this chart from Bank of America Merrill Lynch:

What it shows is pressure building on the front-end of Euribor contracts. Short positions might be stacking up, apparently.

Why? It might be because there is speculation flitting about that European banks will begin to pay back some of their LTRO cash in the near future. Something not everyone thinks is likely to happen. Read more

Another day, another BofA mortgage suit

Although actually, this is being touted as “the first civil fraud suit brought by the Department of Justice concerning mortgage loans sold to Fannie Mae or Freddie Mac,” directed at Countrywide/BofA. (Touted by the DoJ, of course)

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Gawd but the currency wars are boring

There’s basically nothing happening. Sure we’ve got plenty of rhetoric, a Swiss franc floor and QE — but FX volatility is touching recent lows:

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US Markets Live, 24 October 2012

Live markets commentary from 

Germany wants Greece to hand over more budget control

It looks like Germany has decided that Greece hasn’t given up quite enough of its sovereignty yet. We know that Wolfgang Schaeuble wants to set up an escrow account to make sure loan installments stay out of Athens’ reach (in order to guarantee that debt repayments are made to creditors). But it seems that Berlin also wants to put any money from a Greek primary surplus into that account. Read more

Jerome Kerviel loses appeal, heads to prison

Former SocGen trader, Jerome Kerviel, has been handed a five year prison sentence (with two suspended) at the end of the final appeal for his conviction for covering up billions of euros in losses at the bank.

There’s also the small matter having to repay the €4.9bn it took to unwind his positions. Read more

Now, about the UK’s recovery…

Right, everyone has weighed in on the US recovery debate. Martin Wolf got in on the act on Wednesday arguing that and his voice has now been added to a plethora of others (see the ‘Related Links’ below if you want to catch up and a recent paper by Citi’s Sheets and Sockin which we’ve thrown in the usual place) with a consensus building on the R&R side of the argument.

Schularick and A Taylor have already weighed in on the US issue but where it gets fun now is that they have come back with a UK update (with our emphasis): Read more

European bank deleveraging: Basel III edition

What happened with all that European bank deleveraging?

Some of it is over with, says Barclays — leaving, by our estimates of their estimates, about €650bn* of deleveraging yet to be carried out among the major European banks they cover**. Quite big, but much less than the €1.5tn – €2.5tn being discussed late last year. Read more

Markets Live: Wednesday, 24th October, 2012

Live markets commentary from 

The S&P downgrade ratio in Europe – 4:1

More euro gloom.

From S&P ‘s Global Fixed Income research team on Tuesday, “Europe’s Sovereign Crisis Continues To Erode Credit Quality.” Read more

The (early) Lunch Wrap

US earnings raise fears for recovery || Facebook’s positive mobile surprise || Mini iPad price concerns || Coach’s earnings rebound || Republicans in new abortion controversy || Markets update  Read more

On Chinese labour market opacity

Today’s China flash PMIs have been a little challenging to unpick. Inventories are down and input and output prices are up — but order backlogs are down, and so is employment, which HSBC notes is contracting at a faster rate. So the mountains of inventory are shrinking and price deflation (against trend) is no longer happening… but employment is down? Read more

(Seemingly) Perpetually Miserable Indices

It’s Eurozone flash PMI time again. It’s a sad time. From Markit:

The Eurozone sank further into decline at the start of the fourth quarter, with the combined output of the manufacturing and service sectors dropping at the fastest rate since June 2009.

Germany’s IFO survey didn’t help much either.

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The gender gap is closing…slowly

Do explore this gender heat map, courtesy of the World Economic Forum… Read more

Sir Mervyn on ‘bad money’ and other irritations

A particularly charged address from the Governor, perhaps…

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Further reading

Elsewhere on Wednesday,

Older, in bigger houses, fatter, and more leveraged.

– Schäuble, not down with prudent optimism, depresses some engineers.

– Finally!!! A guide on how not to suck at Powerpoint presentations.  Read more

The 6am Cut London

Asian stocks swing on poor US corporate outlook, improved Chinese PMIs || King warns BoE tools are reaching the limit of effectiveness || UBS to cut back investment bank || Apple’s mini iPad pricing disappoints || Facebook’s mobile advertising impresses || Martin Wolf on Reinhart-Rogoff and Bordo-Haubrich Read more

China flash PMIs are up, but there’s a catch

The preliminary HSBC/Markit China manufacturing PMI for October was 49.1 — the best result in three months and a decent jump from September‘s final reading of 47.9. Growth is still below trend, but is the relative improvement a sign that monetary easing is having an effect and/or stimulus is taking place? Read more