Posts from May 2013

Too QEunwind

Yes yes — suddenly, a bad last day of May for the stock market:

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A UK deleveraging disagreement

In this round we have Paul Fisher of the MPC, who recently said that (our emphasis):

In the near term, whatever the source of the changes in perceptions of permanent income, it is likely that growth will continue to be below the previous trend until more of the real adjustments to balance sheets across the economy have been made. That includes households, the public sector, banks and other businesses.In my view we are maybe two thirds to three quarters of the way through in each case, varying both across and within sectors. There is nothing scientific or ‘official’ in that assessment! It’s just a personal best guess on the back of how the economy is behaving plus some direct knowledge of the progress of the banks with their deleveraging plans.

And he’s up against Citi’s Michael Saunders and Ann O’Kelly who suggest that, no… we aren’t that far along at all. Read more

Markets Live: Friday, 31st May, 2013

Live markets commentary from 

The (early) Lunch Wrap

Delayed Bumi results reveal $2.4bn loss || Japanese deflation eased slightly, and industrial production rose 1.7% in April || IMF gives qualified thumbs up to Abenomics || Record joblessness, low inflation show euro zone’s pain || India records slowest growth in a decade || Consumer products giants turn screws on ad agencies, suppliers || The UK coalition will announce £15bn of extra spending || Lloyds sells US mortgage portfolio for £3.3bn || Sony hires banks for Loeb plan || Smiths Group is again weighing a potential £2bn-plus sale of its medical division || UBS is raising salaries for investment bankers to catch up with rivals || Procter & Gamble is already thinking about succession || Encore breaks into UK debt market || Markets wrap || FTAV’s latest Read more

Thundering metaphors

From Michael Hartnett and team on Friday…

The Thundering Word Bubble, bubble, toil & trouble

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Further reading

Elsewhere on Friday,

“Mmmhops.” Yes, really.

Potemkin villages in Ireland. Read more

The 6am Cut London

Japanese stocks rebounded after yesterday’s slide, following reports that Japan’s pension fund may boost stock holdings and that the nation’s industrial output expanded faster than estimated last month. The Nikkei rose as high as 2 per cent before flagging later on Friday. The MSCI Asia Pacific was 0.6 per cent higher. (Bloomberg)

Japanese deflation eased slightly, and industrial production rose 1.7% in April; the latter exceeding median forecasts of a Bloomberg survey which pointed to an 0.6% gain. Core consumer prices, which include oil but exclude volatile costs for fresh food, fell 0.4% from a year earlier, matching the Reuters median market forecast and coming in below the Bloomberg consensus of 0.7%. The sixth straight fall was slightly narrower than the 0.5% decline in March. Household spending for April missed expectations, coming in at 1.5% growth year-on-year, compared to expectations of 3.1%, and a 5.2% rise in March. (Bloomberg)(ReutersRead more

The 2 per cent

Goldman Sachs has hired 350 investment banking summer interns out of 17,000 applications, claiming it has “no problem” attracting talent six years after the financial crisis sparked a series of deep cuts to Wall Street jobs and bonuses.

That’s from the FT’s Tracy Alloway. Read more

The Closer


– “When those yields cross their 10-month moving average, it is time to be gone from risk assets.” Read more

GDP and GDI: two sides of the same inevitably-flawed coin

A couple of years ago, we did a long Q&A with Fed staff economist Jeremy Nalewaik about his work on the differences between Gross Domestic Product and Gross Domestic Income.

The two indicators, as you would expect given their theoretical sameness, tend to be nearly identical over a long enough stretch of time. GDI is interesting mainly because Nalewaik had found that its early estimates tend to be revised less over time than are initial estimates of GDP. Read more

My big fat interbank reference rate

Spotted in this IMF working paper — a bracing proposal for the race to choose one rate, among several out there, to replace discredited old Libor…

Choose all of them: Read more

Banking union’s house of twigs (with cut out and keep optionality)

About that banking union and the aspiration to “break the feedback loop between banks and sovereigns”…

From JP Morgan’s Alex White:

It has been clear for some time that this is not fully achievable in the near term, because of the extent of the institutional journey required (likely including the prospect of Treaty change). For the foreseeable future, Europe’s banks will be left with what Minister Schauble has explicitly referred to as a “timber-framed” Banking Union. This will emphasize that the heavy lifting has to be done at the national level, and will be based around the development of national resolution regimes.

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The point at which the Nikkei rot stopped?

Who knows. But we can report that this report, from Reuters, caused a sharp trend reversal in Japanese equity futures on Thursday accompanied by a sudden weakening of the Yen.

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Markets Live: Thursday, 30th May, 2013

Live markets commentary from 

The (early) Lunch Wrap

Nikkei slump || European regulators have clashed with the US over the timing derivatives reforms || Google is preparing an attack on Apple’s iPhone || Shuanghui agrees $4.7bn deal for Smithfield Foods || Panasonic said it would cut about 5,000 workers || Fiat is in talks for as much as $10 billion in financing to buy rest of Chrysler || Ryanair faces regulatory pressure to sell stake in Aer Lingus || EU agrees to end decades of overfishing || Berkshire Hathaway on Wednesday agreed to buy NV Energy || Blackstone is weighing a bigger than expected withdrawal from SAC Capital || Switzerland has taken a decisive step to resolve its dispute with the US over tax evasion || Brazil’s central bank tightened interest rates 50bps || Markets roundup || FTAV’s latest Read more

Finland has a swap… that’s a bit pointless

Somehow — was it the ludicrous secrecy, maybe? — you could tell this was coming.

On Wednesday, Jan Hurri at Taloussanomat took advantage of the Finnish government’s recent doc dump in order to reach a conclusion about its deal for ‘collateral’ on Greek bailout loans: Read more

Nikkei pain

That’s the Nikkei off 5 per cent on Thursday morning, its biggest fall since last week’s 7.3 per cent hit:

Both the Nikkei and the boader Topix have lost around 13 per cent in local currency terms since hitting peaks last week: Read more

Further reading

Elsewhere on Thursday,

British banks and the Treasury.

– Global warning – the price of everything.

Conflict management and downturns. Read more

The 6am Cut London

Asian stocks fell, with the Nikkei declining more than 3% and the yen trading around 101.2, close to a three-week high. The MSCI Asia Pacific was down 1.4% and the Kospi moved between gains and losses. The Hong Kong IPO of Langham Hospitality Investments saw the shares slump 9.2%. (Bloomberg)

European regulators have clashed with the US over the timing derivatives reforms, in a letter urging further delays to “cross border guidance”, which would which would outline how the US would keep tabs on banks and hedge funds whose international swap trading could have a direct impact on the US economy. The European Commission in a letter sent on Tuesday urged the CFTC to extend an exemption for foreign market participants until leaders of the Group of 20 countries have agreed international principles on cross-border swap rules. (Financial TimesRead more

The Closer


QE: because nobody’s got any better ideas.

DSGE + financial frictions = macro that works?

– Flippers rise housing wave.

Analyst: I always have terrible timing on my calls.

Blog post of Tweet of Vine of Instagram of Tumblr Post of Facebook Update. Read more

Immigration, shortages and complementarities

Mary Meeker’s presentation on internet trends has an unexpected section at the end about high-skilled immigration, which itself includes a link to a much longer version that we recommend.

We could discuss the slides all day long, but here we’ll focus on just one particular issue. Read more

A handy collateral deck

FT Alphaville attended the Sifma collateral conference last week. We found these slides, used by Greg Lyons of Debevoise & Plimpton, to be a very useful explainer of upcoming regulatory reforms (click to open pdf):

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Nasdaq’d, SEC edition

We’re glad we kept a screenshot of this moment in stock-market history:

It (ultimately) landed Nasdaq with a $10m fine — the biggest ever for an exchange — and serious egg on its face on Wednesday, after a settlement with the SEC over securities law charges relating to Facebook’s botched IPO. From the releaseRead more

Stuff to do when stocks tank and forex goes haywire…

Yes, the Wall Street Journal caught our eye on Wednesday with The Federator, a fun retro-looking QE game that flies Helicopter Ben over Main Street USA, spewing cash.

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More austerity please, you’re British (or is it?)

To the untrained eye, this might look like the usual buzzword-soup from the European Commission (home of “growth-friendly fiscal consolidation”): Read more

Between cronyism and rebalancing in China

Chinese premier Li Keqiang on Monday:

China needs growth of about 7 percent to double per capita gross domestic product by 2020 from the level in 2010, Li said yesterday in Berlin after meeting with Chancellor Angela Merkel during his first trip abroad as premier.

Although China has a formal target of 7.5 per cent growth for this year, and that was still kind-of-maybe assumed to be the ongoing target figure for the next few years, no-one was hugely surprised at the declaration of a 7 per cent target.

Anyway, the IMF’s forecasting types have decided it might be time to stop clinging to hopes of 8 per cent Chinese growth this year (and 8.2 per cent next year). They cut forecasts for both 2013 and 2014 to 7.75 per cent. Read more

Markets Live: Wednesday, 29th May, 2013

Live markets commentary from 

The (early) Lunch Wrap

EU to ease hard line on austerity for key countries || IMF cuts China growth forecast to 7.75% || OECD cuts eurozone growth forecasts || Murdoch seeks to persuade Wall St on new News Corp || Germany’s biggest seven banks are still €14bn short of meeting Basel III capital requirements || Japan to Korea: do your own easing || Seven charged over ‘cyber criminals’ bank || Citi settles $3.5bn mortgage lawsuit || Bank auditors urged to question assumptions more closely || Former KPMG partner pleads guilty || German jobs revival stalls || Japanese deflation seen to have slowed in April || Markets wrap || FTAV’s latest Read more

Treasury yields go up a bit

Treasuries exhibited some relatively sharp moves yesterday, with 10-year yields reaching 2.19 per cent this morning:

US yields May 29 YTD

In the bigger picture… maybe not quite a dramatic QExit-related panic: Read more

A new collateral estimate with a cautionary note

We previewed the publication of the big collateral paper from the Committee on the Global Financial System last week, but we didn’t know it would arrive so soon (click to open in pdf):

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