Stocks edged forward, ending up for the fifth day in a row. The S&P 500 closed at 1,544.26, a 0.18 per cent increase (Reuters).
Capital ratios at Goldman and Morgan Stanley barely passed the minimum set by the Fed’s latest bank stress tests. Goldman’s ratio fell to 5.8 per cent under the scenario of a fresh financial crisis, while Morgan Stanley’s fell to 5.7 per cent, compared to the regulatory requirement for 5 per cent. The two banks’ results make it less likely they will be authorised to return significant amounts of capital to their shareholders (Financial Times, Fed stress test results). The Fed will release a second stress test next week, incorporating forward-looking decisions into its data and giving its view of how dividends and buybacks would affect ratios — the step before it authorises whether banks can return capital. Read more
Results and details here, and click to enlarge the chart below showing the Fed’s estimate for how each bank’s ratio of tier one common equity to risk-weighted assets would deteriorate in a crisis — or if you prefer, “estimates of the minimum tier 1 common ratio during the severely adverse scenario for each of the 18 BHCs with all prescribed capital actions through the fourth quarter of 2014″…
Abenomics does not suffer rules gladly so the BoJ’s self-imposed ‘banknote rule’ must be getting pretty nervous right about now.
It says the BoJ’s holdings of longer-term Japanese government bonds cannot exceed bank notes in circulation (unless they decide it can, naturally). Read more
Anyone who bought gold in 2008 is probably more than tempted to cash in their profits right about now.
Reflecting the scale of the change in sentiment — and confirming that there was indeed something of a choke level for gold at around the $1,908 mark — is the following chart from Macro Risk Advisors which neatly sums up the degree to which investors have been liquidating gold ETF positions. Read more
From Albert Edwards’ latest:
I was on gardening leave when the Dow reached its previous peak in October 2007. One echo from those days is that I was beginning to feel lonely. Pessimism (realism) is very rare on the sell-side so I took a coffee with my fellow bear, Bob Janjuah and cheered up tremendously, reinforced in my belief that this is all going to end very, very badly indeed.
Enjoy! Some 148 pages of accounting-for-loan-losses reading:
It’s the IASB’s latest version of its attempt to make banks recognise “lifetime expected” losses on loans or bonds as soon as there are “significant” signs of a credit going bad, instead of waiting until it’s too late and risking a sudden wave of defaults. Read more
When James Mac is away, the bloggers will play, but this is a rather serious tale. It relates to the nationalisation of SNS Bank, inclusive of its holding company SNS Reaal.
The above video tells the story of one investor in SNS Bank subordinated bonds. Read more
… the Japanese seek inflation everywhere.
All this talk about Japan, JGB bond yields, QE, the yen… and hardly ever does anyone throw up the following chart.
So, without further ado, here is the most important Japanese chart of all courtesy of Capital Economics… the CPI: Read more
Live markets commentary from FT.com
Osborne to hand Carney more powers || Google tip-off leads to Microsoft EU penalty || BoJ rejects call for monetary easing || Aviva slashes payout after £3bn loss || Icahn muscles in on Dell deal || KPMG at risk of losing vital HSBC audit || Time Warner to spin off magazines || Equities rally sparks gold funds sell-off || Markets: Markets await central bank decisions Read more
This does smack of desperation, doesn’t it? From the FT on Thursday morning:
Osborne will use his Budget on March 20 to reinforce his message of “fiscal conservatism and monetary activism” by clarifying how the government intends to use monetary policy to get the economy growing again.
Elsewhere on Thursday,
- What happens if people live forever?
- Tracy Alloway gets some MS Paint competition. Or maybe not.
- There is no shortage of gold. Read more
Asian stocks mixed, Nikkei slightly higher || Brussels to climb down on data privacy rules || BoJ holds policy in final Shirakawa meeting || Time Warner to spin off magazines || S&P raises Portugal outlook || Gavyn Davies on financial risk Read more