Posts from January 2013

The Closer


FT markets round-up:A strong January for global stocks has finished meekly as an unexpected bout of caution over the US economy triggers a mild retreat of some benchmarks from cyclical highs. There has been renewed selling of the Japanese yen late in the New York trading day with the currency hitting Y91.56 against the dollar, its weakest level since June 2010. The proximity of the payrolls report was fostering the tentative mood in markets, delivering softness in industrial commodities and a stall in recently buoyant growth-sensitive currencies, but a mixed reaction across highly-rated fixed income products. Gold is cheaper by $14 at $1,663 an ounce. The FTSE All-World equity index is down 0.2 per cent after the Asia-Pacific region, excluding Japan, lost 0.3 per cent. The FTSE Eurofirst 300 drops 0.6 per cent, and Wall Street’s S&P 500 has settled 0.3 per cent lower and is back under 1,500.” (Financial Times)  Read more

Joining the Establishment, UK NGDP targeting edition

Getting a favourable leader in the Economist is pretty Establishment, surely.

At the very least, it’s interesting that the red-top weekly has managed to endorse and explain a fairly specific nominal GDP target for the Bank of England. Read more

Belgium and the LTRO

LTRO-porn continues… this time it’s semi-core.

As we noted before, the higher than expected repayments by banks of the Long Term Refinancing Operations to the ECB might also push up the amount of paper in circulation as collateral which was tied up in carry trades is returned to banks. That would put pressure on markets which benefitted from the LTRO cash.

What we didn’t think of was Belgium. Poor thing. Read more

Banks vs babies

Yep, China again.

Here’s a table from a fresh IMF paper pondering the country’s Lewis Turning Point, the moment when people streaming into cities from farms will be fully absorbed, industrial wages will take off, and — an estimated 350m jobs later after it began — the era of cheap Chinese labour will end. Click to enlarge. Read more

The perpetualisation of debt

FT Alphaville has just returned from the Danish Institute for International Studies’ conference on central banking in Copenhagen.

The theme was “central banks at a crossroads” — which we thought was particularly apt — and discussions ranged from collateral-backed finance and shadow banking to central bank independence. Indeed, many thanks to the DIIS for having us.

But one presentation, we would have to say, stood out more than most; that of Anat Admati, George G.C. Parker professor of finance and economics at Stanford Graduate School of Business, who’s out with a new book this month entitled “The Bankers’ New Clothes“. Read more

Ware the currency wars

You gotta roll with fashion:

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China’s two paths to urbanisation

China’s growing demographic challenges have been well documented and their economic impact much discussed. So how about urbanisation being touted as the solution?

After all, more people working in cities generally means more productive workers, hard to argue with that. But Beijing’s traditional policy of encouraging urbanisation through greater infrastructure investment is getting ever diminishing returns. If the government really wants more people to move to the cities, argues Wei Yao at Société Générale, it must start treating its new urbanites better. Read more

Reforming RWAs, some reading

As promised

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Spain finds €40bn hidden in sofa

In our last post, we covered up-to-date figures on some of the major components of the headline Spanish deposits number. Here we discuss a new component that will come into play over the next few months. In fact, it might have already been a factor in November’s number.

It’s the €40bn of previously undeclared assets of Spanish residents! The finance minister announced last week that this was simply hiding in a sofa (or possibly multiple sofas), and it wasn’t all that hard to find once they went to the trouble of removing all the cushions. Or, something like that…

OK, actually it’s the amount that came to light through the government’s tax amnesty that closed on November 30th, 2012. But hey, that would have been a hell of a couch, eh? Read more

Markets Live: Thursday, 31st January, 2013

Live markets commentary from 

The (early) Lunch Wrap

Costs drag Deutsche Bank to €2.2bn loss || FSA targets banks on interest rate swaps || Chinese hackers target New York Times || US economy slips into reverse || Chinese steel mills face tax pressure || Russia concerned over Israeli air strike || Markets update: a pretty meek finish to a very strong month for stocks Read more

Spanish deposit figures disclaimer: now updated through December ’12!

The measurement of Spanish deposits is whatever you want it to be! Or at least it sometimes seems that people regard it as such.

FT Alphaville has previously discussed how hard it is to meaningfully interpret this number. The last time we went there, to try to explain various underlying components of the figure and which direction they’re travelling, the media was aflutter with tales of deposit flight.

Now, there are stories of deposits and capital returning… and we need to add further driving factors to the headlines. What with the tax amnesty that unearthed some €40bn of previously undeclared assets of Spanish residents, as announced by the finance minister last week, and all. Read more

Further reading

Elsewhere on Thursday,

– No, a robot won’t take your job, says robot.

– Some genuine creative destruction.

– Patents were a problem in Thomas Jefferson’s day too.  Read more

The 6am Cut London

Asian markets fall on US GDP and Japan’s industrial production || FSA to investigate annuities market || Rio says Mongolian mine on track after halt report || MPs criticise Barclays’ bonus culture || Split over blame for West Coast fiasco || Governments can’t blame companies for tax evasion Read more

The Closer


Fed-falling: the S&P 500 fell 0.4 per cent to close at 1,501.96, while the Russell 2000 lost sight of Tuesday’s record high, dropping 1.2 per cent (Bloomberg). Read more

The Fed holds

And a dissent from Esther George. Full statement from the Fed’s open market committee:

Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors. Employment has continued to expand at a moderate pace but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has shown further improvement. Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable. Read more

“Keep moving”

“Alicia Keys has come to BlackBerry because she believes in the product and technology, and subscribes to our overriding philosophy to “Keep Moving”: to empower people through mobile computing and communications,” said BlackBerry President and CEO Thorsten Heins…

Yes, Blackberry’s Global Creative Director outed herself as an iPhone junky! a year ago. Read more

LTRO flowed

That’s a very small €3.7bn take up by banks participating in the European Central Bank’s three-month Long Term Refinancing Operation on Wednesday. We’d expected more. Read more

Here’s holding out on you, kid

At times, pursuing a defaulted sovereign debtor for full payment can almost (almost) come across as a facetious exercise. As when NML’s latest brief in the Argentine pari passu case quotes CasablancaRead more

UK PLC goes behind the paywall on Friday – UPDATE

So here’s the bad news.


RNS, the newswire used by most U.K. companies to distribute time-sensitive press releases, will require anyone wishing to receive announcements in real-time must register before Feb. 1, 2013. Anyone who fails to register will receive the press announcements after a 60-minute delay. There is no cost at this time to register.

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Advance reading of US Q4 GDP: -0.1% annual rate

The top par of the release:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 0.1 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent.

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FTAV video: the robot employment threat

We had a lot of fun making this short video, which is based on a topic that’s been discussed energetically in the blogosphere and elsewhere for a few months, and which has captured Izabella’s fascination for nearly a year. Read more

Value-at-risk for oil and gas reserves?

How much of the oil and gas sector’s asset valuations could be at risk from climate mitigation policy?

The International Energy Agency’s latest annual World Energy Outlook, released in November, followed the popular practice in long-term forecasts of using several scenarios. One involves global policymakers moving to limit atmospheric CO2 concentration to 450 parts per million, in order to limit to 50 per cent the probability of average temperatures rising 2 degrees or more.

The problem for fossil fuel companies is that could limit their ability to utilise all their reserves. Read more

Markets Live: Wednesday, 30th January, 2013

Live markets commentary from 

The (early) Lunch Wrap

The Bank of Italy has provided a robust defence of its regulation of Monte dei Paschi di Siena || Monte Paschi ignored warnings over risk, documents show || RBS is winding down its M&A business || Wider euro ‘Tobin tax’ will net €35bn || Chesapeake’s controversial CEO, Aubrey McClendon, is resigning || Individual investors helping drive US stockmarket surge || Swiss banks lose old taste for gold || Brussels soften line on bank ringfences || Euro zone economic sentiment rises more than expected || Euro carry reversal inflicts global pain || Amazon’s profits fell 45% in Q4 || India’s finance minister sees end to Vodafone dispute || Apple failed to get its $1.05bn damages award against Samsung increased || China anger at EU telecoms demands || Toyota to recall 752,000 Corollas in U.S. for airbag problems || European Cloud Over Ford || Markets roundup || Germany won’t stand in Cyprus’ way, apparently || Backloading the carbon markets || FOMC preview Read more

Germany won’t stand in Cyprus’ way, apparently

Cyprus, the small economy with the relatively massive bank recapitalisation problem, may have some kind of good news in its quest for a bailout: Germany might not be so wedded to blocking or delaying said bailout after all.

Schauble Cyprus screenshot - SZ  Read more

Backloading the carbon markets

The EU carbon market has been miserable for most of the past few years, with prices staggering downwards from their c.€30 levels on the scheme’s launch in 2005. But it’s become very gloomy in the past couple of weeks, with mid single digits prices falling as much as 40 per cent to a record low of €2.81 last Thursday. Read more

Further reading

Elsewhere on Wednesday,

Incestuous amplification, economics edition.

– Why is there still a shortage of safe assets?

Consumer spending isn’t enough… Read more

The 6am Cut London

RBS winds down M&A business || Asian stocks rise || Brussels may soften line on ringfencing || Chesapeake’s McClendon to retire || Bank of Italy defends MPS supervision || Apple fails to get Samsung penalty raised || Italy’s foreign tax crackdown Read more

The Closer


FT markets round-up:“Global stocks rose and challenged new cyclical highs, supported by better than expected corporate earnings and improving economic data. The FTSE All-World equity index rose 0.6 per cent to 234.76 as the FTSE Eurofirst 300 rose 0.4 per cent and after the Asia-Pacific region added 0.9 per cent. In New York, the S&P 500 climbed 7 points to 1,507 and closing at a five-year peak. Solid house price data from S&P/Case-Shiller was partly counteracted by news that US consumer confidence is now at its lowest in more than a year. Still, Wall Street’s mood was buoyed by the latest in a batch of mostly sentiment-supportive corporate results. Indeed, with about a third of the S&P 500 constituents having reported this earnings season, 75 per cent of them have delivered profits above analysts’ expectations, according to Bloomberg. Other growth-focused products were firm, with copper up 0.2 per cent to $3.66 a pound and Brent crude closing above the $114 a barrel mark. The dollar index fell 0.2 per cent as the euro rose 0.3 per cent to $1.3491 and gold advanced by $9 to $1,663 an ounce.” (Financial TimesRead more