Posts from Tuesday Jan 29 2013

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

FOMC preview

Some of this meeting’s thunder was stolen by the last meeting, when the Fed moved to the Evans Rule sooner than had been expected.

So nobody is expecting any major policy changes or innovations in the FOMC statement that will be released Wednesday. (There’s no presser until the March meeting.) But in addition to any changes in the economic outlook, a couple of items will be worth watching. Read more

More on GC rates and MMFs

GC repo rates and term (3-month and 6-month) GC futures have fallen in recent weeks. The only mystery is why it took so long.

A decline was largely expected as a result of TAG expiring and the end of Operation Twist. The former had given large risk-averse investors a safe place to stash their money, and the latter had allowed flooded dealer inventories with safe collateral against which slightly less risk-averse investors and MMFs could reverse repo and get a tad extra yield. Read more

A Grilli grilling

Italy’s economy and finance minister Vittorio Grilli was explaining to the Parlamento Italiano on Tuesday exactly what the hell’s been going on at the 541 year-old Monti dei Paschi di Siena.

Catch him live, here. And yes, you will need to understand Italian. Read more

Stanley Fischer flying solo

We don’t know his plans, but the Bank of Israel’s much lauded head, Stanley Fischer, may soon join the increasingly globally poachable mobile labour market for CB heads. He’s a free man from the end of June… and we hear there’s an opening in Canada. Read more

Doubting the bull market in Treasuries is over…

US Treasuries are kicking up with the 10 year threatening to push through 2 per cent for the first time in quite a while. It’s a little bit of economic optimism — better data means more chances of Fed tightening.

Capital Economics did the needful and put voice to the idea that the bull rally in Treasuries might have further to run for all sorts of not very contrarian reasons (our emphasis): Read more

Waiting on RBS

It’s not exactly surprising that US Libor prosecutors are pushing for criminal charges against one of Royal Bank of Scotland’s subsidiaries.

As we keep hearing, RBS’s level of involvement in the rate-rigging scandal is somewhere between Barclays, which got a nonprosecution agreement and paid $460m in penalties, and UBS, which paid $1.6bn and had to agree to having a Japanese subsidiary plead guilty to criminal charges. Read more

That great rotation, charted

Turning on a para-dime…

 Read more

Markets Live: Tuesday, 29th January, 2013

Live markets commentary from 

The (early) Lunch Wrap

Draghi meets Italian ministers over MPS || Seymour Pierce is approaching rivals about injecting money || US bank stress test scenarios revealed || Boeing battery maker GS Yuasa cleared in probe || Moody’s has cut the credit ratings of six of Canada’s biggest banks || Anglo takes $4bn hit on Brazil iron ore || Trafigura chief doubts rally will return || India’s central bank cuts interest rates || Goldman Sachs raises $1bn selling stake in ICBC || A break for embattled ranchers || Markets round-up || The surprisingly long path to US monetary union || RBS in for another round of bonus awkwardness, with added Libor angle || The return of negative US repo rates Read more

The surprisingly long path to US monetary union

European monetary union: so troubled, so awkward and ill-conceived, et cetera.

And so… speedy?

We spent a bit of time last year pondering precedents and possible scenarios for monetary union break-ups, of which there are few with much appeal. But Deutsche Bank strategist Stuart Parkinson makes the interesting argument that it took about 147 years for the US to become a monetary union. Read more

RBS in for another round of bonus awkwardness, with added Libor angle

Soon, it appears, we’ll have another big Libor settlement to write about — this one from RBS. Both the FT and the WSJ are tipping the fines to be in the order of £500m. The FT says it could be more than £400m to the US authorities and about £100m to the FSA; the WSJ doesn’t mention how it might breakdown between the US and UK, but says the settlement “could be completed within the next two weeks”.

Also, yikes! RBS (or specifically, an Asian unit of RBS) might have to plead guilty to some criminal charges if the US prosecutors have their way, says the WSJ.

Shockingly RBS does not like this. But… RBS may not have any choice: Read more

The return of negative US repo rates

Take note. This is an important observation from TD Securities, especially in light of all the talk that US Treasury/safe haven trades are dead in the water.

Our emphasis: Read more

Further reading

Elsewhere on Tuesday,

Misunderstanding QE, for about five minutes.

– Brands, in human guise, are trying to engage with you.

– David Graeber answers a lot of questionsRead more

The 6am Cut London

US prosecutors want Libor guilty plea from RBS || Asian shares higher || Seymour Pierce seeks cash injection || Draghi meets Italian ministers over MPS || US bank stress test scenarios revealed || Goldman Sachs raises $1bn from ICBC sale || 787 battery maker cleared || (Some) RBS bonuses defended Read more