Posts from Tuesday May 7 2013

The Closer

ROUND-UP

Brazil wins battle for WTO leadership: “Roberto Azevêdo has emerged as the new director-general of the World Trade Organisation after a pitched battle with Mexico’s Herminio Blanco, according to officials familiar with the contest. Both Latin American countries saw the race for the WTO leadership as a way of elevating their influence in the global economy and cementing their status as rising powers.” (Financial TimesRead more

How to kill the European repo market in 10 easy steps

1. Take as much collateral as possible and park it at the ECB.

2. Watch as market bifurcates around quality/inferior collateral.

3. Disregard spikes in settlement fails.  Read more

USD/JPwhy?

By Theo Casey, marketcolor

The loss of simple narratives in forex is something we are learning to deal with together. To continue navigating major and minor crosses we need to make complex narratives more digestible.

Consider dollar-yen. It’s behaving like the bought end of a carry trade. Read more

Capital controls: “unfortunate, but inevitable”

Still time (at pixel) to listen to Eurogroup chief Jeroen Dijsselbloem defend the Cyprus bailout in front of some unimpressed European MPs on Tuesday. Click the pic for the feed. (Or hereRead more

China, yuan to really do this?

China’s State Council has announced intentions to carry out some potentially quite big reforms. From Bloomberg:

China signaled it will propose plans this year to allow freer flows of its currency in and out of the nation as part of measures to loosen control over the yuan and interest rates. Read more

Markets Live: Tuesday, 7th May, 2013

Live markets commentary from FT.com 

The (early) Lunch Wrap

Draghi talked up ECB’s readiness to act in a speech yesterday || China wants to water down World Bank report || RBA cuts rates to record low || HSBC first-quarter profits jump to $8.4bn as bad debts fall|| Microsoft to reverse course on Windows 8 || Protests mount about allocation of BP’s Gulf money || Rio Tinto to go ahead with WA iron ore expansion || Former KPMG auditor’s acquaintance to plead guilty || Big JP Morgan investors not convinced about Dimon’s dual role || Markets || FTAV’s latest Read more

Walsh’s record at Diageo, charted

Usually, when a chief executive of note retires after an extended tenure, the valedictories talk about corporate growth. Think, for example, of Mick the Miner turning a $500m coal asset called Xstrata into a global miner worth $50bn or more. Or Chris Gent producing similar magic in the field of mobile telecoms at Vodafone.

What’s rarely mentioned is the amount of stock issued in the process; rather than executive graft, the growth in size typically reflects equity financing of acquisitions. Xstrata investors never saw a 100-fold increase in their investment; at Vodafone, investors are still nursing burnt fingers from backing Gent’s extraordinary land grab. Read more

What the Danish negative rate experience tells us

Back in July, 2012 the Danish central bank, Nationalbanken, lowered the deposit rate to -0.2 per cent. Back then we wrote that it was going to be costly for the banks, and that money market rates were going deeper into negative territory. With Draghi’s comments last week, how did that whole negative deposit rate action turn out for Denmark?

Nordea had a note out last week on that very subject. Now, before we move, let’s remember that Danish monetary policy is tailored around the FX peg. The deposit rate was there to assure outflow because of mounting pressure on the EUR/DKK pair. Read more

Lessons in monetary policy – Use it or Lose it

Surprise!

Economists mostly failed to predict that the Reserve Bank of Australia would cut rates to a record low of 2.75 per cent at its monthly meeting today. Yep, lower than during the height of the financial crisis — another sign that we’re living in different times now. Read more

Further reading

Elsewhere on Tuesday,

- The Big Fight is ON

- Lawson wants out

- Soros goes short Down Under (maybe)

- Some Berkshire Kremlinology Read more

The 6am Cut London

Asian stocks rise || China wants to water down World Bank report || RBA cuts rates to record low || Draghi says ECB can cut further || Microsoft to reverse course on Windows 8 || Protests mount about allocation of BP’s Gulf money || Rio Tinto to go ahead with WA iron ore expansion || Former KPMG auditor’s acquaintance to plead guilty || Big JP Morgan investors not convinced about Dimon’s dual role  Read more

Current account imbalances since the crisis

The chart is from a recent Barclays report on global trade. Read more