FT markets round-up: “The euro fell sharply and European government bond prices rose as market participants digested the implications of the European Central Bank’s latest policy decision and subsequent comments by president Mario Draghi. The euro fell more than a cent against the dollar, taking it back below $1.31. The possibility of further ECB rate cuts pushed the yield on the German 10-year government bond to within a whisker of last July’s record low and drove the country’s two-year yield into negative territory. The Bund yield settled 5bp lower at 1.16 per cent and that on the Schatz fell the same amount to minus 0.03 per cent. Ten-year French and Belgian yields touched record lows. The 10-year US Treasury yield, meanwhile, was flat at 1.63 per cent as the market focused on Friday’s non-farm payrolls report.” (Financial Times) Read more
With the S&P 500 making a fresh run higher at pixel time, it would be rude not to share the latest thoughts of Albert Edwards, Socgen’s Ice Age bear. Rather than gawping stocks, he reckons we should be mindful of the red metal…
(With some header credit due to Mark Dow)
He came, he cut, he stuck a load of fingers in the air…
The tl;dr version of May’s Draghi presser involved the ECB chief mentioning a heap of possible actions — from getting the “dead” ABS market going to help SMEs, through to negative interest rates, while giving a little bit of forward guidance on policy — but without committing to anything concrete. Read more
A 25bps cut to the refi rate from the ECB:
2 May 2013 – Monetary policy decisions Read more
Compare (Reuters, March 25):
“It was made clear to our Latvian friends that if they want to join the euro, they should not provide a haven for Russian money exiting Cyprus,” a euro zone central banker said.
Contrast (Mr Kristaps Zakulis — financial regulator, Riga, April 24): Read more
A telling chart (which you can click to enlarge) from BNP Paribas’ Ricardo Santos and Michelle Lam. As they note — after a break particularly in the second half of 2012, there’s recently been a marked increase in banks’ holdings of sovereign debt… especially in Italy, France, Portugal and Spain. Read more
Live markets commentary from FT.com
The backwardation of gold || The Aussie bank share bubble || Stepping towards numerical QE guidance || ECB Meeting || Chinese renminbi at record high || Shell chief exec to step down next year || Apple avoids potential $9bn tax bill with debt sale || Ad tools boost Facebook || Tablet shipments rise 142% || Google invests in lender || Transocean dividend plans || Goldman under criticism for Malaysia bond deal || IBM Lenovo deal breaks down || Kodak may emerge from bankruptcy in July || Market Update Read more
The conspiracy channels continue to make a big deal about the backwardation of gold — which is a situation in which gold prices for today are higher than for tomorrow. The thinking is that this must indicate rampant demand for physical gold.
In reality, since gold is a highly financialised commodity, the backwardation signal doesn’t actually indicate the bullishness they imply it does. Rather, it suggests something entirely different: that interest rates in conventional money markets are turning increasingly negative. Read more
Elsewhere on Thursday,
- Under-employment in the UK.
- Energy fact of the day.
- A funny chap. Read more
Asian markets fall on poor US and China data || ECB expected to cut rates || Irish PM calls for ECB reform || Osborne backers want to sell bank stakes before election || Japanese money supply reaches record || Facebook revenues beats, profit misses || Apple’s bond issue helps avoid $9bn in potential tax || Reinhart and Rogoff on austerity alternatives Read more
The Aussie banks are very good companies. They are profitable, resilient, well capitalised, well managed, shareholder focused and have a very strong industry and regulatory structure. However, following the significant leveraging of the Australian & NZ households over the last thirty years they are now low growth and remain heavily exposed to housing, funding markets & unemployment risk. Read more