Markets Live: Tuesday, 30th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

UK house price growth slows || Next warns on weather || RBS reverse impairment boost || Nissin to raise noodle prices || Ukraine fighting picks up || Naru faces ruin || Markets mixed Read more

The EU versus Apple & Ireland

In the light of the foregoing considerations, the Commission’s preliminary view is that the tax ruling of 1990 (effectively agreed in 1991) and of 2007 in favour of the Apple group constitute State aid according to Article 107(1) TFEU. The Commission has doubts about the compatibility of such State aid with the internal market. The Commission has therefore decided to initiate the procedure laid down in Article 108(2) TFEU with respect to the measures in question.

Click for the full document laying out the case.

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Who likes European bonds?

The self-described data geeks at Citi have a new note on who buys euro-denominated bonds, and we want to share some highlights.

Even though European banks were endangered by their significant holdings of sovereign debt, their portfolios were relatively less exposed compared to pensions, insurers, and foreigners. Read more

Global disinflationary pressures

Consider some of the global non-policy forces that might now be weighing on price inflation:

– Aging demographics, high debt loads, weak nominal wage growth and persistent output gaps in advanced economies. Read more

Further Reading

Elsewhere on Tuesday,

- A Troll confesses, click here.

- The internet is broken.

- The measure of a desperate manRead more

The 6am London Cut

Two of the world’s largest securities depositories have finalised a joint venture to create a vast pool containing trillions of dollars of collateral to ease banks’ search for scarce assets to back trading. The US’s Depository Trust and Clearing Corporation and Belgium’s Euroclear confirmed they would create a venture called DTCC-Euroclear Global Collateral Ltd. The two have been in discussions for more than a year. (Financial Times)

The Frenchman nominated to be Europe’s next economics commissioner has had his authority to review national budgets curbed. The move was a nod to deficit hawks in Berlin who opposed Pierre Moscovici’s appointment. Mr Moscovici, the former French finance minister, will be unique among the 27 incoming commissioners in that he will be legally required to prepare and submit his assessments of national budgets jointly with another commissioner. (Financial TimesRead more

The Closer


- Seriously, David CameronRead more

It all makes sense when you realise there are TWO US dollar currencies

Most people know that China’s currency is classified according to trading conditions. There is, for example, CNY, which refers to onshore yuan. There’s CNH, which refers to Hong Kong (offshore) yuan. And then there’s NDF, the non-deliverable forward market.

What differentiates these currencies are the terms and conditions that apply to those particular market zones, and how easy or not it is to transfer currency in and out. As implied yields of the respective markets show (chart via BNP Paribas), the rates of return for all of these markets varies significantly — because they are, to some extent, entirely different currencies:

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Occupied territory

Amid the protests in Hong Kong, a quick reminder of what a wonderful place it’s been to invest, whether in equities or housing. Strapping one’s economy to China’s growth rocket while hanging on to a US dollar-pegged currency and the rule of law was a recipe for success.

Hong Kong house prices v Hang Seng

Of course, for the multitude of investors who forget to read the warnings: past performance does not necessarily predict future results. Also, fabulous gains on property are frequently the precursor to not-so-fabulous losses on property. Hong Kongers should remember this: after the October 1997 peak was followed by a crash, it took until April 2012 for home prices to rise back to where they had been, with prices halving along the way. Read more

Reserve Bank of New Zealand really wants you to short the kiwi

It isn’t often that central bankers devote entire speeches to trashing their own currency.

Yet that is what Graeme Wheeler, the head of New Zealand’s central bank, did on September 25, calling the exchange rate “unjustified and unsustainable” — the same phrase used in the statement accompanying the July 24 rate hike and the introduction to the most recent monetary policy statementRead more

FOMC vs the cruel, cruel summer

This morning’s Personal Income & Outlays report revealed the third consecutive monthly decline in core and headline PCE PI inflation (though August), both now just below 1.5 per cent:

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23 years later…

The American Life radio show and the Pro Publica investigative journalism service set an interesting debate a-blaze last week, detailing the 46 hours of secret recordings undertaken by Carmen Segarra, a specialist hired (and subsequently fired) by the New York Fed.

The recordings have painted a vivid picture of regulatory dithering in the face of a rapacious Goldman Sachs as the bank sought to gain clearance for a share warehousing operation that would allow Spain’s Santander to sidestep European capital requirements.

Subsequent criticism has centred on the NY Fed’s apparent impotence in the face of Wall Street muscle. But is it more the case that Matt Taibbi has been right all along? Does the bank actively help clients dodge (if not break) the rules?

Let’s examine a largely forgotten example of Goldman’s past behaviour in London… Read more

Negative rates, in context

Peter Stella, former head of the Central Banking and Monetary and Foreign Exchange Operations Divisions at the International Monetary Fund, who now heads his own consulting company, is — as ever — on a mission to explain central bank actions for what they really are.

His latest focus area: the real story behind negative interest rates at the ECB.

Critical to understanding the purpose of these, he suggests, is the following chart:










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BitCon: The book

Jeffrey Robinson is an American author best known in media circles for his work on international financial crime via his 1995 book The Laundrymen.

Suffice to say, when one of the world’s best known financial-crime authors turns his attention to the world of cryptocurrencies, and in particular Bitcoin, it probably makes sense to pay attention. Especially when the book he publishes is called, BitCon: The Naked Truth About Bitcoin.

Sadly, for the Bitcoin faithful — as well as all the other reasonable institutions that seem to have been taken in — the verdict is not good. Robinson reduces the entire phenomenon to a classic swindle. A small cohort of ruthless predators taking advantage, as usual, of the naive and gullible via a carefully constructed and asymmetrical myth, which happens to appeal to those of a certain persuasion, encouraging them to take leave of their senses entirely.

Part of the fervour is driven by classic get-rich-quick sentiment, but the other and the more sinister part is based on the art of indoctrination, no different to that employed by cults focused on getting people to hand over their hard-earned cash for the the sake of reserving themselves a prime slot in heaven and/or the supposed system that comes after this one.

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Markets Live: Monday, 29th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

Osborne to set out plans to curb welfare bill || Balfour Beatty warns on profits for fifth time || Middle-class swell profits at Aldi as it looks to expand ranges || HMRC to take tax debts from pay packets || Apple hit by Brussels finding over illegal Irish tax deals || Markets Read more

How’s it koan, at Quindell?

The Board of Quindell Plc (AIM: QPP.L), a market leading global provider of professional services and digital solutions, notes the recent share price performance and confirms that it knows of no reason for such falls.

As originally planned, the Company will update the market on or before 15 October 2014 on its trading for the quarter ending 30 September 2014 and the continued positive progress being made by the Group in respect of all key performance indicators including cash performance.

 Read more

Further Reading

Elsewhere on Monday,

- The remittance multiplier as secret weapon.

- “From $199” you say. Interesting.

- Our water is older than the sunRead more

The 6am London Cut

Allianz has insisted it has no plans to sell Pimco or interfere more in the business, after billions were wiped off the German insurer’s share price following the shock departure of Bill Gross, the US fund house’s chief investment officer, on Friday. (Financial Times)

While Apple is no stranger to allegations of tax avoidance from politicians on the warpath, in Brussels it is facing a more worrying threat: a tax repayment order that could potentially run to billions of euros. (Financial TimesRead more

46 hours later…

Some drivetime financial radio for Friday. Click to download or stream:

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Man versus machine

So you thought Pimco was under scrutiny before. The departure of Bill Gross — co-founder, monarch, guru, talisman — provides a case study into one of the questions at the heart of asset management. Is it the person or the process?

It is more than a theoretical question. The immediate reaction to Friday’s news from old industry hands, beyond “blimey!”, is that any organisation other than Pimco would be going straight onto the watchlist for redemption of assets by the investment consultants who direct so much institutional investor money.

Pimco, though, is a machine. Read more

Pimco deGrossed

They say that to lose one figurehead may be regarded as a misfortune; to lose both looks like carelessness. Read more

Too much competition, overcapacity, arghh!

Earlier this week we highlighted the following chart from Matt King at Citi representing the corporate sector’s seeming resistance to capex:

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Markets Live: Friday, 26th September, 2014

Live markets commentary from 

The (early) Lunch Wrap

Hungary halts flow of gas to Ukraine || Gunvor nearly doubles cash reserves || Bankers’ pay withheld from Lord Hill’s Brussels remit || FBI claims to have identified Isis militant Jihadi John || Apple hits back over ‘bendgate’ furore || De La Rue shares tumble on profit warning || India’s Modi Aims to Rekindle U.S. Investment || Alibaba bears emerge to short 8.9m shares || Markets  Read more

Further Reading

Elsewhere on Friday,

- Falling commodity prices flash warning on widening global divergences

- Samsung has more employees than Google, Apple, and Microsoft combined.

- Asymmetric monetary risks.

- Patience is a virtue when normalizing monetary policy. Read more

The Closer


- Bringing back US productivity growthRead more

Subprime lending + cars + robotic repo men = financial journalism gold

Here is a cartoon of a GPS unit, represented by a robot, repossessing a car bought on credit by a McDonald’s employee on minimum wage. The robot is repossessing the car, using new technology, to pay off some greedy bankers who have been bundling subprime auto loans into subprime auto asset-backed securities and then selling them to equally greedy investors.

Are you outraged yet?

No? Then stay with us.

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Crowdfunded, fruity and English

Spotted on the tube:

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