May, 2010
ETFs and the ‘flash crash’
Nasdaq has published the list of trades it cancelled as a result of Thursday’s epic market ‘flash-crash’ — and as it transpires, a significant number of those affected were ETFs or ETNs.
Index Universe sums up the situation — although remains baffled as to why.
Draaisma turns bullish
Morgan Stanley strategist Teun Draaisma has thrown in the towel and closed his bearish underweight position on European equities.
Draaisma has been bearish since late January, when he downgraded in the expectation of a 10-15 per cent fall in stock prices.
Goldman Sachs, or how to mint money daily
The numbers are in: Goldman Sachs made money every single day in the quarter ended March 2010, and at least $100m on 35 of those days, according to the former investment bank’s latest filing with the SEC.
[Abacus] The many legal risks of Goldman
Here’s an interesting tidbit, or two, or three (or four) from the ‘Legal Proceedings’ part of Goldman Sachs’ filing to the Securities and Exchange Commission, published on Monday:
We are involved in a number of judicial,
Bank of England rate unchanged, again
A picture, even one of Bank of England website press releases, tells you everything:
Yes, the Bank of England’s Monetary Policy Committee once again maintained its Bank Rate at 0.5 per cent and kept the Asset Purchase Programme’s size at £200bn.
Eurozone bank CDS goes squeaky-pop
Eurozone financial CDS has well and truly tightened from last week’s blow-outs:
Click to enlarge the chart, provided by Markit. Sovereign CDS is also squeaking back.
Spare a thought for those who bought protection late last week…
Asia bungees off Europe’s bailout
While Europe’s markets threw themselves into a dead wolf bounce on news of the EU’s bailout on Monday, traders around Asia were contemplating the day’s gains in regional markets.
In a wave of what some fear could be misplaced optimism following overnight news of Europe’s massive rescue plan,
Markets Live transcript 10 May 2010
Markets Live chat transcript for the chat ending at 11:42 on 10 May 2010. Participants in this chat were: Neil Hume, FT Bryce Elder NHGuten Morgen NHand velkome to ze Markets Live
And so it begins…
RTRS-GERMANY’S BUNDESBANK SAYS EURO ZONE CENTRAL BANKS HAVE STARTED BUYING GOVERNMENT BONDS.
And by the looks of thing, the process may have kicked off in Greece:
But, in Germany…
RTRS-TEN-YEAR GERMAN BUND YIELD RISES ABOVE 3 PCT,
Wer soll das bezahlen?
Further reaction to the European “shock and awe” stabilisation package this time from Marc Ostwald of Monument Securities who says there are lots of unresolved issues.
Perhaps the most important, he says,
How bad in Europe? Your cut-and-paste guide
Courtesy of the fixed income team at Deutsche Bank and drawn up before overnight events.
It’s a handy table of Lehman-Greece parallels, or, financial system stress measures now versus the fourth-quarter of 2008 — after Lehman Brothers collapsed.
Ahead of the curve on the VIX? (Updated)
If you invest with options, you might find yourself with a long-volatility exposure?
In which case, you might be inclined to offset that risk. One way you could do so — as we understand it — is by shorting or buying puts dynamically on the VXX ETF.
Towards a United States of Europe
From Berlin, via Reuters, on Monday morning:
GERMANY’S MERKEL SAYS WE MUST ADDRESS THE ROOT OF THE PROBLEM, THAT MEANS CONSOLIDATING BUDGETS
EURO GERMANY’S MERKEL SAYS THIS PACKAGE IS NECESSARY TO
LTROpprobrium
So the European Central Bank has just announced it will restart its Long Term Refinancing Operations (LTRO) as well as begin to snap up government bonds.
But how well did the LTRO work the first time around?
Gary Jenkins over at Evolution Securities has an intriguing theory that the ECB’s mass liquidity provision,
The dead wolf bounce
So, this is what shock and awe looks like.
Stock markets rocketed on Monday after European Union leaders announced a €720bn rescue package for the continent’s bond markets. Flashes, via Reuters:
RTRS-BRITAIN’S FTSE 100 UP 1.5 PCT AND FRANCE’S CAC 40 CLIMBS 2.4 PCT
RTRS-GERMANY’S DAX RISES 2 PCT
RTRS-EUROPE’S FTSEUROFIRST 300 EXTENDS GAINS,
Europe’s QE is sterilised and sensitive
Here’s something intriguing about the European Central Bank’s overnight statement.
It’s being lauded as European quantitative easing by some market commentators — but there’s a key difference to the kind of government bond-buying that has been carried out in the UK,
The smell of burnt fingers wafts across Europe…
Monday’s euro-action, post the announcement of a package of market-stabilising measures:
Are the euro shorts in pain? Remember, there were a lot of them.
According to The Street:
The extreme market positioning is not simply in the record short euro spec positions at the IMM (which is now more than twice the record short set in 2008),
Peabody, Macarthur and Australia’s resources super-tax
A setback for the biggest M&A deal in Antipodean mining on Monday has intensified the furore over the Australian government’s plan to introduce a 40 per cent tax on mining profits.
As Bloomberg reports on Monday,
Further reading
Elsewhere on Monday,
- EU bailout: shock, awe, and Dirty Harry.
- But is it shock and awe enough?
- ‘The euro is at more risk than it has ever been’.
- Comparing ECB bond-buying to Fed MBS purchases.
Pink picks
Comment, analysis and other offerings from Monday’s FT,
Clive Crook: America has good reason to worry about Greece
At the end of last week, the US looked hard at Greece and was scared, writes the FT’s Crook.
Snap news
Breaking pre-market news on Monday,
- EU, IMF and ECB announce $720bn show of support to curb crisis – statement.
- Fed restarts dollar swap-lines – statement.
- Bank of England announces reinstatement of Fed swap-line – statement.
Guest post: El-Erian on Europe’s ‘massive policy response’
Pimco’s chief executive Mohamed El-Erian reacts to news that the European Union and IMF had agreed a €720bn emergency funding facility. His earlier guest post is available here.
The announcements coming out of Europe tonight are dramatic,
Central banks restart dollar swaps
Echoing across the world on Monday — the sound of the dollar taps being turned on. Again.
From the Federal Reserve:
In response to the re-emergence of strains in U.S. dollar short-term funding markets in Europe,
ECB statement on ‘measures to address severe tensions in financial markets’
As published on the ECB’s website, emphasis FT Alphaville’s:
The Governing Council of the European Central Bank (ECB) decided on several measures to address the severe tensions in certain market segments which are hampering the monetary policy transmission mechanism and thereby the effective conduct of monetary policy oriented towards price stability in the medium term.
Wolfpack watch
We have action. Allegedly.
Bare bones…
€440bn euros – plus €60bn — all subject to IMF-style conditions.
The package has clearly shrunk somewhat. But to that €500bn eurozone total we can add another €220bn apparently being put up by the IMF.
Stopping the wolfpack (updated)
While we await details of the EU’s emergency lending mechanism and loan guarantee package for troubled countries – a statement is expected around 21.00 hrs (GMT) – here are the observations of Swedish Finance Minister Anders Borg…
FTfm on AV
Some highlights from Monday’s FTfm.
Hedge funds losing the Ucits battle
Hedge funds are losing the battle to command position on the alternative Ucits field as traditional long-only managers gain more
Guest post: El-Erian on a critical weekend for Europe and the economy
This is a critical weekend for Europe (and the global economy), with governments shifting to a “whatever it takes” mode as they scramble to regain control of the situation, Pimco’s chief executive Mohamed El-Erian writes for FT Alphaville.
Papandreou: ‘We can do this. We must do this. We will do this together’
Here’s the Greek prime minister’s statement to Friday evening’s Eurogroup heads of state and government meeting in Brussels. It’s short and rather moving.
Click to enlarge.
Related links:
Eurozone