Posts from Wednesday Jan 9 2013

The Closer


FT’s markets round-up: “Global stocks resumed their new year rally after Alcoa set a mildly positive tone for the US fourth-quarter earnings season. The FTSE All-World equity index rose 0.4 per cent after the Asia-Pacific region added 0.4 per cent. The FTSE Eurofirst 300 gained 0.7 per cent and London’s FTSE 100 added 0.7 per cent to close just shy of the 6,100 mark amid demand for banks and mining shares. In New York the S&P 500 advanced 0.3 per cent to 1,461, within just a few points of a fresh five-year peak. The CBOE Vix index, Wall Street’s “fear gauge”, earlier fell close to 13, flirting with its lowest level since before the start of the financial crisis in 2007. The index later rebounded to trade at 13.82 at the close. In keeping with the more optimistic theme many industrial commodities were firmer, with copper up 0.9 per cent to $3.70 a pound – though Brent crude fell 26 cents to $111.68 a barrel following news of a hike in US energy inventories.” (Financial TimesRead more

REVEALED: dumb financial journalism, dumb corporate management, dumb financial regulation

We are going to lay the blame for this — right up front — on the idiotic Financial Markets and Services Act. (Or at least the utterly dumb implementation of such by Lord Sants and colleagues.) The “markets abuse regime” has led us to…where do we start?

Okay, with this chump: Read more

Les Miser-NAV-ables

Well, it’s a revolution! Apparently.

This is Goldman’s first report on its money market funds to disclose daily net asset values (h/t Tracy): Read more

Ireland, a local (law) bond for foreign buyers

Portrait of a returning peripheral sovereign, encore:

Speaking today, NTMA Chief Executive John Corrigan said that Ireland had made considerable progress in its phased return to the markets over the past year and, with the success of yesterday’s €2.5 billion syndicated bond sale, had eliminated the “funding cliff” presented by a €11.9 billion bond repayment due in mid January 2014. The NTMA intends to step up its re-engagement with the market during 2013 so that Ireland is positioned to successfully exit the EU/IMF programme. Its working plan is to raise €10 billion, subject to market conditions, of which one quarter has been achieved with yesterday’s bond sale. Mr Corrigan also said the NTMA would continue its regular auctions of short-term Bills, which recommenced in July 2012, with the first 2013 auction scheduled for Thursday 17 January.

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The best version of the hypothetically least-bad last-ditch solution

Greg Ip has the single best post on the economics and logistics of the Platinum Coin option that we’ve come across.

It includes a solution that involves two of our favourite topics from 2012: the expiration of the Transacton Account Guarantee and the safe asset grab (even throwing in a bonus Gary Gorton reference). Read more

Greece’s fragile bond rally

Greece may have an ongoing issue or two, but that didn’t stop its government debt rallying 274 per cent in the second half of last year. Clearly, the driver was the reduced likelihood of it leaving/being kicked out of the eurozone, rather than the (dismal) economics.

Gabriel Sterne at Exotix says the run was one of the “most astounding sovereign bond rallies of all time”, but that the bonds are now over-bought. The declining possibility of a Grexit, he says, is more than fully priced in (his emphasis): Read more

The vexatious VIX

What should we make of this? The CBOE VIX, the barometer of choice for those monitoring market volatility, dropped like a stone between Xmas and New Year. And the trend has continued in the days since…

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US Markets Live

Live markets commentary from 

GS: seasonal adjustment distortions have faded away

We wrote after last week’s US employment report that the seasonal adjustment problems we described in late 2011 and the first half of last year had likely faded.

We’re referring specifically to the distortions in the Census Bureau’s X12 algorithmic process, which is used to make the adjustments to many of the country’s most important economic indicators, rather than new seasonal distortions that have been introduced separately (usually weather-related distortions). Read more

Reminder: US Markets Live at 10am EST

We’ll be talking about the start of US earnings season, AIG chutzpah, preview Thursday’s ECB and BOE meetings, the $1tr Coin [Do we have to – Joseph], and whatever else hits the tape in real time. Same time, usual place.

In the euro area, it’s pretty much going to suck for awhile

Shortly after the new year, the Economics Research team over at Goldman Sachs published their outlook for growth in the euro area. Frankly, it doesn’t look all that hopeful, especially in the periphery (surprise!). We hope you weren’t holding out for something better than the growth rates associated with a “muddle through” strategy…

But hey, at least it’s several rungs higher on the ladder of economic happiness than the collapse of the currency union, eh? Read more

Take the German political landscape, add Cypriot banks slowly, do not allow to boil… umm, whoops

From a report by Germany’s spy agency in early November arguing that the main beneficiaries of aid to Cypriot banks would be rich Russians who have invested illegal money there, through to a very public bailout veto threat. All in just two months! Speedy work indeed by Germany’s opposition.

From Eurointelligence on Wednesday:

Suddeutsche Zeitung is reporting this morning that the SPD [Social Democratic Party] is considering blocking a Cyprus deal on the grounds that it won’t support tax dumping and money laundering.

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China’s (not remotely insignificant) rebalancing challenges

A great new year piece from Standard Chartered’s China economist Stephen Green. The country’s economy, he writes, is “running along at a reasonable pace” as 2013 begins. But potential growth is already sliding, he says, and clouds are gathering…

We all know that China’s current growth model is not sustainable. It is not going to collapse tomorrow, but there are clearly problems with it – and we believe those problems have gotten worse in the past couple of years.

The imbalances are not just rich/poor, rural/urban, and east/west, writes Green. There are four key dynamic imbalances affecting the country: Read more

Markets Live: Wednesday, 9th January, 2013

Live markets commentary from 

The (early) Lunch Wrap

Goldman’s “secret” prop-trading || What those Trillion Dollar Coin might mean || BoJ’s potential new inflation target || Ex-SAC Capital analyst names 20 people in insider trading investigation || US oil imports to fall || US tax season to open late || Boeing shares fall on Dreamliner woes || Samsung’s mobiles boost earnings || Goldman to report NAV on funds daily || Shell’s Arctic oil exploration reviewed || UK clients of MF Global may get increased payout Read more

Further reading

Elsewhere on Wednesday,

What David Bowie has to teach us about the economics of retirement.

– Dear Basel, does gradualism matter?

– Rage against the coinRead more

The 6am Cut London

Asian stocks rise, yen weakens || HSBC’s Ping An sale in jeopardy || US oil imports forecast to reach 25-year low || Ex-SAC analyst names 20 insider traders || Shroders jettisons PwC as auditor after decades  Read more