Posts from Wednesday Jan 2 2013

The Closer

ROUND-UP

Cliffonomics: The last-minute deal over the US fiscal cliff triggered a lift in equity markets around the world as the threat of sharp tax rises and spending cuts tipping the world’s biggest economy into a new recession receded. But the rally in the wake of the deal may not last long, as the White House and Republicans are already positioning themselves for a series of even greater confrontations over the budget in the early months of the year. (Financial TimesRead more

Banks refuse to clear trades unless they can keep grandma’s money

Ready for pop quiz? Don’t worry, it’s only one question and it involves pictures. Ready?

In the below picture, a pension fund governed under the Employee Retirement Income Security Act (Erisa) has a trading relationship with a bank… Read more

On the new purpose of government debt

Frances Coppola has whipped up an absolutely fabulous commentary on the BIS paper on safe assets, which cuts straight to the point:

“the purpose of government debt is not to fund government spending. It is to provide safe assets.” Read more

Beancounters, having resolved not to resolve differences in derivatives netting, instead have cool new footnotes

Netting of the mark-to-market of derivatives positions is attractive. It’s more efficient when it comes to posting and receiving margin, decreasing the amount of operational and counterparty risk. The ultimate in netting efficiency is, of course, the newest too-big-to-fail institutions — central counterparties (CCPs) and clearinghouses.

There’s another place where offsetting positions is attractive: financial statements. It can make a big difference. Citi demonstrates this with estimates of what derivatives exposures (including repos, brokerage receivables, and associated collateral) would look like if you applied full netting instead of that dictated by respective accounting standards… Read more

Information asymmetry, LSE edition – UPDATE

So the LSE had a technical b0rk this morning, which clogged the Regulatory News Service out for more than 90 minutes. The silo of corporate news was finally released at 8:37am.

No harm done though, right? Market integrity intact? Possibly not. Read more

US Markets Live – 2 Jan 2012

Live markets commentary from FT.com 

Why a “free” market changes everything

Something very significant may be happening to labour and the capital reallocation process.

And arguably it’s down to technology and crowd-sourcing.

But before you shout: “this is what Marx always said, Ricardo and the Luddites were well ahead of you on that one”, we would propose what we’re talking about is a complementary trend not one that necessarily validates or duplicates what the above have said perfectly. Read more

US Markets Live returns at 10am EST, fiscal flailing/follies/fudge edition

Same time, same place, same crew — 10am EST, 3pm in London.

Joseph and I have shaken off last year’s crankiness (no I haven’t — Ed.) and will be taking questions about the fiscal cliff deal, European markets, and anything else that comes across the tape. See you there. Read more

China’s FX exodus: the suitcase edition

We’ve written a lot about capital outflows from China, what Beijing is doing to try to stem the flows, and how all this impacts the renminbi. Most of the time, the talk is about billions of dollars whizzing around the financial markets, one way or other. Yet, it seems that China’s capital outflow is accelerating even in its simplest form — yes, we mean bundles of cash hidden in suitcases.

It’s seriously old school, and seems almost quaint, but the sums are sizeable. Read more

Holiday illiquidity in one chart

Eric Hunsader at Nanex presents us with a nice start to 2013 markets — a no less than an 8 per cent drop and subsequent clawback in natgas futures during early Wednesday trade:

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Markets Live: Wednesday, 2nd January, 2013

Live markets commentary from FT.com 

Market Live — back at 11am

Yes, Bryce and Murphy have dragged themselves back from holiday.

Just in time, by the looks of things. There’s some sort of stock market rally underway. Read more

The (early) Lunch Wrap

Congress approves fiscal cliff deal || But battles remain over US budget talks || Lack of grand bargain complicates Obama’s priorities || Eurozone manufacturing falls more than expected || Cameron seeks bold steps from G8 leaders || Posco-led group secures Canada mine stake || Markets update || Euphoria in the banking sector || The Fiscal Fudge – early analysts’ and blogosphere reactions Read more

Euphoria in the banking sector

Amidst a general fiscal-fudge-relief-rally on Wednesday, one sector stood out…

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And from the fiscal fudge-osphere

You’ve heard what the early (and slim) analyst reaction has been, now for what the blogosphere has had to say about the fiscal deal achieved.

A good rundown comes courtesy of Pragmatic Capitalism’s Cullen Roche:

  • A deal was actually finalized. That’s good news. It looked like we might actually go into January without a deal and that the odds of no deal at all were rising.
  • No one really won here. Congress is totally dysfunctional.
  • There’s still a lot unanswered.

 Read more

The Fiscal Fudge – early analysts’ reaction

You just knew it was coming: chaotic brinkmanship, followed by a half-baked compromise that sees substantially all contentious issues kicked off to another day. Last minute Congressional agreement over tax rises, simply offers up spending cuts and the debt ceiling as the next two crisis points for US legislators.

So it’s Rally Time, but only sort of. Asian stock markets were up sharply, but that was at last partly down to the latest positive PMI data from China. In London, the Footsie — much more of a barometer for the US — was up 1.5 per cent or so at pixel. Read more

Further reading

Elsewhere on Wednesday,

- The Where To Be Born Index, 2013.

- ”The Fed is creating another bubble’ — corporate debt this time.

- Ten objects that show how 3D printing will change the worldRead more

The 6am Cut London

Fiscal cliffmanship: The US economy was brought back to the edge of the fiscal cliff late on Tuesday as Republicans in the House of Representatives baulked at supporting a bipartisan budget compromise passed in the Senate. The White House and Senate Republicans forged an agreement solely on the issue of taxes, delaying a tougher decision on spending cuts for two months, making the agreement unpalatable to conservatives in the House. House Republicans did, eventually, give up on the idea of trying to attach spending cuts the bill, allowing a late night vote that approved the deal. The majority of Republicans voted against it. (Financial Times, Bloomberg, ReutersRead more