Markets: Global equities hit fresh cyclical highs but commodity prices and the dollar fell back as weak US and eurozone economic data fueled concerns over the outlook for global growth. The FTSE All-World equity index climbed 0.5 per cent to its highest since June 2008, while the S&P 500 rose 0.3 per cent to a fresh record closing and intra-day peak. However, the FTSE Eurofirst 300 eased back 0.2 per cent even as eurozone inflation and labour market figures heightened expectations that the European Central Bank would cut interest rates this week. Consumer price inflation in the region fell to a 38-month low in April while the unemployment rate rose to a record 12.1 per cent in March says the FT’s Global Markets Overview. Read more
The yen has gained back 2.4 per cent against the US dollar since it threatened but failed to break Y100 ahead of the most recent, and quiet, Bank of Japan meeting — the first since April 4, when QE on steroids was announced.
Now, we are not suggesting this is definitely the start of a yen correction — if we could predict FX moves for sure we’d be on a yacht, Japan isn’t lacking the political will to give it a further shot, this dip is small in context and we’ve seen its like before — but there is clearly a threat.
Simon Derrick, chief global markets strategist at Bank of New York Mellon, sent through a few thoughts which we think capture that threat quite nicely: Read more
Since 2009 the stark contrast between oil prices (high) and natural gas prices (low) in the US has prompted questions, and visions of a new future of transport fuels.
There was some excitement that this might be gathering steam when Warren Buffett’s freight train network BNSF revealed it would trial LNG powered trains. This is the sort of thing that T. Boone Pickens has been pushing for years: use domestic natural gas as transport fuel to reduce costs, reduce emissions and diminish US dependence on oil imports, while providing a ‘bridge’ to renewables-based infrastructure. Read more
Liquidity and credit are not always best friends — Funding for Lending in the UK and the LTROs spring to mind. However, blaming liquidity alone for the lack of credit out there is obviously [expletives removed].
For one, banks can’t lend if they can’t find borrowers — although it might be unfair to blame borrowers who are seeing unappealing terms — and for two, central banks have poured a fair amount of liquidity out there with more available on tap.
Live markets commentary from FT.com
US expects first debt cut since 2007 || Federal prosecutors launched a new criminal investigation focused on corp boards || Luxembourg to share company bank details || BP beats expectations despite post-Deepwater disposals || Japan manufacturing PMIs grow faster and consumer spending rises || Letta’s push in Italy || Cyprus announces plans to cut down on graft and reform its political system || Greek firms dip back into bonds || France plans to cut its armed forces headcount || Alfredo Sáenz resigns as Santander chief ahead of legal ruling || Abu Dhabi-UK clean energy investment talks || Deutsche Bank bites bullet on stock || Kodak’s UK pension fund gets old film assets || Markets || FTAV’s latest including dour EU unemployment stats Read more
Some stagnant stats out of Eurostat on Tuesday….
Euro area unemployment rate at 12.1%
EU27 at 10.9%
Here’s the damage, broken down… Read more
Hans-Werner Sinn — he of Target2 imbalance fame — had a piece on Project Syndicate last week in which he stood firm against George Soros and his demands for Germany to leave the euro if it continues to block the introduction of Eurobonds.
Though not because he thinks Germany is wrong to oppose Eurobonds, but rather because he believes there is no legal basis for such demands. Article 125 of the Treaty on the Functioning of the European Union, he says, expressly forbids the mutualization of debt. Read more
Elsewhere on Tuesday,
- The algo trader nexus.
- Desperately seeking $6bn.
- Better mental hygiene. Read more
Asian stocks set for highest close since 2008: The MSCI Asia Pacific Index was 0.7% higher at 3am UK time, with almost three shares rising for each that fell. The measure has advanced 4.4% this month, poised for the biggest monthly gain since June. Japanese shares were mixed after Honda shares fell 3.4% when a profit forecast missed analysts’ estimates. Earlier, the S&P 500 closed at a fresh all-time high. (Bloomberg)(Financial Times)
Luxembourg to share company bank details: Luc Frieden, finance minister, said Luxembourg was willing to expand the number of accounts covered by new information-sharing agreements with the US and the EU to include global companies. The accords, agreed this month, currently only cover individual taxpayers. (Financial Times) Read more
US stocks close at a fresh record closing high: The S&P 500 rose 0.7 per cent to 1,593.61, with the benchmark eclipsing its record high set earlier this year. The day’s gains came as investors welcomed a better than expected report on homes sales and remained optimistic that the Federal Reserve would maintain its aggressive stimulus programme ahead of meeting of central bankers beginning on Tuesday. the FTSE Eurofirst 300 index rose 0.5 per cent. Japan’s stock market was closed for a holiday. (Financial Times)
IMF warns over strong capital inflows into Asia: The international lender said strong capital inflows into Asia had increased the risks stemming from rapid credit growth and rising asset prices, but sounded an optimistic tone on the economic outlook for the region, which it expects to lead a “global three-speed recovery” with growth of 5.75 per cent this year. (Financial Times) Read more
And so to Victorville. Nothing to do with FT Alphaville maybe winning some debate, but a real live city, east of LA, beyond the mountains where the desert starts, near Apple Valley. It’s what American friends would call an “ex-urb” and here’s the welcome sign:
Jeremy Grantham as usual is the one to grab the public’s attention whenever GMO produces a note. However, it must be said, Ben Inker’s accompanying thoughts in the same edition are also worth some of your time.
Of particular interest, for example, is the following observation:
There are times when the markets do not seem to be following the script properly, and we are left wondering whether we are dealing with a temporary anomaly or a more permanent problem. Today we are faced with one of these problems: the persistently high proﬁt margins of U.S. corporations. High proﬁt margins should not persist in a mean-reverting world, and yet proﬁtability in the U.S. has been higher than long-term averages for most of the last 20 years, oddly pretty close to the same length of time that the U.S. market has been trading above replacement cost.
Oped pages in recent months have been regular hosts to pieces extolling some of the unsung benefits of the US shale-gas revolution. Some of these have gone so far as to proclaim that shale gas is, or will be, a significant benefit for the country’s entire economy.
Lately, though, the narrative is beginning to sound hollow. Read more
By Theo Casey, marketcolor
This might be best considered an addendum to Kate’s Politburo detective work on Friday which highlighted China’s changing attitude to growth (now maybe less important) and financial risk (now probably more important). It’s a piece of the China recovery puzzle we don’t look at enough. Read more
We’ve been reading a lot lately about the potential for cheap natural gas to replace oil-derived transport fuels in the US — and perhaps globally.
Much of this excitement overlooks some fundamentals of energy and commodities in general and the US natural gas sector in particular. The short version is that energy markets are incredibly difficult to predict, and adding interactions between energy sources only adds to the uncertainty. Read more
Some might remember this banner from last year’s Russia vs Poland Group A match at the Euro 2012 tournament:
It was, to say the least, a little bit antagonistic. Read more
(Or ‘goldilocks syndrome’ if you’d prefer)
An existential cry has been sounded once again in the world of FX which has suddenly been reduced to trading short term signals in a fickle market. Shocking. Gone are the days of simple carry, Risk on-Risk off and easy reifying market stories. And it seems they are missed, almost as much as they were once bemoaned…
From HSBC’s ever excellent FX team: Read more
Live markets commentary from FT.com
JPMorgan’s executive re-reshuffle || Strong capital inflows into Asia increase risk, says IMF || HFT to face speed limits on EBS platform || Chat apps overtake text messages || Ark gala mothballed || Alphaville’s latest podcast || Pari passu saga || Deep thoughts on civilisation || Market update Read more
Well, this was fun while it lasted. Now what did it mean?
Click to enlarge the document capping a weird week in the pari passu saga:
It’s an order from the Second Circuit on Thursday, denying an unusual request filed on Monday by the Italian retail investors who count themselves among Argentina’s holdouts.
Although looking back at it, was the unusual or just ahead of the curve? Read more
If you submit to theoretical physicist Geoffrey West’s urban development theories, then you’ve probably aware of the idea that humanity is set to face a critical crunch point soon enough (if not already). And by crunch point, we mean — either humanity throws everything it’s got at speeding up technology to ensure its resource consumption-to-population footprint becomes manageable, or we wither away.
(The Roman Empire, by the way, is perhaps the best example of a civilisation which failed to make the next great technologically leap to the carbon age and did actually wither.) Read more
From the London Stock Exchange on Monday…
As part of a reorganisation of London Stock Exchange Group’s (“LSEG”) Italian legal entities earlier this year, a valuation report was prepared for the specific purposes of the reorganisation and was filed with the Companies Register of the Milan Chamber of Commerce and has recently been made public. This report included a LSEG revenue projection for the year ending 31st March 2016 of €1.4Bn with 12% annual LSEG revenue growth from the start of FY14. It also included 5 year (FY14 to FY18) financial projections for the Italian legal entities together with historic information for such entities for the 9 months to 31 December 2012.
Elsewhere on Monday,
- The ‘floor’ idea of pricing risk.
- FOMC preview.
- Many financial insiders actually agree with Jeffrey Sachs. Read more
Asian stocks inched up amid optimism for further global economic stimulus measures from the Fed and the ECB this week. The MSCI Asia Pacific index excluding Japan gained 0.2% per cent after rising 2 per cent last week, the most since January 4. Australia’s ASX rose 0.5%, the Kospi fell 0.3% and the Hang Seng moved between gains and losses. Japanese and Chinese stock markets are closed for a holiday. The Fed’s FOMC meets on Wednesday and the ECB’s interest rate decision is due on Thursday. (Financial Times)
The Fed is widely expected to maintain its easing policies on Wednesday, in part because of inflation measures falling below the 2% target. (Wall Street Journal)(Bloomberg) Read more
In which dragons war with bitcoins for your attention…
…it was just someone using Excel on a laptop who was highlighting cells for a formula and released his index finger from the left-clicky button of his mouse too soon.
Writes Irish stand-up comedian Colm O’Regan for BBC Magazine, in his piece about “The mysterious powers of Microsoft Excel”. As you will likely have guessed, his article was inspired by spreadsheet blunders in Reinhart and Rogoff’s 2010 Growth in a Time of Debt paper. Read more
Eurozone M3 data are out…
That’s the annual growth rate of the euro-zone broad money supply (M3) falling from 3.1 per cent to a well below expectations 2.6 per cent in March and allowing a quick segue into a good news/ bad news post ahead of next week’s ECB meeting and increasingly probable cut. Read more
By Theo Casey, marketcolor
Half nine (GMT) is seldom a cheery time of day for the Chancellor.
Mid morning, several times a week, the Office for National Statistics releases worse-than-expected parcels of economic gloom, which serve to undermine HM Treasury and George Osborne’s Plan A.
At least that’s what it normally does. Read more
Live markets commentary from FT.com